Wednesday, July 20, 2011

Talent Retention Fuels Brain Drain

Is your region trying to keep the best and brightest from leaving? Those talent retention policies undermine economic development and, ironically, cause brain drain. The proof:

"I think the real punch line here is that it appears that it's the better inventors who are more likely to respond to these laws," Fleming says. "It's the people who have lots of patents, it's the people who have high-impact patents, it's the ones with many coauthors. Prior research has shown that the best engineer is worth much more than the average engineer. And if those are the people whom the states are losing, it's a big hit. Policy makers in these states are really shooting themselves in the foot. Some have argued that firms will not invest in R&D unless they can keep their people, but other research by Mark Garmaise at UCLA has shown just the opposite."

To that end, Marx and Fleming have shared their findings with government officials in their home state of Massachusetts, where legislators are considering a bill that would restrict the terms of non-compete agreements in the state. A hearing is set for September 15. Brain drain is arguably an issue in Massachusetts, which reportedly retains only about 60 percent of its college graduates.

You can read a copy of the unpublished report here. The case study looks at Michigan talent migration patterns. The results are fascinating:

Limited job mobility within a state that enforces non-competes is likely to entail higher opportunity costs for more productive inventors, with their past track record also making them more visible to and hence likely to be recruited by out-of-state firms. Likewise, those with significant past collaborative ties might have greater awareness of out-of-state opportunities through their professional networks, and hence be more likely to emigrate to the best available option even outside their original state. Interestingly, both of these kinds of elite knowledge workers are probably exactly the kind of talent a state would normally be particularly interested in retaining.

The best talent is less likely to stay in a state with a restrictive geographic mobility regime. You might retain greater numbers of graduates, but at a cost. You'll encourage the cream of the crop (innovators and job creators) to leave.

Over the 5+ years I've been blogging about brain drain, I've shifted my thinking from talent retention policies are ineffective to outright destructive. The underlying issue pits quantity of migration against quality of migration. Brain drain is commonly (and erroneously) phrased in quantitative terms. Shifts in population numbers do not indicate brain drain or gain. "More" doesn't necessarily mean "better".

This is the unspoken part of the shrinking cities paradigm. They aren't coming back. Graduates will continue to leave. The region can still thrive. But those aren't numbers that buy votes or justify economic development projects. And for that matter, won't sell books.


ArroyoLover said...

Regions who keep the best and the brightest over a long period of time do so not by regulatory means but by creating the lifestyle environment that attracts and keeps talent.

Having just spent almost a month in my native Northeast Ohio, here's what I've observed as missing:

1. This region seriously needs to get 'wired' for high tech. I live off my smartphone and it was very frustrating to find so few areas wired for 3G and 4G. Today's talent wants to be connected all the time where ever they are.

2. Competition - Top producers want to be challenged, not hanging around with people who talk about the past. The Youngstown Business Incubator is a great success story here but the region still lacks critical mass in fostering a competitive environment across all industry sectors. Top talent always wants to play with the pros.

3. A creative business climate that fosters innovation - the high structural debt, high cost of living and heavy regulatory environment in places like California provides a perfect storm for the CleveBurgh Region to recruit and relocate top talent. I don't see any of that going on....just the same old tired we want manufacturing jobs mentality. The region would do better by saying: invest here for 10 years; we'll give you a free house that you must homestead and pay taxes on while improving your neighborhood; we'll give you amazing tax breaks and $1M cash in innovation funds; and we expect you to create x amount of permanent jobs. And just think: there is a built-in talent pool of 78 million baby boomers who want to come 'home' and do something produtive (

On the plus side: the region does not promote what it does have: amazing water and outdoor recreation, including hiking trails, biking trails, and water trails, all appealing to competitive talent; world class medicine, art, and symphonic organizations; a fast and functional transportation infrastructure - no carmageddon.

Community visioning and re-tooling that focuses on who their client should be: TALENT and then creating the climate that makes the talent want to live and work there is the only answer that is sustainable long-term.

Steve said...

A creative business climate that fosters innovation - the high structural debt, high cost of living and heavy regulatory environment in places like California provides a perfect storm for the CleveBurgh Region to recruit and relocate top talent. I don't see any of that going on....just the same old tired we want manufacturing jobs mentality.

I agree with all of this. People I know who live in California are looking to leave what feels like a "sinking ship". They're looking for a new place to live/work. Cleveburgh could be that place if there was an effort to get these people. Looking at my own industry, tech, Pittsburgh is the natural location for anyone in the tech industry wanting to leave Silicon Valley. Carnegie Mellon is as good as Stanford. Pittsburgh makes an excellent place for people working in and businesses in Silicon Valley.

I'm sure there are other examples as well, some of which apply to Cleveland or other parts of Cleveburgh too.

For that matter, I don't think recruitment for Cleveburgh should be limited to California. The DC area is also a good area for such recruitment. While the DC area isn't as in trouble as California, it does have a lot of similar problems such as a high cost of living and a barely functional transportation system. There's a lot of people in the DC area who came from Pittsburgh. It's possible to get them to return. Speaking about the tech industry again, being in Pittsburgh makes a lot more sense for most of DC's tech industry than being in DC does. Most major places in the tech industry like Silicon Valley, Route 128 outside of Boston, etc. have a major educational anchor like Stanford or MIT. There is no equivalent in DC. The "anchor" is the federal government which is not as effective an anchor as Stanford, MIT, or CMU is. Plus anyone working in the tech industry is playing second fiddle to the political "industry" in DC. That's not going to change because DC is our nation's capital. I think it wouldn't be that difficult to start getting the tech industry in DC to start moving to Pittsburgh. Anytime I have ever heard Pittsburgh come up in conversation in DC, Pittsburgh always has a positive reputation. There is a real missed opportunity going on here.