Postindustrial Strength Brain Drain Policy

In the discussions of the stimulus and infrastructure problem, little attention has yet been paid to addressing brain drain. Yet for many regions – particularly in the old industrial heartland – no issue could be more critical.

Perhaps the most important investment in regional human capital occurs at local schools. Enterprise looks to the secondary and post-secondary institutions within the area for labor. In this regard, it makes sense to fund better learning with local and state taxes as long as that talent remains within that geography.

Older industrial age cities and states are particularly dependent on a parochial labor pool. That’s the political legacy of the industrial economy. Workers tended to put down deep roots and this lack of geographic mobility made unions the only means to fight depressed wages.

But the conventional solution for regional decline has been greater ‘investments’ in education. Yet increasingly high local and state taxes for education no longer make sense. In fact it can be argued that Rust Belt cities such as Pittsburgh have often been victims of their own success. Excellent schools – particularly in the suburban periphery – increased the geographic mobility of the next generation. When tough times hit in the late 70s and early 80s, these young adults were ready to embrace opportunity wherever it may be. When they left for Houston, Phoenix or Tampa, they took all those tax dollars with them.

Out-migration isn’t a problem when your region is benefiting from some other place’s investment in human capital. But if no one is moving to your city or state, then retention of talent becomes a matter of economic survival. This is difficult to accomplish when your graduates are smart enough to know about greater opportunities that exist all the way across the country. It is also made worse when your local businesses are loath to pay the prevailing national market rate for the labor it needs.

In this sense then, plugging brain drain can help depress wages and make a place like Charlotte that much more attractive to Rust Belt graduates. Remember, captains of industry made a lot of money exploiting captive labor markets.

The dependence on local talent also disrupts network migration. Cities that must attract “foreign” workers develop pathways that make it easier for future workers to move there. It also helps connect the local economy to the global one, as has occurred on the west coast, with Asian immigrants opening connections to Pacific Rim economies and in south Florida, where Cuban migration has created a dynamic international business sector.

Furthermore, getting newcomers helps outsource the costs of cultivating human capital. Low tax regimes bank on in-migration. Poor local schools don’t really matter when the best and brightest from the Rust Belt are moving into your brand spanking new crystal palaces. In this sense, the “legacy economy” is subsidizing Sun Belt boomtowns.

The Rust Belt needs to learn from the Sun Belt. The game is all about attraction. The geographic mobility of talent within the Rust Belt would be a good place to start. Instead of squeezing the local labor pool, pave a new path to a fellow postindustrial city with a similar tax burden and effectively starve the boomtowns. Your neighboring legacy economy feels the same pain you do. Talent churning between the two locales beats the futility of fighting brain drain.

Even growth states such as Georgia are overly concerned with who leaves. Sun Belt (i.e. growth) states obsess the out-migration of native graduates as much as Rust Belt (i.e. shrinking) states do. The same policy boondoggle in Ohio exists in Georgia. Across the board, there is a prejudice for homegrown talent.

In contrast, I think older, now shrinking cities must embrace out-migration and focus more on growing the numbers of newcomers. These people will bring the new ideas and connections regions like ours need. Leave the self-destructive nativism to the Sun Belt.

Read Jim Russell's Rust Belt writings at Burgh Diaspora.