The Mobility Paradox: Investing in Human Capital Fuels Migration

China has an interesting urban development strategy. The government bypasses those areas that it considers backward and plagued by poverty and entrenched political corruption. Instead, the investment goes into those areas it presumes to be new boomtowns.

Now imagine if that Darwinian approach was used here in the United States. A report (“City Beautiful”) authored by two economists at the Federal Reserve Bank of Philadelphia advocates pushing federal infrastructure dollars – which could soon be flowing in the hundreds of billions – not towards our tired, hard-pressed urban areas but those that have experienced the greatest extent of gentrification.

If you don’t want to slog through the published paper, then you can read about the controversial findings in a recent Boston Globe article. The journalist, not surprisingly, sensationalizes the conclusions and the choice quotes do a great job of provocation: "'If you have sun and a beautiful beach and 300-year-old buildings, it's no wonder that you're going to attract people,' said [co-author Albert Saiz]. 'But that's no use for Detroit or Syracuse.'"

The author of the Globe piece goes on to question the coming urban bailouts: “Why send another federal dollar to bolster manufacturing in Akron when it could support a golf course in sunny Phoenix?”

I get the sense that the economists in question aren’t making such a stark distinction. But I can understand why the press would go down that road. I’ve read the research and there are concerns about the wisdom of investing in cities that currently don’t attract tourists or Richard Florida’s elite Creative Class.

The Federal Reserve Bank of Philadelphia report attempts to reconfigure the understanding of urban geography. People are congregating in urban centers for a new purpose: leisure. The old school of thinking identified the central business district (CBD) as the economic heart of the metropolis. Higher densities were the result of a more efficient way of doing certain types of work (e.g. financial, insurance and real estate).

The new school sees the city as a special playground and the study tries to capture this effect by looking at tourist Meccas. In short, jobs are following talent to pleasant places to live.

Gerald A. Carlino and Albert Saiz try to figure out if the geographically mobile are indeed heading to sunnier climes or if the leisure amenities follow the talent. They claim that quality of life comes first. The best and brightest are not chasing top employment opportunities. They are keener on finding a “cool” place to hang out.

Other research suggests this approach may be limited. For example, although job growth has been very strong in some sun belt cities that are cited, growth rates in other amenity-rich cities – Boston, New York, San Francisco – have been well below par. Although often attractive to twenty-somethings, these areas also suffer a persistently strong net outmigration.

Perhaps more to the point what use is any of this to those living in the heartland cities? Should Akron start putting more money in skateparks or global warming?

There are huge problem in spending money in order to attract the geographically fickle. Fads fade and the mobile – largely people under 30 – will move again. And what about the people who can’t move? We’ve yet to address the mobility paradox.

Moving to a better place might be one of the most distinguishing features of American culture. However, less and less people can manage to do so. There are considerably more “stuck” than there are “mobile.” The nomads of the knowledge economy comprise the global elite. They can live wherever they like and, particularly when young, can move at the drop of a hat.

Where does that leave the postindustrial cities currently failing to attract the twenty-something demographic? One suggestion is to better educate people tethered to their neighborhood. The rub is that greater investment in your human capital will make your young adults more likely to leave. This is the mobility paradox. Regional workforce development has the unintended effect of increasing out-migration.

A common response to the mobility paradox is the transformation of a downtown area into a “cool city.” The theory is that the best and brightest won’t leave if there are more fun things to do. Tying up the urban budget with projects aimed at retaining the creative class has its own perils. There is little, if any, evidence indicating that this policy will decrease the geographic mobility of the well-educated. Many cities stuffed with cultural amenities also sport high rates of out-migration. Furthermore, tastes change. ”Best places to live” lists change quite a bit from one year to the next.

We should learn from the bust of hot destinations such as Florida or even California. Today’s paradise is tomorrow’s backwater. Meanwhile most of the population will continue to live in “Forgottenville.” Should we just forget about them?

Globalization would seem to reward such an approach. Some cities will cut it, most won’t. Good luck dealing with the political instability. China gets away with ignoring its “old” cities thanks to robust growth and iron-fisted control. Given the current economic slowdown, things may be getting tense there, particularly in the left-behind industrial towns in the interior.

So should amenities drive President Obama’s economic strategy? These days, the Sunshine States also are in dire need of a bailout. Alabama fights Michigan for federal attention. If the Rust Belt benefits from the Chicago President, let’s hope it's for its own sake – not just the creative class.

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