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April 2004, Vol. 127, No. 4

Précis

The “brain drain”

Précis from past issues

The “brain drain”

In an article in The Living Cities Census Series (Brookings Institution Press, January 2004), author Paul Gottlieb analyzes the location and migration patterns of younger and older workers—especially those with college degrees—in the Nation’s most populous metropolitan areas. Gottlieb’s article, "Labor Supply Pressures and the ‘Brain Drain’: Signs from Census 2000," urges State and local economic development policymakers to consider "shifting their emphasis from increasing the quantity of certain types of workers, toward embracing human capital development as a longer-term goal."

During the recent tech-driven economic boom, Midwestern cities such as Cleveland, Pittsburgh, and Des Moines experienced an exodus of workers. At the same time, these cities had a large number of workers in the 55-to-64-year-old age bracket, which causes a major dilemma for policymakers: the available quantity of labor will further decline when these older workers retire. The Great Lakes region, for example, will soon face a dilemma once its skilled machinists retire "en masse."

Two major economic consequences could result from these demographic shifts. First, wages will rise in areas where people do not want to live or work. If higher wages do not bring back workers to these areas, then a "vicious spiral" could follow, Gottlieb explains. Goods produced locally would price out of global markets, and businesses would move to areas where more skilled workers live. Second, and more seriously, a lack of specialized human capital in these metropolitan areas would hinder economic growth and competitiveness.

To combat these consequences, many States and metropolitan areas have implemented "brain drain" prevention programs to retain young college-educated workers—who are more entrepreneurial and take more risks than older workers. These programs include (1) internships designed to familiarize promising students with local companies or fields; (2) loans that are forgiven if a student settles in the home State; and (3) scholarship or tuition policies that attract local high school students to local universities, following the empirical observation that those who go to college in State are more likely to take their first job there.

Using data from the 1990 and 2000 decennial censuses, Gottlieb explores the threats to the labor supply created by retirements and youth migration. The analysis primarily focused on the cohort aged 25 to 34 in 2000. However, older workers in skilled occupations were also analyzed.

The author’s conclusions include the following:

• The proportion of workers who are young and educated is highest in the Northeast region, followed by the Midwest, the South, and the West.
• Young and educated workers represent a larger part of the workforce in metropolitan areas with high populations, strong arts scenes, significant international immigration, and large numbers of high-tech jobs.
• Metro areas that captured the largest number of new 25-to-34-year-old residents between 1990 and 2000 are located almost exclusively in the South and West.
• Compared to older workers (aged 35 to 64), young workers migrated more often to high-amenity, high-human-capital metropolitan areas during the 1990s.
• Metropolitan areas in the Northeast have the highest proportions of workers between the ages of 55 and 64.

Gottlieb asks, "How can economic development professionals approach issues of both labor supply and demand to create economic growth or stem decline?" Policies in labor supply and demand target individuals and firms, respectively. A chamber of commerce, for example, could help create a community-college program whereby retired manufacturing specialists become teachers, mentors, and recruiters of young apprentices to continue their trades. For firms, tax breaks and research tax credits could increase their sales or profits—and thus, eventually increasing the demand for labor.

At the national level, these programs may not be enough of an incentive; there may not be enough young workers to go around. National proposals, instead, focus on keeping older workers in their jobs longer by offering flexibility in work hours and working conditions. "The concern," Gottlieb writes, "is that current legal requirements and institutional practices give older workers an all-or-nothing choice about retirement, rather than a range of options that would suit their preferences about the mix of work and leisure."

Despite the misgivings of labor-supply and labor-demand policies, one thing stands clear. The debate of these policies will surely continue, considering the coming retirement of the "baby boomers" combined with the human capital requirements of economic growth.