The True Wealth of Any Place

May 15, 2019

 

Over the years I have come to realize that the wealth of a community is in its people. That is true for nations, states, major metropolitan areas, and small towns.

 

People make the difference. People matter. When I think of people and places, two inexorably linked phrases come to mind.

 

The first is "human resources." It was a term first used in the early 20th century to promote the idea that people were an object of worth. It would later be bastardized by companies adopting "human resource management," in which people were viewed as a means to an end.

 

The second is “brain drain,” first coined in 1963 by the Royal Society in describing the exodus of British scientists to United States. The Brits didn’t like it then and for good reason.

 

The term has since broadened to include educated people who leave once place for another, usually for reasons of economic opportunities. It still connotes loss – one community losing its talent to another.

 

Human resources and brain drain (and brain gain) go hand in glove. When brain drain happens, the human resources of a place are depleted. Conversely, when brain gain occurs, the human resources of a community are added to.

 

Population as a Barometer

 

Population can be viewed as a barometer. Whether a community is gaining or losing population, the talent level, the brain power of the place, is being affected.

 

If I were advising a corporate client on a site search for a new facility, I would generally suggest that we confine our search to those places that are not losing population. There may be exceptions, but that would usually hold true.

 

By the same token, if I were advising an economic development organization (a community), I would want to see if there were strategies in place to stem the flow of outward migration, if that  was indeed happening. Staunch the bleeding, stabilize the patient, bring about recovery. Much easier said, of course, than done.

 

A Historic Exodus

 

The tendency of young people to leave small-town America for the big city isn't new. It’s almost a rite of passage, an exodus for some. (It certainly was for me.)

 

The movement of people from rural to urban areas has been happening for a very long time. In this country, it started in the early 1800s and accelerated after the Civil War. By 1890, 28 percent of Americans lived in urban areas, and by 1920, a majority did.

 

The trend continues today. Since 2010, U.S. metropolitan areas grew in population by more than 6 percent, while non-metropolitan areas shrank by 0.5 percent.

 

In short, we continue to become a more urban (and suburban) nation, which has fueled the fortunes of some places and has caused the decline of others.

 

Not surprisingly, that has exacerbated certain social and political tensions. As someone who grew up in rural America and continues to do much of my economic development consulting there, I bear witness to the tensions. There is an overriding belief that decision-making “elites” from the big cities simply do not understand.

 

But on a positive note, I also see creative grassroots efforts in some rural communities that give reason for hope. Local decisions taking place on a local level often have far more effect than edicts or programs handed down from Washington or state capitals.

 

A Proposition

 

On a flight home to Dallas last week from Phoenix, I sat beside a woman who sat on the board of directors of the local economic development organization from a small town in West Texas. She lamented that her town was “drying up,” that the best and the brightest young people were leaving to go to school, never to return except to visit family.

 

I was empathetic. (How could I not be?) I told her that in the end, economic development is about the young and providing a future for them. In rural America especially, it is about convincing younger people to stay, move in or move back.

 

Ultimately, it comes down to a proposition, based on the opportunities and amenities that a community can offer. If young people see low returns for their skills, why would they want to stay, move in or move back? Think of it from their point of view.

 

While moving rates have declined in the U.S., roughly a quarter to a third of adults have moved in the past five years. They tend to be college-educated and move for career advancement. That is, they leave places that offer lower returns for their skills to move to places that offer greater returns.

 

Losing Our Minds

 

A new congressional report examines the talent divide in terms of geography, which is becoming more pronounced. The report, entitled “Losing Our Minds: Brain Drain across the United States,” reveals that brain drain and brain gain tends to fall along regional lines.

 

Here is the opening paragraph of the report’s executive summary:

 

“Over the past 50 years, the United States has experienced major shifts in geographic mobility patterns among its highly-educated citizens. Some states today are keeping and receiving a greater share of these adults than they used to, while many others are both hemorrhaging their homegrown talent and failing to attract out-of-staters who are highly educated. This phenomenon has far-reaching implications for our collective social and political life, extending beyond the economic problems for states that lose highly-educated adults.”

 

And here is the last paragraph of the executive summary, which I find even more sobering.

 

“Our report provides evidence that highly-educated adults flowing to dynamic states with major metropolitan areas are, to a significant extent, leaving behind more rural and post-industrial states. This geographic sorting of the nation’s most-educated citizens may be among the factors driving economic stagnation—and declining social capital—in certain areas of the country. If we are connecting less with communities and people who are different than us, we could be more likely to see adversaries among those in whom we might otherwise find a neighbor.”

 

Prone to Stagnation

 

In a nutshell, those places that lose more of their highly educated adults are likely going to be economically worse off than those that retain or attract highly educated adults. And if the highly educated are concentrating in fewer areas, which appears to be the case, then more parts of the country will be prone to economic stagnation.

 

The Congressional report identifies the best performers over the past three-quarters of a century, those experiencing brain gain, as being the states along the Boston–New York–D.C. corridor; on the West Coast; and Illinois, Texas, Colorado, Arizona, and Hawaii.

 

States faring the worst, experiencing more brain drain, are in parts of the Midwest, the Great Plains, New England, and the Southeast, especially the Deep South.

 

What I find interesting is that some of the states identified as experiencing brain gain do not in my opinion have the best business climates, in terms of taxes and regulation, whereas some of those identified as having more brain drain are more business friendly.

 

Treasure Yours

 

As I have long maintained in numerous blogs, we are entering into a new digital machine age where there will be winners and losers in terms of people and places. (Read “The Game-Changer for Rural America.”)

 

Those communities that embrace this Fourth Industrial Revolution by investing in its people, such as introducing coding in elementary schools, are building upon their human resources and adding to the proposition to keep its best and brightest.

 

People are indeed the wealth of communities, a treasure not to be squandered.

 

 

 

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