In my last post we looked at data on how young professionals have far different preferences in housing than previous generations of recent college graduates.
Many prefer high-density, high-amenity, central-city downtowns, and to rent rather than buy.
It’s obvious why it’s in the interest of central cities like Grand Rapids to respond to this growing demand.
It probably is less clear why it is in the interest of the entire metropolitan area and even the state to make responding to these location preferences of young talent a priority.
Rich Karlgaard, publisher of Forbes magazine, summed it up best: “Best place to make a future Forbes 400 fortune? Start with this proposition: The most valuable natural resource in the 21st century is brains. Smart people tend to be mobile. Watch where they go! Because where they go, robust economic activity will follow.”
Young professionals are the most mobile segment of society. Where they choose to live and work after college will be a big determinant in what regions and states are prosperous in the future.
All of the high, non-energy dependent, per capita income states are anchored by a prosperous big metro with a central city that is a talent magnet. In the Great Lakes region, think Chicago and Minneapolis.
Professionals and managers are now, and increasingly will be, the core of the middle class. They will play the same role in the economy as high-wage factory workers did for most of the 20th century when they were the core of the middle class.
Their purchasing power will create demand for housing, retail, hospitality, etc., which will increase jobs in all those sectors. That doesn’t mean just in the neighborhoods where they live and work, but throughout the region and even the state when they vacation and purchase second homes.
We now have data on how much college graduates add to local economies. The data come from Jonathan Rothwell of Brookings Institution.
Rothwell calculates “the average bachelor’s degree holder contributes $278,000 more to local economies than the average high school graduate through direct spending over the course of his or her lifetime; an associate degree holder contributes $81,000 more than a high school graduate.”
Specifically, Rothwell calculates that households where the highest-educated member has a master’s degree or more in 2014 spent $41,000 in the local economy and paid almost $8,000 in state and local taxes, compared to $32,000 and $5,000, respectively, for households with someone with a bachelor’s degree; $25,000 and $3,000 for an associate degree; $22,000 and $2,000 for some college; and $19,000 and $2,000 for a high school degree.
That extra spending creates more jobs for those without college degrees.
In a New York Times column entitled “Teach Your Neighbors Well,” Harvard economist Edward Glaeser writes that the unemployment rate for all was lower in metropolitan areas with the highest proportion of adults with a four-year degree or more. So it follows that the more college-educated people who are located in the region, the lower the unemployment rate is for those without a college degree.
Young professionals also grow the economy by being creators of new businesses and, where they are concentrated, attracting businesses. That is Karlgaard’s central insight. Unlike highly paid factory workers of the past who moved to where the jobs were, increasingly, knowledge-based employers are moving to where the talent is.
That’s because talent is the most important asset to their enterprise and in the shortest supply.
Recent examples of employers moving to where the talent is are the relocation of General Electric’s headquarters from suburban Connecticut to downtown Boston, and ConAgra moving its headquarters from Omaha to downtown Chicago.
Both GE and ConAgra cited access to talent as a major factor in their relocation.
It all adds up to needing a state and regional economic development strategy that makes preparing, retaining and attracting talent the top priority.
Lou Glazer of president of Michigan Future Inc.