IBJOpinion

MARCUS: If the brain drain stays open, what's left?

Morton Marcus
November 20, 2010
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Morton Marcus

When a person reaches my age, there are dreams of visiting exotic places. A group of scholars are going to meet in Erie, Pa., to discuss “The Brain Drain.” I volunteered to speak, but no invitation has been forthcoming. I’m disappointed.

“The Brain Drain” is a big topic nationally and in Indiana. Locally, it has been lamented for more than 40 years. If all the talk is any indication, we are now down to the Social Sludge and the Witless Wannabes (which might explain the Indiana General Assembly). This departure of gray matter has been studied and decried by some of the most prominent organizations in the state, including Lilly Endowment Inc., the Indiana Fiscal Policy Institute, and the Indiana Commission for Higher Education.

Millions have been given by the endowment to Hoosier colleges and universities to retain Indiana graduates. Yet, the drain remains unplugged. Although Indiana generates thousands of degrees each year, the state fails to keep its diploma holders.

“There are not enough businesses expanding in or coming to Indiana,” explains Larry Gigerich of Ginovus, an Indianapolis economic development consulting company. Gigerich then compliments Gov. Mitch Daniels’ program, “Indiana’s Economic Comeback,” for “trying to make Indiana the most hospitable place for businesses to invest.”

The issue may not be a lack of jobs, but a lack of interest by young people to live in Indiana. It may be a nice place to visit as a post-secondary student, but not a place where one wants to live.

Many years ago, I asked my class in urban economics at Indiana University to describe the characteristics of the place they would want to live. The students almost unanimously described San Francisco. Upon investigation, I discovered that none of them had ever lived in or visited the City-by-the-Bay, where crooners leave their hearts.

What does San Francisco have that Fairmount does not? The California city is a place of human density and economic variety. Fairmount can claim little more than being the birthplace of James Dean, who specialized in playing sullen, embittered characters in a handful of movies.

If being dull does not satisfy you as an answer for Indiana’s failure to hold young people, let’s consider some numbers. The median hourly wage in May 2009 in the United States was $20.90; for Indiana, the figure was $15.03. Where the average worker in the Indianapolis area was earning $18.72, the Bay-area worker was making $29.26 per hour.

Some say the costs of living in the two places are different. But the fact is that the wages are different and prices follow wages, not the opposite way around. Housing is cheaper in Indiana because fewer people want to live here and the value of the goods and services we make is lower than in the Golden State. Lower-valued outputs lead to lower wages which lead to lower housing prices.

When young people choose to live elsewhere, the average age rises. From 2000 to 2009, in 53 of Indiana’s 92 counties, the gain in the population 65 and older exceeded the total population gain of the county. The problem is not a deficiency in fertility or a lack of college degrees.

It’s easy to say the problem is a failure of business investment. We could not admit that the failure is a stodgy environment, communities with hardened intellectual arteries, and businesses that feel at home in such places.

Yes, the issue could be the brain morbidity of business and civic management rather than a need for more business tax incentives.

But I don’t think I’ll get a chance to say that at an academic conference in effervescent Erie.  Academics and the public want to believe that degrees are the essence of progress.•

__________

Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.

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