Implications of the Domestic Brain Drain


You may have seen this subject touched upon before, but someone sent me a report produced by Congress' Joint Economic Committee that further breaks out the data and adds some clarity- and urgency- to the evolving demographics taking place slowly but surely in this country.

Once, it was believed that our mass adoption of electronic communications would liberate everyone from being tied down to a geographic area. With an internet connection, the reasoning went, anyone could work anywhere they wanted. In the end, the precise opposite occurred, with urban based "tech hubs" springing up across the country. New York City, for example, was very successful at establishing one. From Google's foothold in the old Port Authority office building downtown, the tech space has mushroomed into one of the city's most dynamic employers. Today, it seems every city wants to duplicate it. The feeding frenzy over Amazon's "HQ2" was a good example of some municipalities' desperation. But it shows that in spite of the technology, even as it is made even more efficient, people still need a physical community, a neighborhood, to be a part of. And I surmise that it is the very nature of their work that leads them to seek a sense of belonging that they can't find at home. That very human need is enough to overcome what technology can offer. Because people don't have to take it.

But the politics of this demographic shift is interesting- and also worrying. Rural out-migration has been a fact of life since the Industrial Revolution began. At the beginning of the 20th Century, perhaps 40% of the population devoted itself to farming. Today, it's only 2%. Adding to this depopulation is deindustrialization, global trade, a toothless anti-trust regime, and automation. And that forces people to make choices as to how they will support themselves, and what kind of environments that will support the industry they choose, hopefully, an industry that won't shrink or become obsolete.

From the report:

"Overall, dynamic states along the Boston-Washington corridor (Massachusetts, New York, New Jersey, and Maryland), on the West Coast (California, Oregon, Washington), and in other parts of the country (Illinois, Texas, Colorado, Arizona, and Hawaii) are the best at retaining and attracting highly-educated adults. Meanwhile, states in northern New England (New Hampshire and Vermont), the Rust Belt (Pennsylvania, Ohio, Indiana, Michigan, Wisconsin, and Missouri), the Plains (North and South Dakota and Iowa), and the Southeast (West Virginia, Kentucky, Tennessee, South Carolina, Alabama, Mississippi, and Louisiana), as well as Delaware, fare the worst on both counts."

Now, that's odd. Wasn't the story that the expensive, highly taxed Blue States were facing outmigration to cheaper places to live? Well, maybe if you look at an entire state. But New York City isn't Oneonta. And it's not the raw numbers that matter here. It's WHO is doing the moving.

As far as measuring "Brain Drain," the gap in the percentage of Highly Educated between Leavers and Entrants is negative in these states:

Virginia -6.5

New Jersey -6.6

Maryland -10.1

Illinois -10.4

New York -15.7

Massachusetts -16.4

California -20.2

A positive reading means the state is LOSING educated workers. Here again, are the top six.

North Dakota +19.9

Delaware +17.2

South Dakota +14.6

Iowa +14.3

Mississippi +13.5

Idaho +12.0

Put another way, the economics are driving the migration of the better educated. Many people never grasped that a new labor template was changing right before their eyes, and the more it changed, the more some tried to cling to the one that was melting away. They're still at it, but the world will stubbornly keep turning.

This is also driving a massive political wedge. As I've pointed out before, population density is the chief predictor of political choices people make. Those bottom rural six states each have two Senators, just as the top six populated ones do. At the present time, 51 Senators represent only 18% of the population. If trends hold, by 2040, eight states will have half the population, and 42 will hold the other half. This is untenable as it stands NOW. It will grow to be truly intolerable the longer it goes on. People are openly speaking about abolishing the Senate, and expanding the House with a more accurate representation of the population. Naturally, the people who benefit from this lopsided, if not plainly rigged, state of affairs have come up with all kinds of facile defenses of it. This is besides the controversy over the Electoral College, where arbitraging electoral votes is more important than just plainly winning an election.

In any case, here is the entire report, which makes for some interesting reading.

https://www.jec.senate.gov/public/index.cfm/republicans/2019/4/losing-our-minds-brain-drain-across-the-united-states

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FloMartin Securities, Inc.

Donald R. Davret, Investment Advisor Representative

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