December 12, 2003
Understanding Indiana 's Brain Drain
As we roll up our sleeves and dive into the task of addressing Indiana 's economic shortcomings, we should keep in mind the words of the celebrated economist and philosopher John Maynard Keynes. "Policymakers," Sir John penned more than 80 years ago, "are usually slaves of some defunct economist." Or to state it another way, the brilliant solutions we devise for the problems of today have probably all been printed on the pages of books that have been sitting on library shelves for decades.
That rings especially true as we grapple with the issue of Indiana 's "brain drain," the phrase used to describe the net exodus of younger, educated people from our state. Once we get past the emotional and bureaucratic obstacles to rationally discussing the situation, we find that the words of some "defunct" economists are surprisingly relevant.
To our leadership's credit, we have largely moved beyond the knee-jerk reaction of denial to the consistent finding of low educational attainment in the Indiana labor force. There are simply too many other aspects of our economic development -- such as slower wage growth, fewer white collar jobs, and a lower high tech presence in the economy -- that go along with having fewer college-educated workers to pretend that it doesn't matter. As depressing as it is to hear of our state's shortcomings in this area, we are at least facing up to them, and this is good.
Less inspiring has been the rhetoric of some institutions and leaders who feel threatened by the situation, particularly in higher education. To a very simple -- and incorrect -- way of thinking, if so many of our young people are graduating from college and leaving the state, those degree-granting institutions must be doing something wrong, no? State-supported institutions are particularly vulnerable to this reasoning, since the tax dollars they receive are based on the assumption that they are preparing Indiana 's future leaders, not those of some other state.
But here the eighteenth century writings of economist Adam Smith weigh in. It is the process of specialization, Smith wrote, that lies at the heart of efficiency and prosperity. We send our children to college to gain specialized knowledge because that is what the labor market will reward. Should we be surprised when they move out of state to find opportunities that provide that reward?
Not according to the writings of economist Gary Becker. Becker's idea that we all make investments in our intellectual, or "human" capital, holds that returns to those investments will only occur when we go to work for companies that make use of it. The more specialized are the skills that we learn, the higher is likely to be the return, but only if we widen the geography of our job searches to find the best fit.
Thus the real problem associated with Indiana 's brain drain is not the exodus of our state's educated people to opportunities in other states. That, by itself, is a sign that the product of Indiana's higher educational institutions has value, and that those institutions are doing their jobs well. The problem is that the Indiana economy is not able to attract an equal or greater number of college graduates from other states to take their place.
We've made some, but not enough, progress is trying to understand that problem as well. The life sciences development initiatives, as well as those directed at things like logistics, information technology and advanced manufacturing, all add up to a recognition that our state simply has too few opportunities for its more highly educated young people to pursue. What it will take to make these efforts succeed is something we're all trying to find out.
We think that universities and colleges are an important part of the formula. Not simply in their role as educators of young men and women, but in the complex relationships they can develop with the innovative forces of the private sector economy. Surely an economist somewhere has written something on that, but that will have to wait for another time.
About the Author
Increasing Importance of Summer JobsThese jobs offer an opportunity to learn as well as earn money.
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
Big Savings for Ending Prevailing WageMy statistical models show that repealing state prevailing wage laws save taxpayers money.
Re-Thinking Economic Development A large share of the most mobile families—perhaps half—no longer need to live near where they work.View archives