Where Talent Wants To Live

With unemployment down and wages rising, there’s growing concern that a lengthy and potentially crippling talent shortage will sweep the U.S. Addressing this could become a critical issue for businesses competing with Asian and European firms facing similar and, in many ways, more severe shortages.

In the U.S., the shortage has been sparked by both robust economic growth and labor force growth running at about one-third the norm since the middle of the last century. This is leading employers to consider raising wages for all kinds of workers.

The complete listing for the Best and Worst States for Business can be found here.

Some suggest that firms must move to expensive, large urban cores to attract talent, particularly millennials. This assessment needs to be rethought. The labor shortage impacts not only highly coveted tech talent but also those in fields like supply chain management and manufacturing. In fact, according to the Bureau of Labor Statistics, IT is expected to grow by barely 0.2 percent in the next decade, well below health, energy, construction, urbhospitality and professional and business service sectors.

Workers in these fields may not be as willing or able to live in the cramped conditions typical of New York or San Francisco. And even well-educated workers, particularly those in their 30s, appear to be gravitating toward less expensive, more livable metros (see maps). To explore the best future markets for talent, we did a careful examination of U.S. Census Bureau data, both by metro and within metro, as well as by age cohort. We focused not only on millennials but also older workers, many of whom increasingly tend to remain in the labor force.

 City Limits

Urban cores have become more successful in attracting residents over the past two decades—a sharp reversal from the late ’70s and ’80s when crime chased workers and companies out. “Legacy” urban cores populated by highly educated millennials, such as New York, Boston, Washington, D.C. and San Francisco, have thrived.

“Some suggest that firms must move to expensive, large urban cores to attract talent, particularly millennials. This assessment needs to be rethought.”

Yet, this trend is slowing, according to the U.S. Census Bureau’s American Community Survey (ACS) five-year estimates (2007 to 2011 and 2012 to 2016, the latest data available for such analysis).

In fact, growth in urban cores (based on a city sector model analysis) has slowed overall and in every group age 25 and over. Among millennials 20 to 29, the urban core of major metropolitan areas (over 1 million) grew by only 282,000 in the period 2012 to 2016 from the period 2007 to 2011.

The percentage of this age cohort living in the urban cores dropped to 19.1 percent in 2012 to 2016 from 19.4 percent in 2007 to 2011. In the later period, over 1.5 million (representing 85 percent of the total growth) headed to the suburbs or exurbs.
In April 2016, the real estate website, Trulia found more millennials leaving the Washington, D.C. and New York metropolitan areas than expected. In fact, U.S. Census Bureau data indicates that between 2013 and 2014, only 2,662 people between the ages of 25 and 34 migrated to Washington, D.C., compared to 10,430 people in that age bracket who arrived between 2010 and 2011.

Joel Kotkin and Wendell Cox :Joel Kotkin is the presidential fellow in urban futures at Chapman University and executive director of the Center for Opportunity Urbanism. Wendell Cox is a senior fellow with the Center for Opportunity Urbanism and principal of Demographia, an international public policy firm.