I-Ling Shen is a senior research analyst at the Milken Institute, and co-authored the recent study “What Brain Drain? California Among the Best in U.S. at Retaining Skilled Workers.”
What went into the study and what were your findings?
The motivation of our study is that we’ve all read in the newspaper that businesses are leaving California for states like Texas, because they have low taxes and low costs. And as a result it’s almost taken for granted that people are relocating to those states where they believe the job opportunities are more abundant. So we wanted to focus our study on the interstate flow of skilled workers in the past decade. We define skilled workers as holding a bachelor’s degree or above, between the ages of 25 and 64, or senior who are above 65 but are still in the labor force. And what we found is that California, contrary to a lot of people’s belief, has the lowest skilled labor out-migration rate. So we’re doing a pretty good job of retaining skilled workers. The exact statistic is that for every 1000 skilled residents in California on average only 22 people left the state annually in the past decade. Compared to the national aggregate number, more than 30, we’re actually doing really well.
What should California policymakers take away from this?
California’s existing skilled workers prefer to stay in the state, but in the meantime we’ve also found that skilled workers elsewhere are no longer rushing to the Golden State. If we look at the general trend, people are less likely to move to other states during economic downturns, because it’s not certain if they can obtain a job in other states. But we find that despite the rollercoaster ride our economy has been through, the expansion during the middle of the decade and the recession toward the end, the number of skilled in-migrants into California has remained very flat. This is actually the part that California policymakers need to think ahead about, and think about the implications of our declining appeal to workers from other states. If we look at inflows from all over the world, we find that California has had exceptional attraction for abroad talents, and we have relied on them heavily. Nearly half of the STEM degree holders in California are foreign born. But we find that the emerging economies, like China and India, which have grown rapidly in the past decade, are offering a growing number of career opportunities. A lot of our talented workers and entrepreneurs in the Silicon Valley may have an interest to move back home because there are more opportunities to develop their business or obtain a higher level of achievement. So California policymakers need to make a strategic point to maintain a good supply of skilled worker they need for the high tech sector and knowledge based industries in the state.
Is that better solved through improving the state’s business climate or protecting higher education?
It’s more important to improve the state’s public education, because according to our report we found that retention isn’t so much the problem for the state. So the question that should be asked is not: How can business create demand for skilled workers? It’s really, in the future, were not sure if we’ll have an ample supply of skilled workers because they are no longer coming to the state and foreign born talent may be leaving. The main goal of the state government should be to have a comprehensive plan to create more homegrown talent. Because our public colleges and universities are the cradle of that talent, more attention should be paid to that respect. A major part of the problem is that the state funds for higher education have been cyclical because our tax revenue depends a lot on capital gains. That has led to what we’ve seen in the past few years: tuition spikes, enrollment cuts, salary reduction, furlough days. But even outside the past decade, looking at the long term trend the share of total state spending for higher education has declined from 15.2 percent in 1977-78 to merely 7.5 percent in the current fiscal year. It seems to suggest that the state does not put higher education as a top priority. At the same time we know that the demand on the industry side for highly educated workers has been rapidly growing.
The fundamental factor we need to pay attention to is the cycle feature of the state funds for higher education. Because the funds are so unpredictable, schools can’t plan their finances accordingly. For example for this fiscal year, only a few days before the school year started did they know there was going to be huge reduction to their annual budget.
If the state doesn’t have sufficient funds and can’t afford to offer low cost education to all the college eligible students, the state might want to shift more of these resources into offering more financial aid to less privileged students that have demonstrated academic potential and might not have the opportunity to afford college with increased tuition.
How does California’s promotion of the green sector play into the creation or retention of skilled workers?
I don’t really have that much to say about this, mainly because the green sector is still relatively new. If we look at the green sector’s share of total employment of the state, it’s just about 3.4 percent. So it’s really not that significant yet, but we know it has a lot of potential. I would think it’s a long shot to depend on the promotion of the green sector to retain, attract, or even induce more local creation of human capital. In general, I believe the success of the green sector will be very helpful in the future, but right now it’s not such a major player.