Why Does Education Matter?

Some recent research suggests that some cities are behind the curve on employment opportunities.  What is the issue? Is there a valid causation related to education to be found?  It appears that the percentage of residents who have college degrees can forecast the economic success of a locale pretty well.

According to Edward Glaeser, a Harvard economist, metropolitan areas where more than 1/3rd of the population had college degrees (as of 2010) recently had an average unemployment rate of 7.5%, compared with a rate of 10.5% for those areas where less than 1/6th of the population had a college degree1.  The argument is that the latter areas are being left behind in the current economy.

The favored locales include expected economic powerhouses like New YorkBoston, Chicago, and San Francisco, but also hot beds for technology and new startups like Raleigh, Austin, Madison, and the Washington, D.C. area.  Out of favor are older manufacturing centers including Dayton, Youngstown, and Tampa.  A table listing the data for the top 100 metropolitan statistical areas can be viewed here. As you can see from the data spread, the phenomenon is not a Red State/Blue State or North/South issue.

Lessons – if you have a small or young growing company in need of human capital, you have two choices.  If your management team is in place, or you need a long term supply of manual labor, look for those out of favor areas, they will have more of the type of labor that you need.  If you don’t have your brain power in place, or need a workforce heavy with technical skills (engineers, computer science, etc.) head to the in-favor locales, the environment for your high powered skill sets will be better there.  As a bonus, these high percentage areas self-reinforce with a higher quality of life  –  so the long term looks good.  The rich get richer, the not so try to improve slowly or they die off.

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