Economist's Commentary: July 1, 2008

College Graduates on the Move

By Lawrence Yun, Chief Economist

College graduates earn higher income and have higher homeownership rates than high school graduates. They also have an itch to find greener pastures. Within five years of graduation, 45 percent of college graduates will have settled in a new state versus only 19 percent for those with high school diplomas, according to a 2001 study by the Boston Federal Reserve. This data was also highlighted in a recent Economist article on sorting by political affiliation.

Where they settle, expect vibrancy and energy to infuse the local economy and cultural amenities. Interestingly, even as the U.S. economy is teetering on the edge of economic recession, local job gains have been strongest recently in places where there is a higher than average concentration of college graduates. Austin, San Francisco, Seattle, Denver, Washington, D.C. and the North Carolina Research Triangle area of Raleigh-Durham-Chapel Hill are prime examples.

Is your local market doing something to attract these talented people? Is it the case of "build it (in this case, cultural amenities) and they will come?" Or is it the case of bringing in start-up businesses so they can attract talented people to the region? If so, then what factors favor entrepreneurship and a good business environment? One factor that does not appear to have an impact is the cost of housing. The Boston Fed study could not definitively show that a lack of affordable housing is a barrier to college graduates moving to the area.

The factors that draw young talented people should be carefully studied and the right policies adopted. Southern states may want to think about adequate public infrastructure, museums, parks, and the like. Midwestern states need to think of the high cost of hiring - including sacred issues such as pension benefits to unionized workers. Another thought, perhaps, is that there is very little public officials can do about increasing their area's draw because the biggest factor influencing migration decisions may be about Mother Nature. It is well known that a greater number of people seek out warm weather states or areas with plenty of recreational opportunities. Still, everything should be put on the table to discuss what encourages and what hampers young talents from migrating to your area.

Recently, the winners of the great college migration were the Mountain states, according to the table in the Boston Fed report, as shown below. Nearly 70 percent of college graduates living in the region had graduated from another region and moved in. At the opposite end, only 10 percent of college graduates living in the North Central region (i.e., the Industrial Midwest) came from other regions. Given the statistics, one has to wonder how many of the talented University of Michigan students paid subsidized in-state tuition only to leave the state after graduation.

Realtors® throughout every locality have been active and influential in shaping public policies. Is there a role for Realtors® to play in this arena?

Census Definition of Regions.

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