Archived: Cities, Companies Wither or Prosper on Their Reputation to Attract Talent

By Michael Nam

Enrico Moretti, professor of economics and author of The New Geography of Jobs, elaborated at the DiversityInc Top 50 Companies for Diversity event on the diverging fortunes of cities based on attracting college-educated workers. Moretti makes the case that the policies and reputation of innovative cities attract the best talent and indirectly improve the prosperity of the rest of such communities.

Much like Rev. Jesse Jackson’s keynote speech later in the evening that recounted the economic benefits to the American South in the wake of the Civil Rights Movement, Moretti’s talk was as much a warning as an education about what the lack of flexibility and diversity in approach to human capital could bring to both communities and businesses.

“The same trends that are making well-educated workers better off and less-educated workers worse off are at play for communities and companies,” he said. “Over the past 30 years, the best predictor of a city’s economic growth was the share of workers with a college degree in the labor force.”

Moretti classified three separate categories for the cities diverging in economic prosperity: the brain hubs, cities in the middle, and cities with traditional industries. Unlike the college-educated labor force of brain hubs, cities and companies with a traditional approach to labor recruitment, whichfail to manage their reputations for recruiting, appear less attractive to the most desirable talent.

Silence or complicity with racist policies or gay-bashing legislation, slow or opaque communications on those issues or outright hostility to diversifying the workforce will increasingly make it difficult to recruit the most innovative and productive workers from a millennial generation that has the largest share of non-white adults in history and a progressive view of LGBT issues, according to Pew Research.

For instance, some Indiana companies, such as Cummins and Eli Lilly & Company (No.’s 21 and 24 on the DiversityInc Top 50 Companies for Diversity List), stated up front how Gov. Pence’s anti-LGBT efforts would hurt the ability for the state’s businesses to recruit, showing an understanding of the dangers of losing out on the best talent based on local reputation.

For Silicon Valley, notoriously lacking in gender and racial diversity, Luke Visconti, CEO of DiversityInc asked Professor Moretti about the warning a once-prosperous city like Detroit provides.

“If you look at the ’40s, even the ’50s, Detroit, based on all these indicators, was the Silicon Valley from those times,” Moretti said. “Detroit had one of the highest patent per capita production in the U.S., had the highest labor productivity in the U.S. and all the best human capital and talent in the U.S., and of course today it is certainly not in the same shape to say the least.

“The fact that we’re living in an economy where success begets success doesn’t mean that this is forever, doesn’t mean that this is going to continue forever,” he continued, “and I think the tale of Detroit should be a very good parable.”

Moretti stressed the importance of growing a base of college-educated talent for what he calls “the multiplier effect.” Moretti calculated that for each innovation job created, five additional service jobs are created in a city. The “clustering effect” described how such job creation self-reinforces, magnifying the distance between brain hub cities and those with low-innovation.

Tying talent acquisition into the talk, Lisa Gutierrez of Cox Enterprises, the company that owns Cox Communications, No. 17 on The 2015 DiversityInc Top 50 Companies for Diversity list, asked Moretti about human capital as an investment versus cost.

“In a world where competition is global, where everyone can buy very fast computers, where everybody has access to all the information in the world on the Internet, where everybody can buy machines and move stuff in and out very easily, the single most important factor that drives success, not just in communities but also in companies, is the human capital in the work force,” Moretti responded.

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