Throwing water on New Mexico’s latest “economic development” fad

While he doesn’t come out and say it, that is the practical effect of a recent paper from the Federal Reserve Bank of Atlanta that was covered by Richard Metcalf in Monday’s Business Outlook section of the Albuquerque Journal.

The “creative class” model is largely credited to Richard Florida, a demographer and author. The idea is that cities should attract young, highly-motivated, and creative people to make an area “cool” and thus economically-prosperous. He uses the “Three T’s” Talent, Tolerance, and Technology to explain what cities need. This concept has seemingly formed the basis of many “economic development” strategies in Albuquerque and New Mexico as a whole with Marc Lautman leading the charge.

You can see these concepts reflected all over: Rail Runner, Spaceport, Bus Rapid Transit, InnovateABQ, broadband, and more. But is this an effective economic development strategy? Here are some quotes from Metcalfe’s article:

The basic finding is a low level or sometimes lack of trickle-down benefits from the college-educated strata of a metro population to the less-educated, more blue-collar working class. Of the four labor market measures, the lowest impact was in reducing the poverty rate.

One of the conundrums of economic development, especially in the context of growing a knowledge-based economy, is that the advantage goes to “a smaller group of workers within a metropolitan area that have high levels of educational attainment and skills,” the paper says. The upshot is more income inequality.

On the other hand, data also suggest that, in some metros, economic growth precedes growth in the percentage share of college grads – not the other way around – the white paper says.

In other words, lavishing tax dollars on the wealthy and prosperous “creative class” is great for the creative class, but there’s no real “trickle down” effect from this GOVERNMENT SPENDING. And, strong economic growth often PRECEDES growth in the number of college grads. They move where the jobs are!