The More Hard Data We Know, the Better We Can Make Hard ChoicesThis November, 2003 series was written by the Lexington Herald-Leader's John Stamper and Linda J. Johnson.
Based on all current data I've seen, we haven't made much progress in the last six years (see post below, comparing Lex's Per-Capita Incomes to other cities).-----
Alan ReFalo is the quintessential Kentucky boy done good.
-Therefore, he now lives in Nashua, N.H., just outside Boston.
-Son of a woman who escaped the poverty of Eastern Kentucky after high school, ReFalo continued his family's climb up the ladder of life when he joined the Air Force in 1989 to earn money for school. Eight years later, he became the first of his family to graduate from college, earning an electrical engineering degree from the University of Kentucky.
The single 32-year-old now gets paid $80,000 a year, designing semiconductor chips by day, riding his mountain bike by twilight and rocking with live bands by night.
Unfortunately for Lexington, statistics show that ReFalo was only one among thousands of young, well-paid, well-educated professionals who left the region over the past decade.
Generally, they were replaced with waves of rural refugees, desperate to exchange the poverty of rural Kentucky and other sparsely populated places with the economic opportunity of a city. This reshuffling of society's deck of cards has provided swift growth for Lexington, but a questionable amount of prosperity.
The lackluster quality of growth suggests the region's economic vitality may be slowly shriveling over time as its brightest, most creative individuals seek a different life in booming areas of the nation that have placed an emphasis on developing knowledge-intensive industries and a quality of life that attracts young professionals.
"It's not that things are terrible here; we could just do so much more," said Kris Kimel, president of the non-profit Kentucky Science and Technology Corp. "It's kind of like the frustration of being a basketball coach watching his team go to a 10-5 record when it should be 15-0."
The nation's most coveted cities grew differently than Lexington during the past decade. These cities, known as "talent magnets" or "idea cities," grew by attracting large numbers of young, well-educated professionals. They prospered with an abundance of ideas and talent, not raw materials and cheap labor. Cities such as Austin, Texas, and Raleigh, N.C., used this recipe for growth to transform themselves
(nice verbiage!) from overgrown college towns, much like Lexington today, into meccas of well-educated youth capable of hosting the innovative industries that will drive the nation's future economy, said Don Hicks, a political economist at the University of Texas, Dallas.
"What you see is that entirely new occupations and industries unfold there first," Hicks said. "It's just an undeniable fact that you see high rates of business formation and venture capital investments in a few pockets of the U.S."
Not fitting the pocket pattern -- Lexington isn't one of those places.The Lexington metro area -- made up of Fayette and the six adjoining counties -- gained 8,504 taxpaying households and $195.8 million in total household income between 1992 and 2001 due to domestic migration.
But each new household actually made $1,190 less per year than those who left the region, according to a Herald-Leader analysis of Internal Revenue Service migration data.
By recording where individuals file their tax returns, the data provide a clear picture of how money and people flow from county to county across the United States. The numbers show, for example, that more than half the population growth due to migration in the Lexington metro area between 1992 and 2001 was attributable to households moving from 29 Eastern Kentucky counties. Those households, however, had average incomes of $26,102, about $21,000 less than the average household already living in Lexington.
The city also attracted significant numbers of low-income households from rural counties in South Central and Western Kentucky. While rural migrants flooded in, the city's population of young professionals stampeded elsewhere. A U.S. Census Bureau report released early this month shows that the Lexington metro area's population of young, single, college-educated people declined by 13 percent between 1995 and 2000, falling from 15,121 to 13,185. Only 36 metro areas, out of 276 in the nation, lost larger numbers of people in that population subgroup.
The Herald-Leader's analysis of IRS migration data shows where many of those people are going. Metro Lexington lost higher-income households to "talent magnet" cities such as Boston, Raleigh, San Diego, Charlotte and Houston. For instance, the 441 households who left metro Lexington for the Raleigh area, also known as the Research Triangle, had average annual incomes of $58,096. The 371 households that made the opposite move during the 10-year period had average incomes of $45,080.
The net export: 70 households and $13,016 per household.
"You're losing talent and gaining an increasingly dependent population, and that's a problem," Hicks said.
A normal pattern?Some experts, such as University of Louisville economist Paul Coomes, think the data show a perfectly normal pattern of migration for a "feeder city" like Lexington. "Lexington sells higher-education services to the rest of the world," Coomes said. "All college towns are going to export a large amount of human capital, but you're subsidized to do that; you're not a net loser."
In his view, Lexington's role in the economy is to import large numbers of people from rural and smaller urban areas, educate them, then export most of them to cities with more job opportunities, such as Louisville, Cincinnati and Nashville. Lexington gets paid to provide that service, through hundreds of millions of state dollars that pour into the University of Kentucky each year.
If Coomes is right, Lexington is performing its role beautifully. The metro area, for instance, collected a net gain of 939 households from the Huntington, W.Va.-Ashland, Ky. metro area between 1992 and 2001. The gain from Owensboro was 336 households. At the same time, Lexington had net losses of 723 households to the Louisville metro area, 781 households to the Cincinnati metro area and 483 households to the Nashville metro area.
No one disputes that the University of Kentucky is a key underpinning of Lexington's economy, but settling for "feeder city" status isn't much of a vision, suggests Kimel, of the Kentucky Science and Technology Corp. "If that's our place in the world, we've got big problems," Kimel said. "Given all the assets that we have, our vision ought to be striving toward creating an idea city that is actively supporting innovation in all sectors, from services to arts to education."
Nearly 29 percent of people in the metro area are college graduates, ranking Lexington 64th out of 318 metro areas, according to William Frey, a demographer with the Brookings Institution, a centrist think tank in Washington, D.C. But instead of focusing on Lexington's capacity to innovate -- through universities, research and development, and entrepreneurial drive -- the region has instead relied on its status as a low-cost business center to lure regional hubs of national and international businesses.
That formula has worked for the city in the past, producing a diverse economy that has been virtually recession-proof for decades. But "more is required now," Kimel said. He thinks the city's political, business and education leaders can't continue squandering their opportunity to turn the vast amount of research and knowledge produced at the University of Kentucky into viable businesses with growth potential. "We're complacent, and we're likely to wake up one day and find that we've lost a lot of these assets," Kimel said.
The economy has changed rapidly over the past decade, leaving Lexington in a lurch, searching for its place in the world, some economic development officials say. Its traditional strengths -- low-cost labor and electricity -- aren't that important anymore. Its potential future strengths -- a major research university and a high concentration of college graduates -- will take time to nurture after decades of under-investment.
"We're all standing around saying, 'What happened?'" said Julian Beard, Lexington's economic development director. "Our focus is very recent, and it's going to take longer; Silicon Valley didn't get to where it was in 10 years."
(Just last year - 2008 - now Councilman Beard sang a different tune, emphatically telling the public "Lexington will never be Silicon Valley... we need to find a different target to emulate.")
But the rapid restructuring of America's economy means Lexington is quickly losing its capacity to supply people with good-paying jobs that require relatively low education levels.
After decades of attracting manufacturing plants from Asian automakers and the Rust Belt of America, Kentucky lost thousands of manufacturing jobs in the past three years -- a trend that shows no sign of abating, even as the economy begins recovering. Globalization of the economy fueled the losses.
-Companies such as Lexington-based Lexmark International, for example, eliminated hundreds of jobs in Kentucky by shifting production of its printers to foreign countries. "Even Mexico isn't competitive anymore; they're leapfrogging straight to China," Beard said. "Looking at the big picture, I see Lexington no longer being a manufacturing center." The effect on Kentucky's least-educated could be devastating, as low-paying service jobs at retailers and restaurants become the primary option for those without a college degree.
-Manufacturing jobs, however, aren't the only thing disappearing.
Quality-of-Life IssuesAlan ReFalo is gone, too. ReFalo chose the Boston metro area, where a job with Cypress Semiconductor awaited. But the job wasn't his only motivation for moving. Unlike many UK graduates with technical or advanced degrees, ReFalo actually found work in Lexington at Cypress Semiconductor's downtown office. He could have stayed as long as he wanted.
Like so many others in the so-called "creative class" -- a term coined by author and Carnegie Mellon University professor Richard Florida to describe the growing segment of society that creates things for a living -- ReFalo's decision to leave was driven mostly by quality-of-life issues. "It just doesn't have it for the active lifestyle," ReFalo said of Lexington in an interview last month. "This weekend, for instance, I'm going to go out and do a ride on the seacoast on my bike. There's stuff like that going on every weekend around here. Whereas, back home, I'd see somebody saying 'Oh, there's a craft fair over in Shaker Village.'"
Boston offers ReFalo everything from "a crazy music scene" to a museum of fine art. In all, the Boston metro area gained 100 households and $5.4 million in total household income from the Lexington metro area between 1992 and 2001, according to IRS data analyzed by the newspaper. The 165 households that left for Boston had average annual incomes that were $4,398 higher than the 65 households who made the opposite move.
ReFalo's exit from Kentucky was hastened by another major stumbling block facing young professionals in the region. Basically, people feel more comfortable living in a city that offers a thick labor market -- the ability to do a similar job for several other nearby companies. In ReFalo's case, Cypress was the only semiconductor gig in town. "The thing that would scare me about ever moving back to Kentucky is that I would know that I was locked into the job and the company I was at," ReFalo said. "There's no moving around; you'd feel limited."
Bo Cowgill, who attended Henry Clay High School and graduated from Stanford University last spring, can't even imagine living in Lexington. He is the son of Brad Cowgill, a prominent Lexington attorney and chairman of
New Century Lexington (whoa, more great verbiage!), which publishes an annual quality-of-life survey.
As graduation approached, Bo Cowgill was still undecided about what profession he wanted to explore. So he picked a few cities instead. Unlike Lexington, each of the cities he chose offered the cosmopolitan amenities he wanted, like top-notch jazz music and plenty of Thai food. They also had a critical mass of companies in the industries he was considering. In New York, he applied for finance jobs. In Washington D.C., it was politics. In Silicon Valley, the tech industry. "With a liberal arts background, there were a lot of different possibilities that looked good to me and I needed some way of narrowing that down, so I decided I would narrow them down by region and by city," Bo Cowgill said. "I knew that those places would have a lot of opportunities, a lot of smart people and a lot of fun and interesting things to do."
In the end, Internet search firm Google offered him a job in Silicon Valley. In a couple years, he hopes to spend some time working overseas, perhaps in London.
Finding OpportunityFor cities not on the short list of people such as Bo Cowgill, the future seems uncertain, said Hicks, of the University of Texas. But that doesn't mean every other place should just give up, he said.
The Clevelands, Buffalos and Detroits of the world -- all of which have hemorrhaged young people at alarming rates -- may be facing a crisis with no clear solutions. But for places such as Lexington, the rise of the "creative class" is perhaps more an opportunity than a crisis, many suggest. In Memphis, for example, community leaders responded this summer to their brain drain by producing a manifesto declaring their intentions to create a "talent-powered economy."
Playing off the ideas of Richard Florida and his book,
The Rise of the Creative Class, the manifesto calls for a series of actions to boost the city's image with 20- to 34-year-olds, which also happens to be the demographic most likely to move across state lines, according to the Census Bureau.
Ideas suggested to make the city more competitive range from increased support for various university programs and technology incubators to promoting kayaking in the Mississippi River. The report also recommends promoting vibrant hip-hop spots and "spreading the word that Memphis music didn't pass away with Elvis."
No similar efforts to give Lexington a cool vibe are under way. And not everyone thinks it's needed. "This idea that you just need single, young, hip people is oversold," said Frey, of the Brookings Institution. "You can be bright without being single and hip."
For midsize cities like Lexington -- known for low crime rates, decent schools and mild traffic -- attracting young, educated, married couples might be a niche growth strategy worth pursuing, he said. Bo Cowgill's father, Brad, has a hunch that Frey is right. He expects that at least one of his two sons will someday move back to Lexington. "When they hit their early 30s, I think it's predictable that some of those people will find that those places don't accommodate their new lifestyle nearly as well as places like Lexington," Brad Cowgill said. "And so some of the birds start coming home to roost."
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EXTRA NOTES:-
Branding for success: Cities can cultivate an image attractive to the creative class. Metro Lexington had a net gain of 8,504 taxpaying households.
The households that came to the Lexington area, however, made $1,190 less per year than those that left.Where the data came from: The Internal Revenue Service maintains a database that tracks where people file their tax returns. Since 1992, the IRS has publicly released the database, minus any personally identifiable data. The database allows someone to see the flow of people and money between every county in the country. The last year available covers people and money movements in 2001, as filed on tax returns in April 2002.
Consider this example: A household moved from Fayette County to Jefferson County in August 2001. It reported $50,000 in income when it filed its tax return from Jefferson County the following April. The IRS noted the change of address and counted one tax return and $50,000 leaving Fayette for Jefferson in 2001. The same numbers were recorded as arriving in Jefferson from Fayette. The IRS does not determine in which county the money was actually earned. Lexington losing targeted subgroup.
A U.S. Census Bureau report released this month had bad news for Lexington: Its young, single, college-educated population declined significantly between 1995 and 2000. The data recorded the location of single people with a bachelor's degree who were between the ages of 25 and 39 in 2000. It also asked them where they lived in 1995. In all, 4,348 in the population subgroup moved into the Lexington metro area between 1995 and 2000. During the same period, however, 6,836 people in that group moved out,
for a net loss of 2,488 people.Nationally, the highly coveted population group flocked to larger cities and spurned small-town America. Here are some of the notable cities and their net gains or losses:
TOP 5 GAINERSSan Francisco: 49,468
Los Angeles: 32,998
Atlanta: 31,887
Washington, D.C.: 25,469
New York City: 25,131
TOP 5 LOSERSGainesville, Fla.: -7,464
Pittsburgh: -7,444
Bryan-College Station, Texas: -7,103
Buffalo: -6,270
Syracuse: -5,861
REGIONAL CITIESLexington: -2,448
Louisville: 942
Cincinnati: -1,826
Nashville: 4,300
Indianapolis: 4,190
Notice two hugely important things: 
