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(ILLUSTRATION: EUGENP/SHUTTERSTOCK)

Talent Retention Subsidies

• May 02, 2013 • 3:29 PM

(ILLUSTRATION: EUGENP/SHUTTERSTOCK)

Why a proposal in Michigan to subsidize education for students who remain in-state after graduation won’t benefit anybody. It’s brain gain we should worry about, not brain drain.

Brain drain is a positive indicator. When an individual leaves her hometown, she benefits. The community did an excellent job educating its children. The best and brightest migrate. Michigan has decided to put a stop to all of this economic development:

Michigan is working to keep college graduates in the state, and new legislation seeks to slow the “brain drain” with an additional incentive: A tax credit for student loan payments.

“For me, it’s kind of a first step in talent retention,” said sponsoring state Rep. Andy Schor, D-Lansing, “We have some of the best colleges and universities in the world, but people get educated here and then leave for Chicago or San Francisco or some place else. We need to keep them in Michigan, and we need to keep them in our cities.”

House Bill 4182, up for testimony this week before the newly-formed Michigan Competitiveness Committee, would provide a state income tax credit to residents making student loan payments after graduating with a bachelor’s degree from a Michigan university or college.

House Bill 4182 treads on well-worn policy turf. States, counties, and cities all hatch the same tired schemes when college graduation season kicks off. The anxiety about brain drain is ubiquitous. The solutions offered don’t work. Rep. Andy Schor, D-Lansing, hasn’t done his homework.

What the bill does do is offer a tax break to recent college graduates burdened with student loans. That might inform a host of benefits. Talent retention isn’t likely one of them. Regardless, the subsidy is expensive. All the former students who would have stayed, law or no law, will cash in on the opportunity. Even if more people do stay, the return on investment will be lousy.

I’ll let you in on a dirty little secret. Michigan brain drain is a myth, a folktale. The state has a brain gain problem. No one wants to move to a Rust Belt hellhole. Ask Ann Arbor about its struggles to attract talent. Detroit has cast a pall over all of Michigan.

Schor should help out technology start-ups. Recent college graduates from any U.S. institution of higher learning who go to work for a small business would receive the student loan tax credit. What Michigan needs is a talent attraction subsidy, an incentive that works with the tendency of the young and college educated to relocate. Trying to root this demographic is both foolish and counterproductive.

Jim Russell
Jim Russell is a geographer studying the relationship between migration and economic development.

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