Additional Authors: Nicole Kreisberg, Senior Research Analyst; Theodore Cangero, Data Scientist; and Samuel I. Green, Research Intern
The largest metropolitan areas continue to attract recent college graduates as they begin their professional working lives. With the Employment Destinations Index (EDI) we identified what captures young people’s imagination and entices them to test the waters in cities large and small. We looked at the factors pointing to why the young—those 22 to 35 years of age—and the well-educated—those with at least a bachelor’s degree—moved to a new city. We found that once they’ve made the decision to move, they are influenced by urban life and city amenities more than by economic conditions.
It is not surprising to find that our biggest cities (New York, Los Angeles, Chicago, Washington, D.C., and Boston) together capture over 25 percent of all of these young, well-educated movers. It is a surprise, however, to find that Santa Cruz, Calif., once a working class retirement community, now a beach suburb of Silicon Valley, attracted almost the same number of young and well-educated in-movers as Boston in 2013.
This points to one of our findings that seems counterintuitive. We can explain about 70 percent of young movers’ decisions with quality-of-life factors and only about 30 percent with economic factors. We interpret that to mean, after making the economic decision to move, the young and educated are looking for places where they can have a meaningful work/life balance.
Just like the Dutch who settled in the Hudson Valley, the Irish who settled in Boston, or the Swedes and Norwegians who moved to Minnesota and the Dakotas, these workers are moving to places with large populations of people just like themselves: young and educated. This is the single most important factor in explaining post-college destinations.
The second most important factor is the unemployment rate, which we used as an indicator for the local labor market conditions. The third most important factor, the relative lack of car dependency, reflects the values of a generation that is as comfortable on bike, on foot or in an unlicensed, crowd-sourced private car for hire summoned by smartphone.
While the young and well-educated most frequently choose large metro areas such as Washington, D.C., and Seattle, Wash., many are moving to midsize metros such as Bridgeport, Conn., and Colorado Springs, Colo.; small metro areas, such as Ann Arbor, Mich., and Santa Cruz, Calif.; and the smallest metro areas, such as Iowa City, Iowa, and Ithaca, N.Y.
People On The Move
The United States population is highly mobile. When we count up those who move between regions (almost 5 percent), between states (over 4 percent), and within counties (5 to 6 percent) it comes to about 25 to 28 million people moving each year.
In the early 20th century, changes in technology, ownership, and production processes in the agricultural sector all played a role in sending rural migrants to urban areas. This was true for family farmers in the Midwest and African American sharecroppers in the South. In the second half of the century, the South’s economy benefited from the widespread use of air conditioning, greater wealth among the elderly, and the location and expansion of military bases and production facilities, making the South attractive for those seeking economic opportunity. More recently, technology allowed new sites of production outside of big cities. Start-ups as well as divisions of existing companies found high-amenity areas—such as the Pacific Northwest and the Rockies—both economically viable and recreationally attractive.
Migrants are motivated by opportunity or the lack of it, as in the case of changes in the rural economy that sent farmers to the cities in the early 20th century. And sometimes the motivation is the hope and opportunity that comes with an expanding economy, such as the rise of the Sun Belt in the 1980s or the growth of technology-related work in Denver or Bozeman with the dot-com expansion. Economic theory tells us that both young people and highly-educated workers are more likely to cast a wide geographic net in their job search.
Today’s college graduates are part of the Millennial generation, which is often defined as those who were born from about the early 1980s to the early 2000s. As a generation, the Millennials are now a larger group than the Baby Boomers. Their tastes and preferences are likely to have a significant impact on the cultural, social, and economic life of the nation. Researchers find that Millennials are more likely to move to urban areas and are vital in contributing to urban revitalization and the attraction of urban life. Furthermore, many companies catering to this demographic group find them to be mobile and hard-working. But Millennials also want the flexibility to strike a work/life balance and take advantage of the amenities of urban life.
As a result, many companies—including start-ups—are opting for vibrant downtown areas over the suburbs. We see this happening in San Francisco; Washington, D.C.; Austin; Boston; New York; and other urban centers. When the largest living generation values jobs that provide personal fulfillment, cities that provide cultural and social opportunities, and a work/life balance, their tastes and preferences are likely to affect the workplace, the city in which they live, and the overall culture that shapes everyday life. AIER’s Employment Destinations Index (EDI) is designed to help young workers exploreemployment destinations in terms of both economic and amenity opportunities.
Almost one-quarter of the population is aged 18 to 30 right now, totaling nearly 57 million people. Compared with the entire population, young people are more highly educated, and young movers are the most highly educated.
Among young people who are old enough to have graduated from college (aged 22 to 35), 34 percent have some college or an associate’s degree, and 22 percent have bachelor’s degrees. Figure 1 shows that the overall population aged 18 and older has a smaller share of highly educated people, as 31 percent have some college and 17 percent have bachelor’s degrees. Millennials in general are a highly educated generation.
Young movers, or people between the ages of 22 to 35 who migrated to another city or state within the past year, are more likely to have been to or completed college. Twenty-three percent have their bachelor’s degree (compared with 17 percent in the general population and 22 percent of those 22 to 35), while 23 percent of young movers have only a high school diploma or GED, lower than the 29 percent found in the general population and 25 percent found among young people.
Young people are also more diverse with respect to race and ethnicity than the general population. Figure 2 illustrates that 66 percent of the general population is white, compared with 58 percent of young people aged 22 to 35. However, within racial ethnic groups, Hispanics are somewhat under-represented among the young movers, as 20 percent of young people are Hispanic, compared with 18 percent of young movers.
Young people have distinct characteristics, demographically, culturally, and in the workplace. Young movers are also distinct; they are more highly educated and more likely to be white than their non-moving counterparts. Considering the distinct qualities of young people who move, AIER looked at the economic and quality-of-life factors that mattered to this group when finding a new place to live. The Employment Destinations Index serves this mobile population, determining not only what factors are important to them, but also ranking the best destinations based on those factors.
Highlights Of The Employment Destinations Index (Edi)
Great Barrington, Mass., home of AIER, is the greatest small town in America, according to Smithsonian. com. But what makes our town great is different from what makes San Francisco or Chicago desirable. Our EDI rankings capture this by comparing cities in four size categories: major metros, midsize, small, and smallest. Our index compares Boston with Washington, D.C. (both major metros) and Midland, Tex., with Iowa City (both smallest metros). Table 1 shows the population cut-offs we used to define these four categories.
Our top metropolitan area among major metros was Washington, D.C. (Table 2). Connecticut’s most populous city, Bridgeport, was ranked first among midsize metros, Ann Arbor, home of the University of Michigan, was ranked first among the small metros, while Iowa City, home of the University of Iowa, ranked first among the smallest metros.
Washington D.C.’s top spot among major metros reflects its position as a city with great attractions. Based on 2013 data, the D.C. metropolitan area ranked very high for major metros in terms of employment and led the top-ranked coastal cities. Thus, new grads will find work relatively easily. Furthermore, new grads will find average salaries for young people with a BA among the highest of all major metros.
While Washington, D.C., is associated with the federal government, metropolitan D.C.’s wage strength can be explained by a high concentration of professional and technical industries. In fact, for the last couple of decades, the district’s economic growth has been driven by private, not public sector employment. But private sector strength is not unrelated to the presence of the public sector. For example, the National Institutes of Health hires MDs and bio-medical researchers and serves as a magnet for other employers. Private pharmaceutical companies find a highly skilled labor force and companies that support clinical trials find a major client at NIH’s Gaithersburg, Md., campus.
While incomes are high, so are costs. Rents in the D.C. area are among the highest in the nation, just behind San Francisco and Silicon Valley. There is a significant $200-per-month gap between rents in D.C. and those in Boston, the next most expensive rental market among our largest metro areas. The district’s residents are just behind those in Boston, San Francisco, and New York in seeking alternatives to private cars. Walking, biking, and using public transit contribute to a lively cosmopolitan atmosphere, as does a mix of racial, ethnic, and national groups. While there’s no shortage of places to socialize in D.C., it lagged among the largest cities in the number of restaurants and bars.
Bridgeport, Conn., located about an hour and a half by commuter train from New York City, is seeing an urban resurgence. Before the mid-20th century, Bridgeport was a thriving manufacturing center with a busy port. The decline of northern manufacturing was noticeable there after the 1950s, when the population peaked. A drop in the employment base was accompanied by a loss of population, declining public revenues, deferred maintenance, and a lack of investment in infrastructure. With a transition to the service economy in the second half of the 20th century, Bridgeport is repurposing former industrial buildings as work and living spaces.
While Bridgeport ranks in the middle of our index for unemployment, it hosts the highest income per capita of any other midsize metropolitan area. In part this high income may reflect Bridgeport’s proximity to Stamford, which is a financial services hub. Just as financial services moved from Manhattan to southern Connecticut, so did the population. Many who work in New York City are skipping over the once-favored suburbs in New York and southern Connecticut for lower-cost Bridgeport. While rents are high compared with the rest of the nation, many in-migrants find them favorable compared with New York and its suburbs. Newcomers also find a public transportation network well connected to the city and a high concentration of restaurants and bars.
Ann Arbor is located about an hour’s drive west of Detroit and an hour north of Toledo. This location contributed to it being a regional transportation hub as far back as the early 19th century, when the Michigan Central Railroad’s route through Ann Arbor connected Lake Erie in the east to Lake Michigan in the west. In 1837 the University of Michigan moved from Detroit to its current Ann Arbor location. These two factors—transportation and the university—shaped the future of what is now one of the best-known college towns in the country.
Ann Arbor’s population swelled in the middle of the 20th century when the Ford Motor Co. opened its famous Willow Run complex as a World War II munitions factory. After the war, ownership of the plant changed hands but remained as an automotive factory through 2010 when General Motors Co. closed the plant. Ann Arbor has survived the rise and fall of the auto industry better than most of Michigan because the university provided the basis for successful diversification into high-tech industries.
The high concentration of young people in Ann Arbor (the highest concentration of young people with a BA in our Small Metro group) along with a thriving high technology sector means that the labor market is very solid. With salaries higher than average and rents and an unemployment rate that are lower than average, recent grads are likely to find the economic outlook promising. In addition, Ann Arbor offers urban amenities that young and educated migrants favor. The combination of public transit and increasing investments in a bicycle infrastructure support a significant portion of commuters who have found alternatives to the solo drive to work.
Besides Ann Arbor, the group of small metros includes other college towns (Gainesville, Fla., and Santa Cruz, Calif.), state capitals (Olympia, Wash.; Lincoln, Neb.; and Montgomery, Ala.), retirement destinations, (Myrtle Beach, S.C.; Biloxi, Miss.; and Santa Barbara, Calif.) and industrial centers (Huntsville, Ala.; Beaumont, Tex.; and Spartanburg, S.C.). All of these areas have grown beyond their original economic function and are providing a balance of economic opportunity and urban amenities.
Iowa City, the home of the University of Iowa, provides young newcomers with much the same balance of economic opportunity and amenity attractions as does Ann Arbor, but with much lower rents (Iowa City rents are about 30 percent lower), slightly lower salaries (Iowa City salaries for young people with a BA are 10 percent lower), and more restaurants and bars. Of course, there are more differences between these two Midwestern college towns. The Iowa City population has grown in the past two decades, in part due to the establishment of the Cedar Rapids/Iowa City Technology Corridor and in part to an influx of racial and ethnic minorities. In the past decade and a half, the share of racial and ethnic minorities has increased by 50 percent, now comprising nearly 20 percent of the area’s population. Out of the 102 cities in our smallest metros group, Iowa City ranks 15th on our diversity score. Many of the cities that ranked at the top of our smallest metro group have benefited from the presence of a university that anchors economic activity, attracts companies relying on high-skill workers, inspires researchers and entrepreneurs to leverage networks, and supports a lively social scene. Others in this group include Ithaca, N.Y.; Lawrence, Kan.; Champaign- Urbana, Ill.; Burlington, Vt.; State College, Pa.; and College Station, Tex.
Factors That Affect Migration
Economic opportunity is always an important reason for moving to a new place. Millenials are demonstrating that while economic factors continue to play an important role in this decision, they are also seeking the amenities that give a city its special cultural and social appeal.
The economic factors in our underlying model account for approximately one-third (i.e., 32 percent) of annual migration of recent college graduates, while quality-of-life factors account for about two-thirds (i.e., 68 percent) of this migration. We interpret these econometric results as corroborating evidence for the claims that those in the Millennial generation are seeking a work/life balance and that they value the social life that cities offer.
With these economic factors we wanted to capture both tangible and intangible aspects of economic life. By tangible we mean economic conditions such as the labor market, earnings, and the cost of living. We captured the cost of living by the average rent that young people pay. By intangible we mean professional satisfaction. The specific measures we used for each economic factor is listed in Table 3.
Traditional economic theory would predict that economic reasons are the primary motivators for movers, and all the more so for the young and well-educated. Our analysis supports the cultural impression prevalent these days that members of the Millennial generation seek a work/life balance. As a group our quality-of-life factors are meant to capture the tastes and preferences of this demographic cohort, including the degree to which a city has a population that is young, educated, and diverse along racial and ethnic lines. In addition, we use the presence of restaurants and bars to capture the degree to which there are “third places”—those fun urban hang-out spots that are neither home nor work. We also include the use of public transit as an additional factor that contributes to the quality of life valued by members of the Millennial generation. The specific measures we used for each quality-of-lifefactor are listed in Table 4.
How To Use This Index
Many different people can use and benefit from the information in the EDI.
Imagine a student who is interested in going to the West Coast yet has no clear direction for his employment path. With an interest in technology andmedicine, as well as business and marketing, he wants to be confident of finding a job but also seeks a great quality of life. He likes the arts and outdoor sports, he has a car and enjoys road trips, and he wants plenty of restaurants and bars to socialize with other young people. He might use the EDI by starting with San Francisco, our second-ranked major metro. It has a booming technology industry but it also ranks in the middle to high end for unemployment and at the top of the rankings for rent. With similar ratings for both San Francisco and San José (the Silicon Valley city that the metro area is named after), our graduate can more realistically assess the hurdles he’ll face in a highly competitive labor market. The challenges will be high, but the longer-term career rewards may be worth it.
Another soon-to-be college graduate wants to get some real-world work experience before attending law school. After four years at a liberal arts college in a rural area, she seeks a more urban post-graduation experience. She wants all of the big-city amenities, including access to public transportation. The EDI indicates that housing costs will be high in New York or D.C., her first choices. But Bridgeport might offer lower housing costs with decent access to New York City, while Baltimore residents can link to D.C. via commuter rail and save hundreds of dollars a month on rent.
After a year of trying—and not succeeding—to earn a living as an oil painter, a college graduate decides to pursue a career in advertising. She needs a big regional center with plenty of ad and marketing companies, but Madison Avenue holds no appeal. Chicago may provide the right balance between large enough but not too large. While the unemployment rate has been relatively high in Chicago, rents are low, wages are moderate, the population is diverse, and it is easy to get around without a car. It would be worth checking with friends and family to see if her extended network can provide some introductions in order to help offset the hurdle of a relatively weak labor market.