Not About LeBron James: Economic Restructuring in Cleveland

The basketball star isn't the only one moving back to Ohio. Even with manufacturing on the decline, Cleveland is drawing talented migrants from other areas.
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The basketball star isn't the only one moving back to Ohio. Even with manufacturing on the decline, Cleveland is drawing talented migrants from other areas.
View along Euclid Avenue in Cleveland, Ohio. (Photo: Tupungato/Shutterstock)

View along Euclid Avenue in Cleveland, Ohio. (Photo: Tupungato/Shutterstock)

I have a lot to say about the LeBron James migration. Story forthcoming, I want to set the table. James is late to the party. The Los Angeles Times digging the trend data:

"The GOP and LeBron are going to grease the skids on a process that's already started," said Richey Piiparinen, a senior research associate at the Center for Population Dynamics at Cleveland State University. "People are realizing it's not your grandpa's Rust Belt anymore." ...

... Many young people fled Cleveland and other Rust Belt cities in the 2000s for places such as Chicago, San Francisco and New York, Piiparinen said. But as those cities became more crowded with transplants, costs began rising and many people were priced out. Now, he said, there's a push-back against the "Brooklynization" of these big cities, and people are moving home. And not just to Cleveland — to Pittsburgh, St. Louis and Buffalo, N.Y., as well.

"It's what we call 'big fish, small pond' talent migration. Are you going to get lost in the shuffle of New York City, or are you going to come back and make a huge difference in your community?" Piiparinen said.

I'm taking a victory lap. Richey and I did the research that shows Cleveland bouncing back when everyone else saw a sinking ship. We reveal brain gain. The public frets about brain drain. The data don't mean much without a theory to explain the trend. Why brain gain Cleveland while everyone else thinks otherwise?

Cleveland is dying. The population is shrinking. Cleveland boomed because of manufacturing. Manufacturing is dying, at least in terms of regional labor market share. I wouldn't be surprised if manufacturing output was at an historic high. Heck, absolute manufacturing employment could be at a zenith and all would be for naught. Some sort of economic opportunity must be driving the in-migration of talent. If not steel, what? Health care, of the tradable sort:

[CEO of the Cleveland Clinic Tony Cosgrove] is among the most influential people in his state, and within all of health care too. Earlier this year, he was named #1 in a regional power ranking of CEOs, politicians, and business leaders in Northeast Ohio. ...

... Back in 2009—LeBron’s last full year in the city—locals estimated that he had a $150 million annual impact on the region. (Although later, some business owners dialed back the rhetoric. “We haven’t suffered as much as ESPN would have you believe,” the manager of one downtown bar told the Huffington Post in 2012.)

Also in 2009, Cleveland Clinic reported that it had a $10.5 billion impact on the local economy. The system employed 41,000-plus staff, and helped create another 40,000 jobs too. Those numbers have only soared in the past five years.

You guessed it, emphasis added. The Cleveland Clinic is the jobs draw. But not all jobs draw migrants from other areas. In the realm of non-tradable employment, you have to live there to be a customer. Don't expect a hairstylist to move from Miami to Cleveland because he hears African Americans complaining about the lack of barber talent in their neighborhood. Likewise, skilled manufacturing labor lives in a flat world. Your hometown, warts and all, is as good as anywhere else.

Health care is usually non-tradable. You have to live there to count as a customer. The Cleveland Clinic is a different animal. Not only is it tradable (clients fly in from the Middle East), the sector niche is diverging. Manufacturing, as any proud Clevelander could unknowingly tell you, used to be divergent. Only a few places in the world got very rich on making value added products. Proximity to natural resources and natural transportation links defined which places won.

The Innovation Economy is free of such constraints. Yet the economic activity agglomerates in a handful of metros (e.g. Silicon Valley). I've tried to weigh in on that debate. I should have left Saint Jane Jacobs out of the discussion. She's become a straw woman in distress in need of rescuing. Sweet Jane saved, the Innovation Economy appears to be in convergence. In other words, labor costs trump geography. Econ 101 doesn't apply only to housing markets. Oh, and labor markets are connected to housing markets. Creepy.

The Cleveland Clinic plays in a global labor market. The talent that the Clinic needs has to live somewhere in Northeast Ohio, with a global wage to fire hose at housing. The talent that the Clinic needs has to be imported. To put a bird on it, non-tradable highly skilled health care labor doesn't make as much as diverging tradable health care labor. One geographic scale of labor market is smaller (and more captive) than the other.

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