Articles by Sean‎ > ‎

How the Gay Index can help Superannuation & Pension Funds

By Sean Kidney. First published in 2003 in the journal of  Fund Executives Australia Ltd

Three years ago a Pittsburgh economist called Richard Florida came up with two indexes that he claimed were the best indicators of regional economic success. They were the “Gay Index” and the “Bohemian Index”.

His thesis, eloquently argues in a series of papers and now a best-selling book, The Rise of the Creative Class, was that regional economic success in the current US economy was dependent on attracting and keeping a growing class of "creative workers". Creative workers are defined as those that use creativity as a key factor in their work whether engineering, product development or business. Based on available workforce data, Florida estimates 30% of the working population of the US are now members of the "creative class".

This class of worker is mobile. Economic growth is a feature of locations where the class congregates. Their patterns of congregation match most closely patterns for the concentration of gay people and for "bohemians", such as artists and culture workers - ergo the two indexes.

Florida, however, is no lightweight academic.

He bases his arguments on mountains of quantitative data. His work has now become widely published in the US and he has become something of a superstar on the academic talk circuit in the US.

The key points he makes are:

  • Creative workers are the engine-drivers of our economies, everywhere from manufacturing to finance and information technology;
  • They have displaced Organisation Men (gender-skewed as they are) as the most productive employees, and as the dominant social class;
  • They have a very different approach to work that values enjoyment, personal challenge, flexibility ahead of security and tenure;
  • They place a high value on environments full of creative and cultural activity and tolerant of diversity - and they exploit their relative employability to gravitate to such locations.

If you accept the notion that concentrations of creative workers drive innovation-based economies, then this last point suggests scope for moulding regional environments to attract such workers and boost economic success.

This is exactly where Florida's work has taken him. He now advises cities from New York to Memphis on civic policy to attract creative workers. According to a recent article in the Sydney Morning Herald, NSW Deputy Premier Andrew Refshauge has taken to reading excerpts from the book to his fellow NSW Cabinet members.

Florida's prescription for civic policy?

1. Invest in the creative eco-system.

This can include arts and culture, nightlife, restaurants, artists and designers, music (Austin, Texas' famous music scene is often cited as a key talent attractor underlying it's high-tech industry success), innovators, entrepreneurs, affordable spaces, lively neighbourhoods, spirituality, education, density and public spaces.

2. Embrace diversity.

It gives birth to creativity, innovations and positive economic impact. People of different backgrounds and experiences contribute a diversity of ideas, debate, talent and perspectives that enrich communities. This is how ideas flourish and build vital communities.

3. Invest in and build on quality of place.

While inherited features such as climate, natural resources and population are important, other critical features such as open and green spaces, vibrant downtown areas, and centres of learning can be built and strengthened.

Investors have an interest in successful economies more than most people. Companies that seem worth investing in have far more chance of success in a growing economy than a stagnant or declining one. The idea that regions and cities with vibrant economies can be created, let alone picked from the mass, is an intriguing one.

If civic policy can influence economic success, it raises the question among major investors of how they skew their investments to exploit this - or even how they can help ensure economic success.

The idea that investment policy spills over to influencing civil policy is not new to large US pension funds like Calpers. As Australian funds become more significant players in the Australian economy the issue becomes how funds can influence the economic settings for the success of companies.

If we know that social policy X leads to economic outcome Y (read Florida's book and judge for yourself) do we wait for Government or Corporations to move in that direction, or do we gently try to help stimulate the correct policy settings ourselves?

The question for pension and superannuation funds, of course, has to be answered in terms of what is in the best interests of their members.

  • ------------
For more on Richard Florida:

The Rise of the Creative Class, by Richard Florida. Published in Australia by Pluto Press, mid-November 2003. RRP $34.95. The US edition is available from Amazon.com

Web site: http://www.creativeclass.org/

The New American Dream, published in the Washington Monthly, March 2003. http://www.washingtonmonthly.com/features/2003/0303.florida.html

The Economic Geography of Talent, published in the Annals of the Association of American Geographers, September 2002 . http://www.creativeclass.org/acrobat/AAAG.pdf
Comments