The financial benefit of moving for a new job has been cut nearly in half over the past few decades.
Americans are moving less and less these da ys. Last year, just 11.7 percent of us (a near record low) packed up and moved across town or the country, a huge decline from the ferment of the 1950s and 1960s.
What’s behind Americans' decreasing mobility?
I have argued that high levels of home-ownership—especially in older, lagging regions— locks people in place, making it harder to move to areas with more vibrant economies and better job opportunities. Demographers have suggested lower levels of mobility are a function of an aging population, since the rate at which people move declines steeply with age.
But a recent National Bureau of Economic Research working paper from the Federal Reserve Board’s Raven Molloy and Christopher Smith and Notre Dame’s Abigail Wozniak offers an even more basic explanation. Americans are moving less—and not as far—because it's not nearly as worthwhile economically.
Most moves are local, from neighborhood to neighborhood in the same city or county, and are largely driven by seeking better housing or more proximity to family and friends. But long-distance moves between states are different. These interstate moves are typically driven by those seeking better job opportunities.
Since the 1980s, neither the job opportunities nor the potential for better wages have made such moves worth it, according to the study. It finds that by 2013 the rate of interstate relocations had fallen 51 percent below its 1948 to 1971 average levels, the peak years for such longer-distance moves. As the graph below shows, since the 1970s the rate of long-distance movement has decreased more precipitously than the rate of shorter moves within the same state or county.
To better understand the connection between residential and employment mobility — which they define as the amount that people switch employers, industry, or occupation — the authors looked at two data sets: the Current Population Survey of the US Census and more detailed information on three individual cohorts from the National Longitudinal Surveys of Youth from the late 1970s to the late 2000s.
Controlling for a wide variety of economic, social, and demographic factors, the study finds that none of the usual suspects – including a higher rate of home-ownership – can fully explain the simultaneous decline in job and residential mobility. Instead, the evidence suggests that Americans are moving less because they're changing jobs less often, and they're changing jobs less often because the money to be gained from doing so just isn’t as good as it was in the past.
The graph below, from the study, shows the decline in the rate that Americans switch employers, occupations, and industries. The line moves up and down, but its overall downward slope indicates that Americans are changing jobs, occupations, and industries less over time. As the authors put it: "Our preferred interpretation is that the distribution of relevant outside offers has shifted in a way that has made labor market transitions, and thus geographic transitions."
Looking in more detail at three cohorts of workers from the National Longitudinal Study of Youth covering the late 1970s to the late 2000s, the authors find that the economic benefits of changing jobs has indeed decreased. For the oldest workers studied, the gains from changing employers added up to about 7 percent. For the two later cohorts, the benefit to switching jobs had fallen to about half that level.
The authors explore several competing explanations to the joint declines in residential and labor market mobility, including changes within the housing market, the decline in higher paying manufacturing jobs, the polarization of the job market, and the rise of dual-career households, but find little empirical support for them. Instead they note that:
Because labor market transitions occur much more frequently than long-distance migration and because labor market transitions have been declining even for workers that remain in the same state, it seems unlikely that an increase in the cost of migration would be able to explain the decrease in labor market transitions. Rather, the decline in labor market transitions–particularly transitions across employers– has likely led to the associated decline in long distance migration.
The third graph below, also from the study, connects shifting levels of job transitions to interstate migration and mobility. The authors found that, overall, the decline in Americans finding new jobs accounted for at least a fifth of the decline in interstate migration – a not insignificant proportion.
Their explanation is intriguing and provocative. But as the authors note, a great deal more research needs to be done to nail down these trends. They point out that their analysis "does not necessarily indicate that economic activity in the U.S. has become less dynamic." It may be due to changes in the employment practices of firms or it may be due to more efficient sorting of workers into positions. Or both.
It's important to note that the evidence from this study does not mean that the patterns of residential choice and labor market activity have evened out across America. Other research shows that the locations of skilled positions and high human capital locations have diverged further, and that spatial inequality is growing alongside socioeconomic inequality. These two kinds of declining mobility may be a sign that, in our increasingly specialized labor market, people increasingly sort into the places and jobs that best fit them far earlier in their careers. In other words, those who want to be in finance head to New York while they're still young and stay there, just as those who want to be in film head to L.A., and those who want to be in tech head to the Bay Area. Overall, the authors conclude, "our results point more towards the idea that fewer location and job changes are needed in today’s economy."
I'd also caution against using the study’s findings as evidence that people, especially the less skilled and less advantaged, are not getting locked into place by home-ownership. Other economists have shown this fairly conclusively, and my own research has found that metros where home-ownership is slightly less than the national average, around 55 to 60 percent, are far more economically dynamic than those where it is above the national average, at about 75 to 80 percent. It still makes little sense to trap homeowners in place, without the mobility they need to reach their full economic potential. This is particularly important among less skilled workers who have not found their ideal locational match, and who find themselves stuck in place.
Top Image: Shutterstock.com/Joe Seer