How Governments Can Move People to Jobs
The opening scene of "The Karate Kid" left a big impression on me. A struggling, working-class single mom in New Jersey packs her family and all of her worldly possessions into a green station wagon and heads west to California in search of a better life. As a child who had only ever known one town, I was astonished by the notion that you could move across the entire country on a wing and a prayer like that.
I shouldn't have been so surprised -- migration is a common story throughout the world. Immigrants move from Poland to the United Kingdom, or India to Singapore, or the Philippines to Japan in search of better prospects. Rural migrants leave the indigence of farm life for the bustle of China's big cities. And in the U.S., people are always moving around the country as well as immigrating from overseas. My own parents moved from the Midwest to Texas.
This constant churning serves a key function in the economy. Labor is reallocated from declining regions to growing ones, and from sunset industries to young and expanding ones. It's not just workers and industries who benefit -- the entire economy gains from more efficient patterns of development.
This is especially important in the U.S. right now, since smaller cities are in decline. With fewer Americans employed in agriculture or old-line manufacturing, and with the rise of knowledge work and global supply chains, it probably makes sense for the country to have fewer, larger cities. That change will require a lot of people moving.
But in recent years the great American tradition of migration is under threat. Workers in a wide variety of occupations are moving less than they used to. There are fewer and fewer Karate Kids:
Migration within states has fallen as well.
Economists Greg Kaplan and Sam Schulhofer-Wohl have investigated the reasons for the drop. Some are innocuous. For example, occupations have become more homogeneous across the country -- the kind of job a working-class person is likely to get in Ohio is similar to what they'd be doing in Texas. Earnings also vary less from place to place, reducing the economic incentive to move. And more information is available about what it's like to live in another town, meaning that fewer people move without knowing what they're going to get. So the decline isn't necessarily driven by cultural complacency, as my Bloomberg View colleague Tyler Cowen worries.
But that still leaves plenty of other, less salutary reasons for staying put. People may own a house whose price has fallen below the purchase price. The rise of dual-earner families is probably a factor, since it's more difficult to find two new jobs in a new city. And restrictions on housing development in thriving big cities mean that rents are simply too high for many potential workers. Research by economists Andrew Foote, Michel Grosz, and Ann Stevens shows that whereas recessions used to result in workers moving out of town, the Great Recession more often saw them staying in place and exiting the labor force.
There's also another, less visible problem -- poor people trapped in bad neighborhoods. This can happen not just in big American cities like Chicago, but in rural areas too, and it's a common feature of cities around the world. Poor people often simply don't have the money to get out of bad neighborhoods. Often, the traumatic process of eviction is the only way people end up moving.
It's interesting to debate the causes of low mobility, but in the end, the real question is whether helping people move will improve their economic situation. For years, economists have been evaluating -- or creating -- programs that give poor people vouchers to relocate. The results are somewhat encouraging.
The most prominent relocation experiment was the Moving to Opportunity program. In the 1990s, the Department of Housing and Urban Development gave randomly selected poor families from Baltimore, Boston, Chicago, Los Angeles and New York City housing vouchers that could be used to move to neighborhoods with lower levels of poverty. A decade and a half later, economists Raj Chetty, Nathaniel Hendren and Lawrence Katz evaluated the program, and found that it yielded strong benefits for younger children in terms of future income, education, and family stability. Other effects were more ambiguous -- the program didn't result in higher earnings for the adults who moved, though their mental health probably did improve.
Experiments in developing countries -- which economists' research budgets can more easily pay for -- are also encouraging. Economists Gharad Bryan, Shyamal Chourhury, and Ahmed Mobarak gave poor rural Bangladeshis a monetary incentive to go look for seasonal work in cities. The results are encouraging -- once they migrate once, the recipients of the incentive are more likely to make it a regular thing, and their living standards rise as a result.
Given these encouraging results, it makes sense for the U.S. to experiment with more pro-mobility policies. One idea is to provide big relocation vouchers at the federal level during recessions, to encourage laid-off workers to move around the country. Another is to make sure that housing vouchers allow poor people to move to better neighborhoods -- a policy that's already being implemented in some cities. A final idea is to create systems of relocation insurance at the city, state or federal level, similar to unemployment insurance, so that poor people displaced by a local recession or rising rents can move to a better place with less of a life disruption.
As for developing countries like China, they should avoid the urge to evict rural migrant workers from big cities. Cutting off the engine of geographic mobility is a big development mistake.
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Mark Whitehouse at firstname.lastname@example.org