By Bob Sullivan, Credit.com
January is a good time to take stock of your career, and with the economy perking up, perhaps you should to consider making a dramatic change. After all, what’s more American than relocating for opportunity?
But even as careers get shorter — the average millennial will have seven jobs by age 28 — and the gig economy encourages all sorts of creative work arrangements, a funny thing has happened to the idea of heading “West.”
Americans don’t really move much anymore.
In fact, the rate of interstate moves has fallen by 50% in a single generation. In the 1980s, about 3% of the population moved to a new state every year. Today, that figure has fallen to less than 1.5%. The rate has steadily dropped, and it’s dropping across demographics, and through both good times and bad, suggesting it’s a trend with staying power.
Economists are worried about this. Movement suggests opportunity, so a decrease in migration suggests the “American Frontier” may be closing for good.
Why does this matter so much? Labor portability is the bedrock of capitalism and social mobility. Workers must be able to move where opportunities are in order for labor to be distributed efficiently. And freedom of movement (take this job, and shove it!) is the main tool workers have to bargain effectively with employers — not to mention getting themselves a big increase in income. (Want to know where your finances stand? You can view two of your credit scores, updated every 14 days, for free on Credit.com.)
“Given the role of mobility both for individual labor market outcomes and for the overall efficiency of the aggregate labor market, the long-run decline in migration rates could indicate a decline in overall labor market dynamism,” wrote Fatih Karahan and Darius Li on the New York Fed’s blog recently. “Many policymakers have worried that lower mobility is associated with a more rigid economy, where workers cannot move to locations with good jobs. Lower mobility might cause the labor market to be slow in adjusting to shocks, making downturns longer and recoveries slower.”
But try as they might, while everyone seems to agree migration is down dramatically, researchers can’t agree on the cause. In fact, they don’t even agree that it’s a bad thing.
First, to be specific about the change that’s occurring: The Urban Institute called attention to this slowing migration trend recently, citing Federal Reserve researcher Raven Molloy, who said the percentage of interstate movers among working-age people (25 to 59) has steadily slowed from nearly 3% in the 1980s to less than 1.5% from 2010 to 2015.
In a separate paper, Molloy wrote that drops have occurred across all age groups and many demographic categories. You’d expect younger people to move more, but even that group has shown a steady drop — those aged 20 to 24 moved at a 5.7% rate from 1981 to 1989 but only a 3.3% rate from 2002 to 2012, Molly wrote.
Renters moved more than homeowners, but both moved less frequently during that same time span — renters from 6.4% to 3.6%; owners from 1.5% to 0.9%. Those with more education moved more, but again, movement across all groups fell: College+ dropped from 4.2% to 2.1% while those with only high school educations dropped 2.2% to 1.1%.
That means some more seemingly obvious explanations — like trouble selling housing during the recession, or an aging population — don’t explain what’s going on.
Maybe there’s a happy explanation for this. Three years ago, Greg Kaplan and Sam Schulhofer-Wohl wrote a paper for the Minneapolis Fed that dispelled another popular theory — that the growth of two-income couples makes moving harder, because it’s more challenging for both partners to find new jobs in new areas.
Instead, they said that the changing nature of industry in America means that most regions now offer very similar opportunities. Gone are the days when people moved West to farm or moved to Detroit to work on cars. Using data known as the Theil Index, the pair point out that the mix of jobs offered in U.S. states is continually growing more and more similar — that “geographic job specificity” has fallen by one-third in the past 20 years.
“Fewer workers need to move to obtain the best jobs for them, because labor markets around the country have become more similar … That decrease in geographic specificity makes it easier for workers to stay where they most enjoy living and maintain their occupation,” the two wrote.
Their other explanation is even more positive. Would-be movers have a much easier time test-driving their potential new homes from afar. It’s easier for people in Minnesota to connect with people in California to see what life there is really like.
“With more information, workers are less likely to make moves they ultimately regret, and the migration rate declines,” they wrote. The authors note that among people who do move from state to state, there’s a 15% chance that they’ll move again the next year. So, perhaps we are finally learning the grass isn’t always greener. “In other words, American workers haven’t lost their flexibility. They just don’t need to move so much anymore.”
Another explanation is a variation on the discredited idea that the greying population explains why Americans are moving less. Corporations looking to fill jobs would generally prefer to hire locally. Nationwide searches are expensive, as are long-distance relocations. Because a greater number of older candidates are available nearby, many companies are skipping the more costly form of job hunting, indirectly contributing to less migration, even among younger people, Karhan and Li argued in their paper.
“In short, a young individual today is moving less than a young person did in the 1980s because of the higher presence of older workers,” they wrote. (Again, it’s a silver-lining theory.) “These findings suggest that the declining trend in interstate migration is a response of the labor market to an aging population and does not necessarily signal a decline in the market’s dynamism or efficiency.”
But a more recent research paper published by Molloy and others at The Brookings Institution threw a lot of cold water on these various theories and conceded they’re unable to identify a clear reason. It does hint at two intriguing explanations that require more study, however.
One involves declining levels of trust. States where more people say strangers can’t be trusted experienced even greater drops in migration, the paper said. So a decline in overall social trust could be making people less likely to take the leap of faith needed to make a big move.
But the paper’s most intriguing suggestion involves understanding why workers get the pay and benefits they do. Perhaps larger corporations are screening employees more thoroughly, increasing a worker’s costs for finding new jobs, again making a move less attractive.
Or, perhaps the most obvious answer of all: Moving just isn’t worth it any longer.
Companies may also no longer feel much pressure to lure employees with big pay increases — and that in turn means there are no gold rushes that encourage workers to uproot their lives. This explanation fits with another trend that’s stymied economists for years — Americans stubbornly slugging wage increases, despite a seemingly tight labor market.
While pointing out that much more research in this area is needed, Molloy and his co-authors ended their paper ominously: This effect is “unlikely to be benign.”
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This article originally appeared on Credit.com.
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