Related Links

• Why Is Geographic Mobility Declining?

Transcript

Tim Sablik: My guests today are John Bailey Jones and Urvi Neelakantan. John is the vice president of microeconomic analysis and Urvi a senior policy economist, both in the Research department of the Richmond Fed. John and Urvi, welcome back to the show.

John Bailey Jones: It's always great to be here.

Urvi Neelakantan: Thanks for having us again.

Sablik: Our topic for today is American mobility, or the lack thereof. Earlier this year, you wrote an Economic Brief article exploring why Americans are moving across states less today than they did 30 years ago. Can you give us a picture of what this trend looks like, and what data are you using to measure this?

Jones: Data from the Current Population Survey show a pretty significant decline in interstate mobility, with a lot of that decline having occurred by 2010. However, interstate mobility for young adults is still falling.

There [are] other data sources of mobility, including the American Community Survey and data from the IRS. You can look at IRS filings and see if people are filing from different locations in different years. These data suggest the fall is smaller than do the data in the CPS, but the same general pattern still holds.

Sablik: Has geographic mobility declined for all age groups?

Neelakantan: Yes, though the data shows that the decline is not uniform across age groups. Young adults have historically been a mobile group. They move as they finish school to embark on new careers, to establish their own households. But even this traditionally mobile group has seen a significant drop in their mobility rates. In fact, the steepest drop is for this group.

Sablik: OK, that's interesting. I was wondering if overall population aging could be playing a role in declining mobility.

Jones: For sure, it does. Older people tend to move less than younger people, so as the population gets older, the average mobility rate will fall.

But there [are] suggestions that there might be feedback effects as well. There is a recent paper that suggested that population aging may be depressing mobility among younger people. The idea is that as the workforce ages, employers are going to spend less time trying to recruit people from outside their metro area and spend more effort recruiting locally. This is going to make it less likely that people are going to be moving across metro areas if all the job recruitment is within a given area.

Neelakantan: There is a housing angle here, too, what we call the "lock-in effect." Imagine that the interest rate on your mortgage was much lower when you purchased your home. You now have much less incentive to sell it and take on a new mortgage at higher rates, and so that effectively locks you into your current mortgage and home. We have related work that looks at this factor at older ages, and it may be a reason for why older people are not moving.

Sablik: Yeah, we'll definitely come back to the topic of housing.

But before that, I wanted to ask about another potential factor that you highlight in your paper, which is the increase in women working full time over this same period that mobility has declined. How might that affect geographic mobility?

Neelakantan: When women work full time, that typically happens within households. So, now you have two earners instead of one. That creates challenges that didn't exist when most families just had a single earner.

So, the share of women working full time has increased, but the earnings difference between the two spouses has also narrowed, with women catching up to men. That makes it less obvious what to do when a relocation opportunity arises because now you have to consider both co-equal careers. So, you have to find two jobs in a new location, which is twice as hard as finding one. Research shows that dual-earner households are indeed substantially less likely to relocate than single-earner families.

Jones: There's also the issue of child care. If both spouses are working full time, the need for child care goes up and a lot of child care is provided informally by relatives, parents, siblings, and so forth. That also makes it more difficult to move.

Sablik: Yeah, and a big reason that people move is if they get a better paying job in another state. Has that incentive changed over the last three decades?

Jones: It might well have. Different metro areas host different sorts of jobs — Silicon Valley does tech — so you would still see very different average wages. But most people are moving for specific jobs that match their skills, and there is some evidence that the wages for specific jobs have narrowed over time across geographic areas.

Sablik: So, there is less to be gained by moving within the same kind of industry to a different state.

Jones: Yes, that's exactly what I'm saying.

Sablik: To come back to the housing point that Urvi raised earlier, to move states you need to find a new place to live. Urvi, you mentioned about how there is this lock-in effect. How is the price of housing affecting geographic mobility more generally in terms of finding new places to move?

Neelakantan: Housing availability definitely plays a big role. There's a 2019 paper by Hsieh and Moretti, which finds that highly productive cities like New York and San Francisco also happen to be cities that have restrictions on housing supply, and that prevents workers from moving into those cities. That's not only preventing mobility. More importantly, it's acting as a barrier to economic growth because it's preventing workers from other places from accessing high productivity jobs in these productive cities. Hsieh and Moretti estimate that these spatial constraints lowered aggregate growth in the U.S. by 36 percent between 1964 and 2009.

Sablik: You hinted at what was going to be my next question, which is how might the U.S. benefit economically from higher geographic mobility? Why is it that we care about this decline and why is the Fed studying this issue?

Jones: First of all, I would give you the standard economic answer, which is that it depends. It depends on why people aren't moving.

To allude to our earlier discussion, mobility has declined because women are working more and earning more. I wouldn't necessarily say that the decline in mobility was a bad thing. It may just be a perfectly reasonable response. But if mobility is low because the housing markets are constricted, that's different. There are matches between workers and jobs that probably should be occurring but are not.

Neelakantan: I think one of the biggest problems is that if mobility is limited by these externally imposed, inefficient frictions, then that impacts worker productivity and, most importantly, economic growth.

Sablik: Based on the causes that you've studied and that we've been discussing today, are there policies that could potentially help improve mobility?

Jones: Well, there certainly are a lot of regulations restricting the supply of housing. I suspect it'd be beneficial to relax a lot of them and make housing more available.

There is this buzzy new acronym in policy circles — this is called "YIMBY," which means, "Yes, in my backyard." It signals an openness to new construction. A lot of the constriction on building new housing is coming from the community level. So, [either] people's attitudes towards adding housing change or we can find a way to add housing in a way that meets the concerns of existing residents. That would certainly be for the good.

Neelakantan: Yeah, I'll second John's answer. I think relaxing policies that limit the supply of housing in productive areas could go a long way.

I'll circle back to a couple of things we talked about earlier. We talked about dual-career couples. I think having unemployment benefits for the spouse who doesn't have a job in the new location has been shown to encourage mobility for married couples. John also spoke to child care, especially if couples are moving away from family members who used to help in caring for their young children.

Sablik: John and Urvi, thank you so much for joining me today to discuss your work.