Has America’s economy become less mobile?
Photo: Dwight Burdette. Source: Wikipedia
Labor market mobility in the US has declined. It used to be that when an area was depressed, people moved to where there were better opportunities. But following the financial crisis, more folks stayed put and simply dropped out of the labor force—either retiring or going on disability. This has broad implications for wages, productivity, and overall economic growth.
Migration across state lines from areas of high joblessness to areas of low unemployment helps equalize wages rates and employment opportunity. Some places may be harder hit than others, but our mobility has made the US into one large labor market. I myself have changed the state where I live several times when I needed to move to take a new a job. And it was always to a better situation.
But there is evidence that the rate of interstate and intra-state migration has fallen. This trend didn’t start with the financial crisis, but the dramatic decline in housing prices didn’t help. Since at least the ‘80s, workers have been less willing to pull up stakes and relocate. It’s not just that there are fewer young people in the workforce, or that it’s harder to move when both spouses have jobs, or that regulatory burdens associated with hiring and firing have increased, or that people just don’t trust strangers as much anymore. It’s like a combination of factors—some demographic, some regulatory, some cultural—that have pushed labor market mobility downwards.
Whatever the cause, this has an effect on productivity and profits. If fewer people are willing to move to where there are jobs, this means some areas of the country will suffer longer downturns, while others could see labor shortages. During the oil boom, convenience-store clerks in North Dakota could earn $24 / hour. But there weren’t as many folks willing to put up with their harsh winters. This means 7-11s in Williston weren’t very profitable.
This is important. If companies can’t make money, they’re not willing to hire new workers. Low mobility could lead, then, to a less dynamic labor market. If we want to get back to a growing economy, we’d better make sure businesses can hire the people that will help them grow.
Douglas R. Tengdin, CFA
Chief Investment Officer