Get moving: Relocating can help boost workers' wages

Get moving: Relocating can help boost workers' wages
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Geographic mobility can be a powerful force for improving individual labor market outcomes and helping struggling places to catch up with the rest of the country. This process enhances overall productivity and wage growth, and it can also play a vital role in shielding against regional shocks.

It is therefore disturbing that this force has diminished in recent decades. Movement from low-income to high-income places has declined in line with shrinking economic convergence among states. Today, people are not as willing to move to another state for a new job, and mobility is far less responsive to labor demand than in prior years.

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Looking at The Hamilton Project’s Vitality Index — a composite measure of the economic and social well-being of U.S. counties that we developed with our colleague Jana Parsons — we find that there is relatively little migration from struggling counties to prospering counties.

From 2015 to 2016, more than one-third of migration out of the bottom fifth of counties was into other counties in the bottom fifth. By contrast, only 13 percent of movers from the bottom fifth ended up in the top fifth of counties. Overall, migration does essentially nothing to shift people from struggling communities to thriving communities.

Conversely, those moving from already-strong locations were likely to move to another strong location, with nearly 40 percent moving to other counties in the top fifth of the distribution and almost two-thirds moving to counties in the top-two quintiles.

The overall reduction in mobility has come as convergence across locations has stalled and labor market dynamism has stagnated. But the low mobility of those in weaker areas toward stronger areas also means an important route to improved economic outcomes is breaking down.

To better understand how migration affects individuals’ outcomes, particularly the intergenerational transmission of opportunities, we use data from the Opportunity Atlas to look at the share of people who remain in their childhood local labor market upon reaching adulthood.

People who grew up in the upper end of the income distribution are substantially more likely to move than children of low-income parents. More than half of those at the top of the parental income distribution move to a different labor market by adulthood, while less than 30 percent of those at the bottom of the parental income distribution do so.

This should not come as a surprise: Highly educated individuals have higher mobility than their less-educated counterparts, and family income is correlated with education. Still, lower mobility for people born into low-income households means they are missing out on possibilities for greater success in the economy.

Geographic migration can improve workers’ career advancement, earnings and other economic outcomes. Migration and job changes are often directly linked: About half of moves in 2017 were for reasons related to the labor market.

Migration — both intrastate and interstate — is associated with higher earnings growth. Especially for young employees, it can be valuable to explore new labor market options in distant locations.

It is concerning that we see far less migration among children born to lower-income families and less movement from lower-income to higher-income places. Changes to public policy could help.

One example of this type of policy is a Hamilton Project proposal by economist Abigail Wozniak that would increase Pell grants for low-income students who do not have access to a local college but want to enroll in a postsecondary institution, helping to offset the high costs of relocating for school.

This policy would not only promote college degree attainment, but geographic migration as well. The proposal would also encourage mobility after graduation by altering student loan deferrals, helping graduates to find better employment matches in a wider variety of places.

It is important to recognize that many people will not leave struggling places, in part due to ties to people and places. Policymakers should consider options that would help those places and the people who live there to flourish.

The Hamilton Project released earlier this year a book, "Place-Based Policies for Shared Economic Growth," including a range of policies that would promote more broadly shared growth across the country.

Jay Shambaugh is the director of The Hamilton Project and a senior fellow in economic studies at the Brookings Institution. He previously served as a member of the White House Council of Economic Advisers. Ryan Nunn is the policy director of The Hamilton Project and a fellow in economic studies at the Brookings Institution. He previously worked at the U.S. Department of the Treasury in the Office of Economic Policy.