Timothy Noah has a new article in the Washington Monthly which lends further credence to Ryan Avent’s thesis in The Gated City: to the extent domestic migration is happening at all, it entails a shift from high-cost regions to low-cost regions rather than from low-productivity regions to high-productivity regions:
So, for example, when people moved from Connecticut to Texas in 1980, they moved to a place where per capita income was 17 percent lower. By 2011, when people made the same migration from Connecticut to Texas, they wound up in a place where per capita income was 31 percent lower. And yet they kept coming.
Maybe you’re thinking that states with lower wages have a higher volume of jobs. Pay people less and you can hire more of them, right? But in fact, most Americans moving across state lines are relocating to places where they’re no more likely to find employment. As the Atlantic’s Jordan Weissman pointed out in December 2012, of the ten states with the highest rates of in-migration, more than half had unemployment rates equal to or higher than the national average.
I’m all for making the case against restrictive local land-use regulations that price many Americans out of high-productivity regions. But there are a few other things to keep in mind. Weissman notes that retirees continue to shift to warm-weather states, and they are for obvious reasons less sensitive to labor market conditions. Indeed, they might benefit from weak labor markets, as they are likely to be consumers of labor-intensive services. He also notes that at least some professionals might be leaving high-tax states for low-tax states. These are workers for whom weak labor markets are less of an issue, as the unemployment rate for the college-educated is substantially lower than the unemployment rate for the non-college-educated across the U.S. Noah is skeptical:
Why are Americans by and large moving away from economic opportunity rather than toward it? It all starts to make sense when you think about “push” rather than “pull.” One “push” factor heavily touted by conservatives is state income taxes. Raise the state income tax, conservative dogma holds, and taxpayers will make an exodus to lower-tax states. But a Reuters report in February cast doubt on this hypothesis, pointing out that the rich typically stay put when state income tax rates rise. As for working-class Americans, moving to a state with low income tax rates hardly makes sense if you have to take a bigger cut in wages. Moreover, states with low income tax rates generally have high sales taxes, which, because they are regressive, punish working-class people the most.
The article Noah cites, by Nanette Byrnes, draws on the work of Stanford’s Cristobal Young and Charles Varner of Princeton University, who find that tax increases on high-earners in New Jersey and California didn’t lead to a reduction in the number of millionaires. Byrnes correctly writes that location choice decisions are influenced by “commute times, community attachments and real estate costs.” What she doesn’t reckon with is the counterfactual, e.g., might the number of high-earners in New Jersey and Californoa been higher in the absence of tax increases, and how tax levels might impact the decision to start a high-earning career in one jurisdiction or another. New Jersey and California are states that benefit from fixed amenities. Cold-weather states can’t import the high mean January temperatures of warm-weather states, and so states with better climates can exploit fixed amenities by, for example, charging higher taxes. Similarly, it takes a very long time for economic agglomerations to emerge. Austin, Texas is a fast-growing city, but it will take a very long time for it to match New York city’s stock of human, social, and cultural capital, as New York city has enjoyed several centuries of capital deepening. There are many high-earners for whom access to New York city’s labor market and its institutions is essential to productivity. But this is not true for all high-earners, and it is these high-earners who might be more inclined to migrate. It’s true that the crudest possible interpretation of “conservative dogma” is incorrect. People will not generally abandon amenity-rich communities in which they have deep roots in response to small tax increases. But the population of high-earners, like the population of high-earners at large, is heterogeneous, and the relevant question is what happens at the margin.
What we really want to know is how domestic migration patterns reflect local labor market conditions for prime-age workers, and in particular for non-college-educated prime-age workers. One dynamic, identified by the sociologist Chenoa Flippen, is that some middle-income workers might be migrating to improve their relative status, e.g., a given level of income that places you at the 50th percentile in southwestern Connecticut might place you at the 75th percentile in a low-cost Sunbelt state, and this in turn will allow you to downshift spending, consume more leisure, increase savings, etc., at relatively low psychological cost.
One other point from Noah’s article is worth highlighting:
The larger reality is that Americans of all ages and stripes were becoming far less likely to move. So, for example, between the 1980s and the 2000s, the percentage of young adults (those aged eighteen to twenty-four) who migrated across state lines declined by 41 percent. Similarly, whether married or single, black or white, parent or childless, factory worker or knowledge worker, educated or not, Americans in any or all of these categories became far less likely to move than their counterparts a generation ago. Even immigrants from abroad are much less likely to move, once they get here, than were foreign immigrants in the past. [Emphasis added]
The declining geographical mobility of foreign-born workers strikes me as interesting, as immigration advocates have recently touted the work of Brian C. Cadena and Brian Kovak, which finds that less-skilled Mexican-born workers are more likely to move in tune with fluctuations in local labor markets than native-born less-skilled workers. Cadena and Kovak attribute this in part to the mobility-dampening effects of unemployment insurance benefits — less-skilled Mexican-born workers are less likely to be eligible for unemployment benefits than less-skilled native-born workers, and this “likely increases the urgency of finding new employment” for the former. Noah doesn’t mention the role of social transfers in shaping geographical mobility. Yet the apparent decline in geographical mobility seems to strengthen the case for lump-sum unemployment payments, relocation vouchers, and other mobility-enhancing policies.
People often forget that moving can be not just expensive but traumatic, particularly for those who have to sever or at least disrupt ties with loved ones. Moving from a low-productivity region to a high-productivity region can represent an economic boon, yet there are real costs as well. What happens, for example, when you experience an economic disruption, and you don’t have relatives who can help you look after your child? We can socialize this function by offering high-qualty, publicly-subsidized child care. But this is expensive, and at least some parents would much prefer to have their children care for by family members rather than strangers, including well-compensated and well-trained strangers. We need to factor the value of family and community ties into the calculation. Without discounting the importance or the value of poverty alleviation measures, it’s hard to deny that they make it somewhat easier for poor people to remain in depressed economic regions. Since there is a broad public consensus that we should not eliminate social transfers designed to alleviate poverty, there is value in rethinking how we might nudge people in the direction of self-sufficiency. Reforming local land-use regulations can make a big contribution, as can people-based rather than place-based policies, an argument Edward Glaeser has been making for over a decade.