Residential mobility has declined significantly, as Jennifer Medina and Sabrina Tavernise report:
Mobility always tends to slow in times of economic hardship, and there has been a gradual decline in American mobility for decades. But census numbers released earlier this year showed that domestic migration in 2010 had plummeted substantially since the recession began and reached the lowest level since the government began tracking it in the 1940s.
“When times get really hard it gets really hard for people to up and move,” said Kenneth M. Johnson, the senior demographer at the Carsey Institute, who conducted the analysis. “People who might have left New York for North Carolina are staying put. But that is a very recent change, so that places that had been growing rapidly suddenly aren’t, and the outflow has really slowed down.”
Raven Molloy, Christopher L. Smith, and Abigail Wozniak recently summarized the evidence on whether “house-lock” is to blame:
There has been much speculation and some research about the possible role of the housing market contraction and the economic contraction in reducing geographic mobility. The housing argument often refers to the effect of underwater mortgages in damping the ability of homeowners to move. Also, as noted earlier, mobility is often pro-cyclical, so the economic contraction would be expected to reduce mobility. However, we believe that the decrease in mobility is best-understood as a longer-term trend, and that the economic contraction and the housing market bust appear to have contributed relatively little in addition to the longer-run factors.
Given that we have seen a secular, long-term decrease in mobility, the question is whether or not we should care as a policy matter. Molloy et al. conclude their paper on the following note:
In addition to the mystery of its origins, the reduction in geographic mobility is also interesting for its potential macroeconomic implications. For example, it has been suggested that higher migration rates in the United States may indicate lower frictions in the labor market as compared to Europe. Thus, lower migration rates might signal an increase in labor market frictions (although the direction of causality is not clear). On the other hand, high levels of migration may reduce commitment to the provision of local public goods or corrode social ties in other ways, in which case lower mobility might raise aggregate well-being and possibly economic output. The link between migration and macroeconomic performance has received relatively little attention to date; by providing an overview of recent trends in aggregate migration patterns, we hope that this article will fuel new research on the role that it plays in the larger economy.
Last year, Jens Ludwig and Steven Raphael that we should encourage greater residential mobility among the resource-constrained:
This paper proposes the creation of a “mobility bank” at a government cost of less than $1 billion per year to help finance the residential moves of U.S. workers relocating either to take offered jobs or to search for work, and to help them learn more about the employment options available in other parts of the country. Whereas those with college degrees and savings are much more likely to move in response to job loss and to improve their job market outcomes, those with less skills and no savings may have difficulty financing such transitions. The government should target mobility bank loans toward displaced, unemployed, and underemployed people in depressed areas of the country and should help to insure people against job-outcome uncertainty by making repayment terms contingent on the borrower’s post-move employment and income.
Though I imagine many people will find this idea distasteful, I wouldn’t dismiss it out of hand, provided some other program were phased out — a good place to start would be regional development funds that aim to keep depressed regions on life support, as the mobility bank cuts in precisely the opposite direction.
Basically, this “mobility bank” will step in and play the role normally played by one’s extended kinship network. The poor tend to have weaker family ties, which makes borrowing the money you need to move to a more economically viable region difficult if not impossible. What we don’t want to do is create a new entitlement, which is why well-designed repayment terms are important. One model for how this program could work is the student loan social enterprise Lumni. Lumni uses an algorithm to determine whether or not a student is a good credit risk, based on past academic achievement and major, and then offers an income-contingent loan or “human capital contract.” Large numbers of applicants won’t make the cut. Those who do will be given a loan that will be repaid as a percentage of income, e.g., 12 percent of income for the first five years out of college. Lumni thus has a stake in the success of its students. The mobility bank might offer loans only to those who have good prospects of finding employment in their region of choice, e.g., a carpenter will have a better shot at getting the loan if she moves to a region in need of carpenters, etc.
Perhaps this program could be implemented by the voluntary sector. It doesn’t seem likely to attract the interest of for-profits. I see it as a cheaper and more effective alternative to government programs that try to keep people in economically-depressed regions, and one that is more likely to yield more net contributors than net recipients.