The downside of declining domestic migration

The Upshot, a section of The New York Times, released some interesting new charts this morning on the origin of residents of different states. The interactive charts lets readers see where residents of a state were born and the trends over time. The data present interesting state-level stories that should spark readers to consider the context of the overall national trends.

Domestic migration, or people moving within the United States, has been on the decline in recent decades. The impact of this trend isn’t clear yet, but it’s an important one for economists and policymakers to understand. The ability and willingness of Americans to move for work has been a defining characteristic of the U.S. economy. Compared to Europeans, Americans have been much more willing to pack up and move.

Yet over the past 30 years or so, U.S. workers have become less likely to move. There might be changes in the destinations of moving workers, as the Upshot data indicate, but the actual amount of moving has declined. Economists aren’t entirely sure about the causes of this trend. But state-specific factors, such as tax rates and housing costs, are almost certainly not behind the decline. As Princeton University economist Greg Kaplan put it, housing prices “might explain why people are moving from San Francisco to, I don’t know, Houston. But you’ve seen a decline in migration from Texas to California as well as California to Texas.”

An emerging hypothesis is that migration is declining because the benefits of migration are, too. Specifically, the decline is related to structural changes in the labor market. We’ve covered research previously in this column that shows the benefits of switching a job has declined over time, which also reduces the benefit of migration. In that sense, the decline in mobility might be benign.

Or something more serious may be afoot. Research by economists at the International Monetary Fund shows a negative side to the decline in mobility. The paper considers migration as a way for workers to respond to a job loss. If a negative economic shock, such as a decrease in manufacturing jobs, hits a region then workers would presumably move to a new area of the country to find a job. But over time, economic conditions have become more similar across the United States. Differences increase during recessions, but a regional shock is less likely to create big differences.

Specifically, their research shows that after a shock, migration might not pay off as a response to losing a job. Instead, they find that workers now respond by dropping out of the labor force. Instead of moving on, workers drop out. This aspect of declining in domestic migration certainly has negative ramifications.

The fall in domestic migration is just a recently understood phenomenon. So economists and other researchers will need more time to fully understand what’s driving the trend. But if the underlying reason is the increasing homogeneity of the labor market, economists and policy makers need to grabble with this reality.