August 27, 2018
Some years ago, I was greatly honored to give a commencement speech to the master’s degree recipients at my alma mater Johns Hopkins University. Part of that speech discussed what has made the United States great. I referenced Frederick Jackson Turner’s “Frontier Thesis”—the idea that the constantly westward-moving frontier and the Americans who pursued it were instrumental in the creation of our democracy and the ideas of freedom and egalitarianism that underpin it. I related that to President John F. Kennedy’s “New Frontier,” an effort to excite Americans about their country’s opportunities and to show people how they could participate in them. I illustrated it with a cartoon of a long-haired, bearded hippie hitchhiking with a sign that simply said, “Further.”
In fact, for a very long time, the frontier was our great release valve. People who were unhappy or unsuccessful or simply wanting a change could pack up and move west where land was readily available, social divisions were limited, and individual initiative and hard work were paramount. And Americans responded. For decades, mobility was one of the features of the U.S. economy as young workers, with families or without, went off to seek their fortunes elsewhere, in some cases voluntarily, in others driven to it by poverty, discrimination, or drought.
Even in the 1940s, the number of Americans who moved in any given year was around 20 percent. But by 2016, that number was down to 10 percent. Worse was the working-age population (25-59). According to the U.S. Census Bureau, only 3 percent of that group moved to a different state in the 1980s, and by 2010 it was down to 1.5 percent. That matters in two ways. First, in strictly economic terms, it affects job creation and labor market efficiency. Geographic mobility, according to the New York Federal Reserve Bank’s (New York Fed) Liberty Street Economics blog, is important:
…for the efficiency of a labor market in allocating the right people to the right jobs. Accordingly, the willingness of the U.S. Workforce to move is a factor behind the greater dynamism of the U.S. labor market compared to Europe.
With our unemployment rate low, employers are having more and more difficulty filling jobs. A more mobile working-age population would partially address that problem. So, why don’t we move as much as we used to? Several reasons keep coming up in the research.
- Housing prices in flourishing markets have skyrocketed. Home prices in markets like New York, Boston, LA , D.C., or San Francisco—where jobs are relatively plentiful and high-paying—have skyrocketed. Reasons for this include increased demand, restrictions on new buildings (and zoning laws that are difficult to change), and rent control combined with other regulations that disincentivize moving and further drive up the prices of non-controlled buildings.
- Occupational licensing has grown—making it harder to practice your job in a new state if new licenses are required. A National Bureau of Economic Research paper by Janna Johnson and Morris Kleiner of the University of Minnesota found that controlling for other variables, “the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations.”
- An aging population. First, there are simply more middle-aged people relative to young people today, and older folks are less likely to move. Second, businesses adjust to the new demographic composition of the workforce and change their hiring/recruiting practices. As Fatih Karahan and Darius Li at the New York Fed put it,
A firm engaging in a nationwide search is more likely to attract younger applicants, while a firm engaging in a local search is more likely to face an older pool of applicants. According to this theory, an increase in the share of middle-aged people in a market makes local recruiting more cost effective. As a result, firms tend to look more for local workers…younger workers in a labor market with an aging population have an easier time finding local jobs and thus do not have to move out of state to find a job.
These are mostly rational responses to market stimuli, but it is worth wondering whether something deeper is going on. Have we lost our edge? Is complacency setting in? Have we become risk-averse? Is today’s millennial hitchhiker, or more likely Uber rider, carrying a sign that says, “Take me home”?
The Chinese seem to think so. They see themselves as a rising power, but they also see the United States as a declining one and that it is only a matter of time before our trajectories cross. That’s the kind of thinking that leads to the famous “Thucydides Trap” and is a path to conflict. We can explore that idea in a future column, but in the meantime, we would do well to remember that avoiding it means focusing on what we can control, not on the other guys, whom we can’t control.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Andrew Chatzky is an intern with the CSIS Scholl Chair.
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