How worrisome is the decline in labor mobility?

Americans have long been willing to relocate in pursuit of a job, and economists believe this willingness is an important factor in the success of the U.S. economy. When workers are highly mobile, it’s much easier for the country to recover from recessions, adjust to technological shocks that create layoffs and to match workers with the jobs they’re best suited for.

In the 1980s, around 3 percent of the workforce moved to a different state each year, but mobility has declined steadily over time, and now approximately just 1.5 percent move today, according to research by the New York Federal Reserve (roughly half of these moves are job-related). 

Is this a sign that the U.S. is losing its advantage in “dynamism,” or does the decline have some other explanation?

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One possibility the researchers investigate is that the drop in mobility is related to the aging of the population. As they note, mobility rates fall substantially between the ages of 25 and 40, and the percentage of workers between the ages of 40 and 59 increased from 45 to 60 percent in the last 30 years. However, an aging workforce can explain only about 20 percent of the fall in mobility. In fact, much of the decline occurs across all age groups.

But the researchers argue there’s another way the aging of the population could have an impact on mobility:

“…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, increasing the prevalence of job postings targeted to local job applicants. An immediate effect is that 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.”

They present evidence consistent with this hypothesis, and with this added channel for demographic effects they’re able to explain about half of the decline in mobility. They conclude: “These findings suggest that the declining trend in interstate migration is a response of the labor market to an aging population and does not necessarily signal a decline in the market’s dynamism or efficiency.”

Perhaps, but even if this research holds up, that still leaves half of the drop in mobility unexplained.

In the past, labor mobility in the U.S. has been much higher than in other countries, for example those in Europe, and it’s often cited as one reason the U.S. economy exhibits more dynamism and resilience. To the extent that the slide in labor mobility can be explained by structural factors such as demographics, it’s not worrisome. 

But subsequent research could come to different conclusions, and a large component of the drop is still not fully understood. Until more conclusive research appears, I’m not ready to conclude that the fall in geographic mobility should be taken off the list of things to worry about.