The Stickiness of Poverty: Highly-skilled Workers Exit; Poor Low-Skilled Workers Don’t
I’ve been reading The New Geography of Jobs by Enrico Moretti, which provides a good snapshot of the long-term trends in the labor market. Moretti’s research confirms that the world is in fact not flat, but spiky: talent accumulates in cities, forming positive feedback loops in which knowledge spillovers and proximity increase the productivity of everyone. Density begets productive density and so on.
One section focuses on mobility and the willingness to move. Here are some facts worth mulling over:
- “Today about half of American households change addresses every five years, a number that would be unthinkable in Europe, and a significant number relocate to a different city. About 33 percent of Americans reside in a state other than the one in which they were born, up from 20 percent in 1900.” (pg. 156)
- “Almost half of college graduates move out of their birth states by age thirty. Only 27 percent of high school graduates and 17 percent of high school dropouts do so.” (pg. 157)
- Notre Dame economist Abigail Wozniak found that among those who entered the labor market during recessions, “a large portion of the college graduates relocated to states with stronger economies, while the majority of high school graduates and high school dropouts did not move.” (pg. 158)
It is worth speculating why unemployed, less educated people tend to stick around even as conditions deteriorate, as in Detroit. Perhaps it’s a lack of information about opportunities. The Grapes of Wrath scared way way too many people. Or it could be that it’s simply because they do not have the resources to move. But it appears that even in areas with high per capita income among high school graduates, less educated people tend to be homebodies. (One surprising stat in Moretti’s book is that high school graduates in cities like Stamford, CT, make more on average than college graduates in Portland, OR.)
Europeans, despite their relative wealth, tend to stay put. 82 percent of Italian men between the ages of eighteen and thirty live at home with their parents. Even when they do move out, they tend to remain in the same neighborhood or even the same city block. To be sure, this stickiness has its benefits. Children become caregivers for their parents. Grandparents can help with childcare. But it also has a macro-downside. The more people stay rooted, the worse economic conditions become as unemployment increases, debt accumulates, and governance decreases in quality.
Moretti proposes “relocation vouchers” to encourage low-skilled people to move more quickly from unproductive cities to more productive economies. This would press down the accelerator on exit over voice, a good move in general. The parallels with education come to mind, and while my biases are against subsidies, I’d be willing to support some experiments here. The key and not unreasonable assumption is that these same people will become productive in their new homes. But whether this is politically feasible is another question. After all, politicians would have to campaign on a promise to move their constituents out of their district, a very unlikely scenario given the incentives of office.