Thursday, August 11, 2011

Low job mobility is not all that confusing

Tyler Cowen is wondering why job mobility is so low, given the variability in unemployment rates across the country. He writes:

"I find it striking that American mobility peaked sometime in the 1980s. Today there are people moving to find jobs, but not at anything like previous levels in earlier downturns. Some of that results from "the problems are in many different places" and that's bad news. But some of it is also "being jobless today involves some greater cushions than in earlier times." Very few people are facing potential starvation. For instance many more men have working spouses. Durable goods have become more durable, or in other words your car is less likely to break down and that makes joblessness somewhat easier to bear."

This isn't all that confusing - much of this is due to housing conditions. Even if you're not underwater you've still taken a hit on the value of your home, so you're going to be more reluctant to sell. Selling is even less attractive because the areas with stronger job markets you would expect people to move into are precisely the areas that had less precipitous drops in the housing market (so moving in these areas from where you are is relatively more expensive than it was before the crisis).

That's the big story when it comes to job mobility. A more structural explanation, I would imagine, is the rise in dual-income households. Even if one person is unemployed it's likely to make more sense to stay where you are with one earner than move somewhere where you'd both need new jobs.


  1. Um, what? That might make sense if it wasn't for the fact that homeownership is what, 5% above 1960s rates.

    How many of the Great Migration sold their tar-paper shacks for a profit? How many sold them at all?

    Don't treat 2011 as some sort of foreign territory incomparable to other periods. Read that economic history textbook of yours, then read a little deeper. There are some serious questions about labor mobility and what that indicates of, not just the labor market itself, but for ideologies of income.

    I was just thinking the other day why Ball jars was advertising, are we, perhaps, looking at the economy as TC would have us?

  2. Nonymous - it's not the home ownership rates that matter so much as whether current housing conditions afford mobility. Not every recession comes with a massive housing crash. Depressed housing prices in this recession deeply cut into worker mobility.

  3. Um, no. As my second paragraph suggests, housing condition were not a significant factor in earlier labor migrations.

    At the very least the statistics say there is 35% of the population not tied down by mortgages, why aren't they moving?

  4. I never said it played a major role in earlier migrations. I'm saying the homeownership rates aren't a decisive factor in the point I'm making.

    Who says the other 35% aren't moving? If you comment on economics you have to think on the margin. Nobody is saying nobody is moving - the point is they are moving less. Why would they move less? I'm not making this up - a widely acknowledged answer is that depressed housing markets limit mobility. Clearly some people are still mobile.

  5. Unemployment by age:

    Homeownership rates by age:

    Seems that the population most likely to be unemployed is least likely to be a homeowner.

  6. Yes, Nonymous.

    It's almost as if age is likely to be related to both unemployment and home ownership and we might want to control for it before identifying the relationship between homeownership and housing.

    Or - if we're really ambitious - we might consider the possibility that employment and homeownership are to a large extent simultaneously determined phenomena so that we need to plausibly identify any empirical argument for their relationship instead of looking at raw data.

    But who knows - I may be completely full of it.

  7. *between homeownership and employment

  8. And if you take that into consideration, do low home resale prices still explain "much" of the observed low labor mobility?

    If homeownership is directly related to age, and unemployment rates are inversely related to age, then how can "much" of the low mobility among the unemployed (young) be explained by housing (old)?

    Finally, I must be misreading your ambitious consideration, else you seem to be undermining your original argument that being stuck in housing reduces the mobility of the unemployed.


    From the abstract: "This paper examines housing market turnover and finds significant evidence of a lock-in effect. The lock-in, however, results almost entirely from a decline in within-county moves. As local moves are generally within the same geographic job market, this decline is not likely to affect labor market matching. In contrast, moves out-of-state, which are more likely to be in response to new employment opportunities, show no decline, and in fact are higher in counties with greater house price declines. Housing market lock-in does not appear to have degraded the efficiency of the labor market and does not appear to have contributed to a higher unemployment rate. "

    H/T spencer@MR


All anonymous comments will be deleted. Consistent pseudonyms are fine.