When people talk about the American economy, one word often comes up: dynamism – the ability for things to change quickly and dramatically. In economics, it’s often associated with innovation, entrepreneurship and risk-taking.
Pursuing opportunity is part of the American ethos, but that idea might be changing. According to recent reporting from the Wall Street Journal, people are moving to new homes and new cities at around the lowest rate on record – last year, fewer than 8% of Americans moved.
Konrad Putzier, who covers economics for the Journal, joined the Texas Standard to talk about his reporting.
This transcript has been lightly edited for clarity:
Texas Standard: You reported that Americans are moving around less for new jobs and opportunities. Why is that happening?
Konrad Putzier: So there are two things happening. One is a longer-term trend that’s been going on for decades. And the second really is something that’s been happening the last two years.
So the long-run trend the last few decades is basically that the population’s gotten older. There’s, you know, all the people now a bigger share of the population than they were decades ago. There are more households with two breadwinners, two people who have jobs. And finally, housing is really expensive in the cities with the jobs, like New York and San Francisco and Los Angeles.
And so those three things really have led to a decrease in the number of people who move to new places for work. And separately, older people are less likely to move. So as the population ages, you have fewer people moving around simply because younger people are more likely to move and there are just fewer of them now than there were.
And then, finally, the rise in the number of people who have two breadwinners in a household, that also makes it less likely for people to move because it’s more complicated than if just one person has a job.
And then on top of that, in the last couple of years, you now have a pretty much frozen labor market because everyone’s just gripped by economic uncertainty, no one knows what’s going to happen, companies aren’t hiring anymore, and you have high interest rates that have made housing even more expensive. And those have really frozen up mobility even more.
In your story you use the term “golden handcuffs” to describe these trends. Explain what that means.
So basically, a lot of people are stuck in their homes, they’re stuck in jobs, for better or worse. And the golden handcuffs, it really applies to people who have good jobs and who have nice houses, but who just aren’t leaving them, even though maybe they otherwise would have, right?
Like you have a good job, maybe you’re interested in changing your career or going somewhere else, but if the labor market’s terrible and you don’t think you’ll actually get a job in a different profession, you’re just gonna stick with the job you have. And that basically leads to fewer people switching jobs.
And the same goes for houses. There’s a lot of people who would like to downsize, older people whose kids are out of the house, maybe who would like to move into a smaller house, but aren’t doing that because they have a cheap, old, low-interest mortgage.
And if they were to move into a smaller house, they might have to pay more per month because the interest rates are so high now. And they’re saying, well, “why would I move into a small house if it ends up meaning I have to paid more per month?”
And so golden handcuffs really mean that all these people are stuck in situations that are, you know, objectively not terrible, but they probably wouldn’t be in if there was more mobility.
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So when did this slowdown of movement start?
It really started between the ’60s and the ’80s. So if you look back at historical mobility data, in the ’40s and ’50s, around 20% of the population would move each year. And that includes people who move into a new house close to home or move to an entirely different city or state.
And that started declining, and it really started declining since the 1980s. And decline in labor market mobility on top of that, that’s really been happening since the 1980s.
Do we know what role the pandemic had on this long-term trend?
The pandemic briefly led to more people moving to new cities and new states, right? There was this whole boom in remote work where basically anyone with a remote job and enough salary could just move to Austin or Boise and just live there. So there was this brief increase in the number of people moving, making long-distance moves.
But it really hasn’t changed much in terms of the underlying trend, because once that big, brief spurt of mobility was over, things pretty much went back to the way they were before. And there are now even fewer people moving than there were before the pandemic.
And if you think about it, the pandemic contributed to rising inflation, right? Because all these supply chains weren’t functioning anymore, and prices for goods and services went up, and higher inflation has led to higher interest rates because the Federal Reserve is trying to bring inflation down with high interest rates.
And what have interest rates done? They’ve made housing expensive. So people can’t afford to move anymore. For a time we thought, oh, the pandemic would lead to everyone kind of moving somewhere else and working remotely. Actually, what’s happened is the opposite. There are way fewer people moving now because of all these ripple effects from the pandemic.
Are there any broader economic consequences? Is it a problem that Americans don’t move as much as their parents or their grandparents did?
It is a problem. We do generally want people to move to where the jobs are. And we want people to switch jobs if there are better opportunities elsewhere.
And on a just basic level, this is a question of economic productivity, right? If your talents are better used in a different city or a different job, if you can make more money there, it will be better for the economy for you to move there.
And from a company’s perspective, right, if you have a bunch of job openings in San Francisco, and you can’t get people to move to San Francisco, for example, because housing is too expensive, that’s bad for your own business. You can’t fill up positions, which means you make less money, you’re less productive, you pay less in taxes, and all that is bad for the economy.
This is also a huge issue for the people who are impacted by this, right? Because the golden handcuffs are one side of this; the way more serious part of this is the people who don’t have a job and who can’t find a house to begin with.
There’s so many college grads now who have a great degree from a great university but just can’t find work because there’s no hiring happening in the market and who can’t find rental apartments, not to mention the house to buy, right? But they can’t even find an affordable rental apartment in many cities.
And so the risk there is that if you fall behind after graduating from college, if you don’t quickly find a good job, you often fall behind for good. There’s research that suggests that 10 years after graduating college, those who didn’t quickly find good work, they often never recover from this.
So the fear is that if this lack of dynamism continues, it’s not just going to hurt economic productivity and economic growth, it is also going to create this new group of people who potentially fall behind.
