Labor Migration in the US Hampered by Inequalities in Housing Cost

As manufacturing jobs in the U.S. have headed off to developing countries where wages are much lower, displaced workers, especially those with fewer skills, have been less likely than in the past to move somewhere else in search of work. Labor migration is part and parcel of American history, but two young economists have just published a paper through the Brookings Institution suggesting that one limiting factor in recent years has been the increasing spatial inequality in housing costs. Peter Ganong and Daniel Shoag suggest that an increase in housing regulations is part of the problem. High skilled workers are much better able to absorb the cost of moving to places with high housing costs than are people with fewer skills and this slows down the movement of unskilled labor and thereby perpetuates income inequality.

I like the paper because it references two past presidents of the Population Association of America--Richard Easterlin and Steven Ruggles--and uses census data from the IPUMS website at the Minnesota Population Center. On the other hand, I am disappointed by the lack of any spatial analysis. We all know that housing costs and incomes are higher along both coasts than they are inland, and there a lot of reasons for this besides just housing regulations. The paper also ignores important population movements over time. You cannot easily equate the cohort of workers in 1940-1960 (pre-Baby Boom and pre-1965 Immigration Act) with the cohort in 1990-2010 (peak earnings Baby Boomers and full impact from changing immigration). 

Still, it is good to get these ideas out on the table where they can be examined. I also encourage you to read today's newsletter from Mauldin Economics, in which Patrick Watson discusses the possibility of jobs coming back to the old neighborhoods in new, technologically innovative ways. If the future unfolds in this way, labor migration could become a thing of the past.