The US is a big country with many local labor markets, some more robust than others. With millions of job vacancies and local unemployment in metropolitan areas varying from 2 percent to 20, economists would expect workers to move where the jobs are, but overall, they aren’t. Daniel Gross at Strategy+Business considers why not:
“The percentage of Americans moving over a one-year period fell to an all-time low in the United States to 11.2 percent in 2016,” the Census Bureau reported in November. That percentage has been steadily declining over the past three decades.
Some of the reasons for inertia are obvious. People are often reluctant to leave their homes, familiar surroundings, friends and families, and the places where they have made investments, even if they realize economic opportunities may be greater elsewhere. Struggling housing markets and underwater mortgages may make it impossible for many people to move. And from companies’ perspective, labor forces and physical locations aren’t simply interchangeable, even in an age where there’s a Starbucks on every corner and people can work remotely. There aren’t enough engineers in El Centro for Silicon Valley companies to hire, and there aren’t enough houses in Fargo for potential job-seekers to move into. And as agile and nimble as companies can be, like people, they feel the need to be part of the ecosystem in which they grew up and had been thriving. If you want to be a player in film, you have to be in Los Angeles. Serious financial firms must have a presence in New York. For those in the technology game, San Francisco and Silicon Valley exert a magnetic attraction.
Last year, a Federal Reserve working paper postulated a correlation between declining labor market fluidity and declining social trust, observing that labor mobility fell as people reported trusting strangers less. In the meantime, as potential employees stay put, companies are making major geographic relocations of their own to seek them out where they already are, in many cases moving from suburban corporate campuses to central city locations.
General Electric, for instance, announced a year ago that it was moving its headquarters from Fairfield, Connecticut to downtown Boston, and has invested in helping its employees relocate, even offering to buy their homes if they were unable to sell them before moving. Last summer, McDonald’s revealed a similar plan to move from suburban Oak Brook, Illinois to central Chicago. Both companies are responding to changes in the talent market, competing for younger employees with in-demand technical skills who prefer to live in big cities (and often already do). Other companies based in high-cost locales, such as Facebook, offer employees housing subsidies to enable them to live closer to headquarters.
On the other hand, while an office in New York is a must for financial firms, as Gross points out, Goldman Sachs and other major investment banks have opened up secondary locations in less expensive places like Salt Lake City, particularly for tech jobs. With the rapid advance of communications technology, more and more digital talent is able to work from anywhere, to the point that employers and their employees don’t even need to be in the same place. The advent of the remote workforce opens up a new avenue for solving the labor mobility problem: In many cases, it’s now possible to hire employees or contract with freelancers wherever they are and let them stay there. After all, Americans today are working less and less from the office, and more and more from home.