Labor Markets and Labor Mobility

Econ Buff Podcast #2 with Rex Pjesky

Dr. Rex Pjesky, talks with me about labor markets and labor mobility. We discuss what labor mobility is, why it is important, and what evidence we see for how long labor mobility has been declining and how severe the decline has been. Potential causes of labor mobility decline and whether these causes are benign or not is examined. We discuss what the implications for declining labor mobility are and how creative destruction could be impacted by declining mobility. We explore the nature of labor mobility in different markets both geographic and occupational, and how Dr. Pjesky views the best way for economists to think about and study the problem.

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Show Notes and Links to things discussed in the Show

"Getting People Where the Jobs Are" David Schleicher, Democracy Journal

"Declining Dynamism in the U.S. Labor Market" David W. Perkins, CRS Insight

"Labor Market Fluidity and Economic Performance" Steven J. Davis, John Haltiwanger, National Bureau of Economic Research

"The Link between High Employment and Labor Market Fluidity" Laurent Belsie, National Bureau of Economic Research

"Top Ten Signs of Declining Business Dynamism and Entrepreneurship in the U.S." John Haltiwanger, National Bureau of Economic Research

"Job Switching and Wage Growth" Jason Faberman and Alejandro Justiniano, Federal Reserve Bank of Chicago

Transcript

Stitzel: Hello, and welcome to the Econ Buff podcast. I'm your host, Lee Stitzel. With me today is Dr. Rex Pjesky. Rex is a Professor of Economics at West Texas A&M. Rex, welcome.

Pjesky: Good to be here.

Stitzel: Rex, today our topic is labor market fluidity, labor mobility, and kind of trends that we're seeing in that, and how that's affecting the broader market. So how do you see labor market -- excuse me labor mobility? Do you see that as declining? What evidence do you see for/against sort of the mobility of labor?

Pjesky: Well Lee pretty much any way you measure labor mobility -- which you know of course labor mobility is the rate at which a worker will move to take on a new job, pretty much however you measure labor mobility -- we see it declining in the United States. So, if you look at how often people move from one state to the next, we're off around 50 percent (or so) from the average from, you know, 1950ish to 1980ish or so. Even if you look at people moving to a different county within a state, we're off about 30 percent or so from what we saw (I guess) in the post-war general generation. Also, if you look at labor mobility among different economic classes, you know, rich/poor -- regardless what demographic you look at --- it seems as though people are moving less for their jobs/to take new jobs.

Stitzel: Yeah, so those are all great/all great points, you know. So, if I can just chime in with a couple of academic studies. So, I always assigned in my graduate class some readings by Davis and Haltiwanger. They're two of the top guys that sort of work in the labor field. I have a quote here from them that says: “the loss of labor market fluidity suggests the U.S. economy is becoming less dynamic and responsive in recent decades.” Your comments highlight that, given that we see declining labor market mobility. I think that's undeniable at this point. Why do you view that as a as a potential problem?

Pjesky: Well, I think most economists view that as a problem because it might be reflective of some underlying tendencies in the economy that are particularly worrisome. The best source, or you know, the best person I know of that has written about this extensively is Tyler Cowen. He wrote a book called The Great Stagnation [2011] a couple of years ago, and he was/he's very concerned about declining labor mobility because he thinks that it is a reflection of (for whatever reason) of our economy becoming less dynamic. People are taking less chances. They're entrenching/entrenched instead of moving (sorry about that) --- [reiterates] entrenching instead of moving. And you know if that's reflective of broader trends in the economy, then it could definitely signal a slowdown in economic growth and innovation, and dynamism in in other ways as well.

Stitzel: So what I'm hearing then -- is you're saying that's more of a symptom of something else? Do you think there are sort of direct problems that it poses? Or it's really just something that we're looking at and saying: because we see this, something else is wrong?

Pjesky: Yeah. I think it could be both. I think it could be both. It could be, you know, the broader trends that Cowen seems to see. Or it could be the direct result of, you know, applications of bad policies, you know, for instance that could be causing this. If that's the case, then you know, it would require different solutions.

Stitzel: So, I mean, I'm intrigued by sort of the difference here. So, we could have on one hand policies that are that are causing problems, that are then manifesting in the labor market. And you know, that's a thread that I'd like to pull today. But if I can, if I can focus for just a moment here, how is it then that it would be a problem in and of itself? So, what is it we would be concerned about? Suppose that I could convince you by whatever -- I don't know how this would be done -- but by whatever data it would take. O.K. there's nothing that is a greater evil lurking in the dark behind this labor mobility. We just have low labor mobility. Would you then no longer be concerned, or?

Pjesky: Well, you you'd have to think about what the reasons were…

Stitzel: Of course. Of course.

Pjesky:…for the declining labor market mobility. If people were just making their own independent decisions -- more content for whatever reason -- to stay put, then that would be more benign…

Stitzel: Right.

Pjesky:…of an explanation. If the decline in labor mobility was the result of increases in efficiency in job matching…

Stitzel: Right.

Pjesky:..then of course, well I don't if that's the reason, I don't think we should be worried about it at all.

Stitzel: No. Of Course.

Pjesky: So, you know, think about how that might/think about how that might work. And actually, in the literature this is talked about quite a bit. you know a generation or two ago it was very difficult for someone to find information on other places. So, you know, if you woke up one morning thinking: “gosh, I really like Oregon, I might want to move to Oregon, or somewhere like that.” You didn't/you don't really have an easy, cheap way of finding out what it's like in Oregon. But today, if you woke up and wanted to learn about Oregon, you can easily find out a lot of different things about what it would be like to live in Oregon. It's very, very easy to find what jobs are available there. It's very, very easy to find out how much housing costs there. It's very, very easy to find out information about what the schools are like there. And, you know, you name anything that you might want to know before you move to Oregon, about Oregon. And you can learn about that almost costlessly.

Stitzel: Right.

Pjesky: Which is a new thing for humanity. So, the decline in labor mobility might just be, you know, based on the fact that people are just making good matches to begin with.

Stitzel: Or perhaps the grass doesn't look as green on the other side if you…

Pjesky: Yeah.

Stitzel:…have more access to the information.

Pjesky: Yeah, I mean, and the grass being greener on the other side is another benign reason why people have suggested that labor mobility might be going down.

Stitzel: Yes, that’s fascinating.

Pjesky: Generation or two ago, or up to a generation or two ago, it seemed that the economy was more geographically diverse in terms of employment opportunities. So, in other words, the kind of work that needed to be done in the Rust Belt (that's why we have these names for places like this) was different than the kind of work that you might do in West Texas, [and] would be different than the kind of work that you might do in California. Because of transitions in the economy, that really seems to have changed quite a bit. So, the kinds of jobs that you might do in in Dallas are going to be the same kind of jobs that you might do in Seattle, or Chicago, or New York, or anywhere. So, you've, you know, one of the things that we may have seen that may be an explanation for this declining geographic mobility just stems from the fact that you don't have to move, right? Our economy is dominated by, you know, almost generic service sector jobs right now, for lack of a better word. You know, it's no different selling insurance in Amarillo, Texas than it is to own the insurance in Green Bay, or anywhere you know, any other place that you might think of. So, there's a declining need to move for work. And so people are moving less for work. These two explanations that are benign are very, very interesting to think about. But I think the literature at least partially rejects them as complete explanations as to what is really going on with declining labor mobility.

Stitzel: So, if I remember correctly, there is quite a bit of research on -- well people working from home [and] working remotely [and] things like that.

Pjesky: That would be something else, yes.

Stitzel: And I'm not even sure. And maybe you have a different opinion than me. I'm not even sure I know which direction I would expect that to influence labor mobility. Do I move less because I can stay here and work? Or do I move more because now I can live in Los Angeles and live on the beach (or whatever it is that I'm wanting to do) and move? It's maybe though both of those things are happening. So if the remote working is a really interesting, and I think, increasing phenomenon, but it's pretty new. So let me back up just a little bit. Unless you had something to say about that.

Pjesky: No, no, no. That's, I mean, that's interesting. I agree. I don't know what direction as far -- for lack of a better word telecommuting…

Stitzel: Right.

Pjesky:…remote worker. But you know, that's probably not the 21st century term for it. I don't know what direction that would push this. That [would] definitely be an empirical question.

Stitzel: So, let me take this back. Because I said a couple of interesting things. So, we would get information -- do I want to move to Oregon [or] do I not? And so, the two things popped out to me immediately. The first one is: well one of those things that allows me to gain information is [that] travel is so much easier, and cheaper, and safer. But maybe that's also a substitute for actually moving to Oregon. I'm like -- I like Oregon, but I'll just fly up there, and climb around in the mountains or whatever it is I'd want to do in Oregon. Yeah, so it's kind of an interesting possibility that all that information that I'm gathering (like you've made the point a moment ago) could just paint a clearer picture [that the] grass isn't really as green so over there. So, I don't want to move there. Or maybe that information (and I would think combined with travel) -- it just substitutes for me actually having to move there. I can live here. I don't have to go through the trouble of moving or finding a job, but I'll just spend the weekend in Oregon this weekend.

Pjesky: Right. Yeah, and that's an extremely good point too. So, you know, our lives are more -- the decisions that we make in our lives are more -- independent of one another. So, if you really like the mountains you don't have to live in the mountains to enjoy them.

Stitzel: Right.

Pjesky: You know, it's not difficult for a middle-class person just to spend a couple of weeks in the mountains every year. And maybe that's enough. You don't have to live there anymore. You know, travel 50 years ago or so was extremely expensive. So, if you really liked the mountains, or the beach, or whatever [then] that's where you had/that's where you had to live. And because of the, you know, more efficient matching going on [then] perhaps now, you know, people are finding their place more quickly and just in/just staying put.

Stitzel: So, the second thing that I'd like to follow up on -- that the timing of the decrease in labor mobility sort of since the 90s [and] accelerating in the 2000s (and we've kind of dropped to new lows in recent years) -- do you think that matches up with your story related to our ability to gather information? That seems to be something that has happened extremely recently. Maybe you have a better sense of that than I do. But also, it seems to accelerate as we get more and more sort of ways to gather information and to experience that world. Do you think those timelines match up?

Pjesky: I'd almost gather that they don't. So, it seems to me like, that you know, according to most of literature [that] this acceleration of the decline in labor mobility (if that makes any sense -- labor mobility -- still I'll put it like this labor mobility) started to fall around 1980, O.K.? This is what a lot of people seem to think. And I don't know of any explosion, and information technology, or decrease in the travel cost that would have been big enough about that time that would have, you know, created such a big inflection point in how we how we live our lives. I mean, I guess you had to the deregulation of airlines about that time. But I don't know if that single event, or something like that, would be enough to explain. If you're going to look at this empirically -- if you were really going to try to find out the answer using data -- and that would be, you know, regardless of what context, regardless of what data you were using, you know, matching up the timing would really, really be key to really getting insight into what's going on. So, if you've got the idea that – wow, you know, a sharp decrease and in the in the cost of travel and the cost of gathering information about other places is what's causing this then you definitely expect to see that coincide with actual migration patterns. And if you don't see that -- even if the trends are going in the directions that you expect, [and] if the timing is off -- then you definitely/we have a problem convincing anybody that that was an explanation, or even part of the explanation.

Stitzel: All right. So that's/that isn't to say it isn't the cause. But if the decrease in labor mobility is happening well before, sort of those -- the age of the Internet, and you know, this ability to travel quickly, cheaply, and safely -- that we sort of attribute to like late 90s (and really taking off in the early 2000s), [then] something else has to at least feel…

Pjesky: Yeah, you got something else going on.

Stitzel: That isn't to say that it couldn't sustain it or make it sort of a more dramatic effect. But I think it's spin. I don't speak about this too precisely because I don't remember off the top of my head. It's been somewhat of a steady decline, is that observable in labor mobility?

Pjesky: I think so. I think so. And again, it's been, you know, decreasing since around 1980. And it's, I mean, it's certainly a puzzle in economics. Just, this is one of the things that economists should have the tools to explain. And something that would be very, very good if we were able to explain this.

Stitzel: And yet it's really an open question. And it's amazing for something to be an open question for 20-30 plus years.

Pjesky: It is. It is.

Stitzel: So, let's talk maybe a little bit about the -- who benefits and who loses. So, if the labor market is more dynamic, who do you see as winners?

Pjesky: Well, I mean, assuming that labor, you know, that, you know, turning labor market is good for innovation and is [also] good for the productive capacity of the economy, then we all win.

Stitzel: Right.

Pjesky: Or if the labor market is more dynamic, [and] if it increases GDP, [and] if it increases the pace of innovation, [and] if it helps people more be more productive (by getting better job matches and acquiring experience more rapidly in various ways) [then] that's good for all of us.

Stitzel: So overall economy in the sense that a dynamic labor market and a dynamic economy, as you mentioned Tyler Cowen’s work earlier, everybody wins in that sense. That to me is the story of like creative destruction, right?

Pjesky: Yeah.

Stitzel: And so, part of my concern, and I don't know maybe I've need to think clearly about drawing the link between what the mechanism is here. You know, but the dynamic labor market is probably both cause and a symptom of good creative destruction happening sort of economy-wide --not to jump ahead too much into sort of causes of this decline, and how we would view them as being good or bad things --- but if the decline in the labor market mobility causes us to have less creative destruction, [then] we'd almost always think that's a that's a bad thing. You have a comment about that?

Pjesky: Oh no. I mean, it certainly would be a bad thing creative destruction. You know, so called creative destruction is, you know, inseparable from economic growth. I don't think that you can have one without the other. So, if there's not a, you know, almost constant availability of new products, and of new ways of doing and thinking about things, then almost by definition we're stuck.

Stitzel: Hmm. Hmm.

Pjesky: So creative destruction is essential. And, you know, how essential is labor market mobility to creative destruction would be a very important question to think about.

Stitzel: So, there's some people that say the labor market mobility and dynamic nature of the labor market is more important for both younger firms and younger workers. Do you think that's true? Or is that probably overstated?

Pjesky: Well, I mean, it's probably a story that would fit the facts. A lot of the explanations we haven't talked about yet. But some of the explanations for cause of lower labor market mobility is the fact that in recent years we seem to have had a slowdown of new firms being produced.

Stitzel: Hmm. Hmm.

Pjesky: I think it would kind of surprise people. When you get into the labor market data, there are a lot of things that would surprise people. But, you know, actually a slowdown of startup firms, of new firms, and the economy is something that a lot of people have noticed, have been surprised about, and think is really, really concerning. You know, if you're, on the other hand -- if we're in the world where we can work anywhere and start a firm anywhere -- you know, you might just but, you know, those two things might not be linked at all because -- firms could just move to where the labor was instead of starting a firm and attracting like labor from everywhere.

Stitzel: So if I saw -- a higher rate of startups (or I mean it could even be the same), but a decrease in the rate of startups (and young firms doesn't fit this story) -- but if I saw a higher rate of the startups, and then I saw a declining labor mobility, maybe we would just chalk that up to the firm's going all the workers that we would want are in this area?

Pjesky: So, we go there.

Stitzel: But we don't see that. So that seems unlikely to be in any option.

Pjesky: Yeah.

Stitzel: Let me piggyback off that and something that you said a little bit earlier. You said, well, you know, all the jobs are sort of general service jobs, and we have this kind of economy. That's almost certain to be true. And if I want to do certain kinds of work, [then] in a lot of ways I can do those anywhere. Now that, I think, jives against kind of the public perception of the economy is increasing. When we think about business in America, we think about really large firms that have specific physical locations. And sometimes the politicians are even trying to attract those jobs into certain places like we saw with New York and Amazon. Now I think you're right, and I think both of these things can be true at the same time. If I'm/if I have a set of skills that is in computer programming, [then] it's almost certain that I can go anywhere and be successful doing that. What if I am a computer programmer though? So what about -- another way to say this would be -- do you think there's a difference in labor mobility sort of by occupation?

Pjesky: Well, I'm not sure. I would wonder is there data on that?

Stitzel: I haven't seen that.

Pjesky: That doesn't mean it's not. I mean, it's not there would that be something you'd want to want to look at. So, you know, think about, you know, you'd want to think about what categories of labor were more generic in reference to geography. You know, something like a doctor, right? You know, for instance, [if you are a] general practitioner or pediatrician, [then] there's going to be demand for your services anywhere. You know, you can pick where you want to live, you can go where you want to live, and you [can] stay there forever because you've checked it out beforehand. Now another thing -- a computer programmer might be, you know, might be a unique case. Because, you know, you can be born, and study, and then grow up to be a computer programmer anywhere. But all of the jobs for computer programmer are going to seem to be concentrated in a few places -- you know, Silicon Valley and, you know, there are a few places in the country that would be known as tech heavy, you know, maybe, you know, Silicon Valley, North Carolina, Austin, Seattle, you know, other places – where, you know, people working in technology in one way or another might gravitate towards. So, you know, seeing what the driver was, and any differences in labor mobility among occupations, might be really key to understanding what's really going on here. That might be an interesting thing to look at.

Stitzel: Sure.

Pjesky: I'm sure people have.

Stitzel: Yeah.

Pjesky: I'm not aware of that.

Stitzel: That's always interesting, you know. If you can have different assumptions about different occupations, [then] that can lead you to kind of paint a clearer picture. So now, maybe while you were saying that I was thinking: is it true that a computer programmer can only work in Cupertino or whatever? That's obviously not true. I can get programming jobs, but they’re sort of fundamentally different, right?

Pjesky: Right.

Stitzel: If I get a job, I can have one, you know, somewhere in Texas for example, and they can be a great job. But if I want to work on the big questions, [and] if I want to work on the stuff that's really sort of shaping that environment, so [then] maybe I'm falling into a certain fallacy, right which -- is, you know, we look at what's going on with the best of the best, and we think that that's representative of the whole market – I hadn't thought about that before. You raised the point/that you raised about sort of where the top tech jobs might be [that] not everybody is out there trying to be the very best in their field. Maybe it matters more where they are than what they're doing?

Pjesky: Yeah.

Stitzel: They want to be computer programmers.

Pjesky: And that could be the case. It's never going to be all or nothing in any of these fields. That's why looking at various, you know, even small and subtle variations across occupations might be instructive on what the answer to this question ultimately is, you know? So well, I mean, what you said exactly true, right? You can get a job as a programmer almost anywhere in in the United States, for instance. But is it/ are the patterns of work different in that occupation than they are for, you know, being a doctor, or being a nurse, or being an insurance salesman, or [being] a college professor or something like that? So there might be some occupations that are more uniform in the population [and] in the economy than others. And so that would provide, you know, data free variation, and data that you could exploit and try to answer some of these questions really, really deeply.

Stitzel: Then that that'd be fascinating, you know. Of course, it's easiest for you and me to think about being a professor. But in some ways, if I want to be the best professor, [then] I have to be in Boston don't I, right (or Chicago or some of these top schools)? But it doesn't seem as dramatic in our field as it does in…

Pjesky: No.

Stitzel:…computer programming.

Pjesky: Yeah. And it may not be. And I don't think it is. I don't think it is. I think that is some variation that somebody could exploit to try to answer this question.

Stitzel: Yeah, fascinating. So do you think there are any potential losers from a more dynamic market? We talked about who the winners could be. So you think there's any losers?

Pjesky: Well, I mean, that's a hard -- I mean my first reaction is no. Because, you know, at the end of the day we are all making our own decisions about where to live. So, the only way I can even begin to answer that question (this would sort of go right in with all we said about the winners of this) is: labor market mobility - does it have some characteristic of a public good? Right? So, you know, let's say I want to stay put. You know, I want to have the same job, in the same town for forever. I'm gonna benefit from other people moving, you know, to and from.

Stitzel: So that's counterintuitive. Unpack that for us just a little bit.

Pjesky: Well, it's -- let me give you another example what I mean by this. This might be off topic a little bit. So, you know, if there were two planets (or two economies) that were exactly the same, and one had a lot of labor mobility, and the other had none, and they were the same in every respect, [then] where would you want to live? You would probably want to live in the place that had more labor mobility. And that would be true regardless of how much you wanted to move. It would be almost exactly the same thing. If I if I asked the question of, you know, if you could live in two worlds -- one where everybody worked really hard and the other world where everybody did not work very hard (regardless of how hard you wanted to work) – you would rather live in the world where everybody was working hard, because that provides all kinds of spillover benefits for you. So, I don't think that, you know, we can't think of losers in this process the way we ordinarily think of someone of someone losing.

Stitzel: So, let me say two things. First, I like your examples. The second one makes the first one very clear, right? It's obvious that we would want to live where the hard workers are, even if I'm myself not a hard worker. And so, I think that's enlightening for the first case. Let me play devil's advocate for just one moment. In a scenario where we're more dynamic, does it necessarily lead to a place where we have more of this sort of Google/Amazon effect where more of the jobs are sucked into these areas focused on specific work? Of course, if we're familiar with the public finance field they're taking advantage of agglomeration economies...

Pjesky: Right.

Stitzel: Is/does a more dynamic economy lead to that, and then cause me to -- now I've I am a programmer I do have to -- live in in Seattle or North Carolina or Austin?

Pjesky: I'm not sure. Does that mean if you had a relatively big place like New York, you know, you can have agglomeration in New York without people having to move?

Stitzel: Right.

Pjesky: So, I don't know if those two things there would be related or not. So, I don't know if that is something that -- if what you described was, you know, -- labor market mobility leading to gains in agglomeration. I don't know if that would be something that would necessarily have to be present.

Stitzel: Or be geographically specific.

Pjesky: Right. Right.

Stitzel: So my thought there is if you were thinking about an economy that is more dynamic [and] that has more, [then] that's another way to say: more opportunities. That's another way to say: (you said it multiple times) more innovation. It's clear that we would want to be in that economy. And it's clear, I think, that we would want to the question is: O.K., does it lead to other things that we could think of? It's not obvious to me that it does. I just I just wanted to see if you had if you had thoughts on that?

Pjesky: No.

Stitzel: O.K., so what I want to move on to next is: as we've hinted at all along, the causes are very important here, right? We've talked about, sort of, what the effect of declining labor mobility is [and] why it's important who wins [and] who loses. It's hard to think of any losers. I think that's important here. There are not a lot of things that are/their sort of as lopsided as to say: O.K., there's no obvious losers here. We just want more of this. Economics is about trade-offs. We've discussed that a couple of times. So are there any of the potential causes that you see as central for what's underlying the climbing labor mobility?

Pjesky: I think that, yeah, I mean, there are lots of possibilities. And, you know, earlier we talked about things that might be causing this that were benign. And there are, of course, some things that might be causing this that I think most economists would consider less benign. For instance, are increases in home ownership causing people to have to stay put? So do, you know, buy a house and you're locked in to an area because you can’t get out of your house? So, you know, increases in home ownership can actually cause decrease labor mobility. And if, you know, policy artificially drives that. And that would be something I think most economists would think wasn't a, you know, good thing. Some things that I've read that might be causing this would be, you know, land use regulations and even occupational licensing, right?

Stitzel: Right.

Pjesky: So if you're licensed -- to be a, you know, pick a profession, [and] if your profession is licensed in Texas -- and you can't move to Kansas, or wherever and practice your profession without getting pre-licensed, and that's an impediment to mobility as well.

Stitzel: And that ties in with the point that you made earlier about the economy is so general. And so many of these jobs that we would like to have -- right, we could be hairdressers, or we could be nurses -- those you can do anywhere. And yet both of those things are good examples of places that are occupations that have a lot of licensing involved. And it's not very easy then to move from Texas to Kansas in that scenario. So, it's sort of a -- I don't say a paradox --but sort of an ironic comparison there. So, you've said a couple things. I want to unpack those a little bit. When you come to this literature for the first time, it doesn't occur to you that home ownership is something that could have negative consequences? Yeah. I can't speak for anyone else. The world that I grew up in [is that] home ownership is just [a] universal positive. And that, I think, has been an American bias for a while now. And it's very interesting to me that we could kind of point to that and say: our bias that way laid the foundation for the previous financial crisis. So, this isn't the first that we should be clued into [the fact that] home ownership is not for everyone all the time. So, kind of walk us through how that mechanism works. So, I have a presumably an area like a city, and then we have homeownership. How does that potentially have those negative mobility consequences That you’re talking about here?

Pjesky: I mean, you know, if it costs, you know, fifty thousand dollars to get your house ready to sell and sell, then it costs you fifty thousand dollars to move to another city [or] another state [or] whatever to get a job. Because you have to, you know, you have to repeat that process. You have to find a place to live. You know if you're a renter, then you just wait for your lease to run out or whatever. You pack up and go. If you're a homeowner, you've got these extra things. And, you know, how large those are compared to every other factor that you're weighing to move to change jobs is certainly gonna be different for every person. But, you know, on some relevant margin that's gonna matter. That's gonna matter to you. So it's probably just anecdotally, you know, anybody listening to this -- if they're thinking about moving -- probably the first thing that they do is think about selling their house (if they're a homeowner).

Stitzel: And the first thing.

Pjesky: It has to be. Yeah, I mean it has to be the first thing.

Stitzel: So, there's a couple of things there that I like to gather your thoughts on. The first thing is: home ownership often represents a large portion of somebody's wealth. And then like you said - there's the specter of the cost thousands of dollars in order to move. And that doesn't even take into account the kind of search cost and preparing your house. You just literally/you're gonna lose money when you sell your house.

Pjesky: Hmm. Hmm.

Stitzel: And that's going to take a chunk out of your wealth because a lot of Americans hold their wealth there. And then I of course I have to do it on the other side too. That would that be a second point that I'd like to touch on. So, any comments about how you view the way that Americans save, or don't save, hold wealth in their house, and view that of my house (is not just a place that I live) it's part of my savings almost?

Pjesky: Yeah. Well, I mean, that's certainly going to tie you to a place, right? If you're, you know, I mean, if you're tied to a house, you know, (or a home as you might call it and, in this context) it's that you're gonna have all kinds of costs leaving that behind. And, you know, if your if your wealth is tied to that place as well (which a lot of peoples’ are), then that's just an additional factor that you're gonna consider whether or not you move or not. And, you know, again, empirically these things are pretty easy to measure. And if I am familiar with the literature this is (I mean it's important enough for us to be talking about) -- but it's not -- THE explanation.

Stitzel: What/which is almost shocking giving how clear the mechanism is that says: this is why it's hard to move.

Pjesky: Right.

Stitzel: I mean it's just as straightforward as can be. You don't think about it at first. It’s sort of those counterintuitive conclusions. Did you have more to say about that? Or can I?

Pjesky: No. No.

Stitzel: Now let me go to a second point then. One of the things that's fascinating is: if you go and you buy a house and you're not expecting to move (you end up needing to move, or finding a better job, or for whatever the reason that you move), it seems unlikely to me that people are gonna move to a new location and then rent (if you've already been a homeowner). So there's sort of a decision. You're gonna have a hard time unraveling.

Pjesky: Right.

Stitzel: Do you think that's true? And do you think that has an effect on mobility that's lasting?

Pjesky: I mean, I certainly think it has an effect on mobility. You know, of course it'd be, you know, relatively straightforward to measure. And, you know, like we talked about before, I mean, this is certainly a factor. You know, it's a nice story to tell, and empirically there's evidence that this is important, but it's not the main driver. It doesn't seem to be the main driver of what's going on here. So, it's declining labor mobility.

Stitzel: Before we move on to the other drivers -- (because, I think there like you said, there's some better and maybe even more interesting ones) that, you know, the housing, the homeownership, [the] and sort of the subsequent housing that pops up to feed that demand --- that I think is a double-edged sword which people don't appreciate all the time. And one of the things that you draw out from this literature (maybe incidentally even) where it's not just the people that are buying the homes that are then tied to the homes and their labor mobility falls (which, by the way, would coincide maybe with our 1980s timeline).

Pjesky: It does.

Stitzel: It does seem like good timing there. I'm not an expert on that, so I won't speak out of turn. But the cities that are then left behind with these large housing capital structures - we got lots of houses in the town and everybody moves out - if you move and you can't sell your house, [then] that is an enormous (that's an almost unfathomable) cost. Almost everybody that would be in that situation -- that makes the labor mobility a problem a vicious cycle, right? And then on top of that -- if you (and I live) in the same city [and] you get a job, [and] move away, and not as many people are moving into the town -- that housing stock is fixed. I pay a price then too, because now there are more homes on the market. The price of housing is going down. It's doubly dangerous for me to hold my wealth in my home, since that's a price that can change.

Pjesky: Right.

Stitzel: And the lack of labor market dynamics here is gonna leave a lot more of those homes sitting there unused and unwanted in some areas.

Pjesky: Yeah, I mean it's certainly, you know, having your wealth in your home can be, you know, it might not be a good diversification strategy. That's what I think that you're saying. Because if, you know, if you lose your job -- you're there for whatever reason if you lose your job -- you might also suffer a decrease in a home value as well.

Stitzel: So that's a good transition (sort of jumping off point into something you've already alluded to). And this fits my sort of personal bias. How do you view the regulation of land? I don't think you called it zoning, but zoning would be a part of that. Land use land use restrictions in general -- how do you view that that playing a role in the decline of labor market mobility?

Pjesky: Well again, it's just, you know, any restrictions on how anything is done -- we would expect there to be less of it. So any policy, any social norm, any/anything that you can think of that makes it more costly to move, or makes it impossible for some people to move, is going to show up in these trends. So, you know, the regulation, and land use, and business practices, and zoning, and everything -- I just lump that in with the occupational licensing idea. So, you have, you know, policy that makes it more difficult for someone to go do their trade in another area. And, you know, may not be much -- that would be an empirical question. But there would, you know, there'd be less of it.

Stitzel: I think it's tempting to think of both occupational licensing and regulations on land use as benign things. They don't sound like they should be harmful. And we might think of reasons that we would want those to occur. And yet, they're unequivocally adding to the cost of moving. I would argue dramatically. Maybe you don't think they're dramatic, but this is definitely not a benign explanation.

Pjesky: Yeah.

Stitzel: It's somewhat/it's serious.

Pjesky: Well, I mean, things like that. It's like any other policy or trade-offs, right? You know, no one is going to think that anything is an absolute good. So, in that sense, it's like home ownership, right? There are lots of reasons that people have identified that suggest that home ownership is a very, very good thing. You know, it provides a lot of stability for families. It does provide a vehicle for someone to put their wealth, you know. For lack of a better word, you know, a lot of people think that it fosters healthy communities [and] healthy community schools. And so, the list of positives for home ownership could be long. The list of positives for zoning and occupational licensing could be similarly long. But that doesn't mean that there aren't any downsides to these things as well. Economics is full of trade-offs. Nothing is free. It's what you learned/it's what you learn at the first day of class -- that nothing is free. So, you know, the process of these things should involve trying to get more of the positives and less of the costs out of these things.

Stitzel: And I think those are/were tremendous points. And as a someone who teaches economics, that if I can get people to think along those lines, [then] I consider that a pretty serious victory. The other thing that I think (and I'm in speculative territory now) is thinking on the margin really matters. And I wonder about which margin we're on when it comes to land use regulations and occupational licensing. We can imagine reasons that those are important, right? I don't want you to build a factory next to my neighborhood. I don't want somebody who has no idea what they're doing being a nurse. And if you don't think that the market mechanisms are strong enough to prevent those, then maybe you think that you need those regulations. I think we're beyond that in most cases (and again, showing my personal bias, speculating a little bit here). And so now that the labor mobility is starting to become a pretty serious issue -- something that economists are increasingly worried about (after all, that's why we're here today). I begin to think that the trade-off is starting to tilt the other way. Maybe if you have no occupational licensing, [and] you have no land use regulations, [then] it's just a Wild West out there. Maybe labor mobility is through the roof. We're clearly not in that stage right now. So how do you see the current trade-off?

Pjesky: I mean, if the decline in labor market mobility is a problem, and if it is a problem that can be alleviated with sort of new policy (or changes in current policies), then I think that it would be absolutely essential that the political process be willing to consider anything as part of the solution to, you know, this problem. That's what policies should be, right? So, you know, a practical prescription on how to make things better again, as you stay on certain margins, because they're always gonna be trade-offs with within those. So, you know, again, to the extent that this labor market mobility is a concern, and to the extent that it could be solved by policy, then we need to be able to anything is on the table.

Stitzel: So, if Tyler Cowen is right, and we're facing the great stagnation -- and this is just a symptom, right, and there's some underlying cause that is, you know, the broader drive of innovation and whatnot -- then we could see some importance for that. If I can borrow another idea, though -- I think most cities are similar in these kinds of regards, and almost all states in particular [are] gonna be the same on occupational licensing. I always wonder why there isn't (and maybe I underestimate how much is actually going on out there) -- I always wonder why there isn't -- more differentiation between cities? Maybe I should view Lubbock. And Lubbock has almost zero land use regulations. And things are just the Wild West out there. But meanwhile in Phoenix, Arizona, every square inch is accounted for. And then people could sell sort into which of those cities that they like. I'm a little off topic here. But do you have any thoughts related to that? Just sort of?

Pjesky: Well, I mean, a question that is in the context of this discussion would be this: are city's more alike now than they were 50 years ago? That's the key question. And in terms of the kinds of jobs that are available in cities, the people who are expressing concern of this labor mobility thing, basically say: yes, they are more alike now than then they used to be. And, you know, you kind of see that. You kind of see that, you know, cities in the Midwest have a different character than cities in Texas, for example. They just look different. And the reason they look different, is because 50 years ago they must have been significantly different, right? You know, even a place the closest, you know, Kansas City -- you drive through Kansas City, and it just seems like a Rust Belt City. It just seems more heavy industry. Dallas doesn't seem that way at all. And so, at some point in the past, it does look like that people would pursue different occupations based on their city. And now it seems that they don't. So, people, you know, -- and this is a very generic statement all right -- individuals don't move as much as they used to for their work, because they don't see as much benefit on net as they used to. All right, why else -- like I said that's a generic statement -- why else would it be happening? So, people don't benefit from moving as much as they used to, so they don't move anymore. That's, again, straight out of Econ 101, which doesn't give you an explanation for that. But, you know, any thinking (or any policy related to this) has to acknowledge the fact that these people that are staying put are making independent decisions that are the best decisions I think they can make for themselves. And I think it's one of the more interesting questions of our time. I mean, is this an inevitable result of the transition that the economy is going through right now? Or is it somehow artificially pushed by some kind of policy that the government is making? You know, those policies in themselves have good ends that they're pursuing, all right. And in both of those cases, we have this, you know, we have this potential harm that is happening to society – that, you know, may or may not be worth the cost, or that may or may not be worth the benefit that we're getting from staying put.

Stitzel: But you have fantastic points. I think all three of those points -- very phenomenal. Let's turn then. We've identified housing. One of my explanations for this -- we've identified land use regulations and occupational licensing. Now you've just mentioned policy. Are there things that you point to (whether benign or not) that you would sort of point the finger at for underlying here that we haven't yet discussed?

Pjesky: I think one last explanation that would/that we haven't covered is, sort of you know, is sort of the condition of poverty in the United States today that might be driving this. And again, this is not going to be anything that's going to be the end-all explanation. Because we, you know, see this decrease in mobility across all economic classes. But it could be the case that, you know, fifty years ago [or] a hundred years ago, if you were in a condition of poverty, then that would lead you to move, all right? And today it could be the case that if you were in a condition of poverty, [then] that might lead you to stay put, all right? So, there may have been a switch in what the condition of poverty meant for someone, in terms of whether or not they should move to another location or stay put, right? You know, I'm from Oklahoma. So we've all read The Grapes of Wrath. And, you know, the family during the Depression fell on hard economic times, and they packed up their stuff, and they moved to California. You know, is that the kind of story that we have today or not? I don't know if that is.

Stitzel: Definitely not as dramatic as that.

Pjesky: It doesn't seem to be as dramatic. Of course, it’s a book, right?

Stitzel: Yeah.

Pjesky: So, I don't know. So, if, you know, granted that's the case, all right? So let's take the assumption that that flip has happened. O.K., the next question would be: you know, why is that? So why is the natural response to poverty today more to stay put? And the natural response to poverty and generations passed was to move, all right? That to me that's an entirely -- of, you know, again granting that that's happening, you know. To begin with, that's a very interesting thing to think about. Because on one hand, you might have someone say: well, you know, due to the nature of the economy, now if you're poor now-- because we have, you know, the seemingly, you know, declining social capital (if you want to call it that) -- then if you become poor (or if you are poor) it's absolutely essential that you stay put, because that's where your social safety net is. So that's where your family might be. That's where your house might be. That's where everything that's familiar and everything that supports you might be. Alright.

Stitzel: So, is that something that's not true in the past then?

Pjesky: Well, that would be an interesting question. I don't know. On the other side, you might say: well, you know, right now people don't have a reason to leave and look for work when they become poor, because we have all of the services available that someone can be poor and they can stay put, right? So, when I was, you know, when I was thinking about this, I realized that, you know, the answer could be both or neither or, you know, some should be one or the other or a combination, you know, of both. But, you know, think about labor market mobility, especially on the lower ends of social economic class, you know, for lack of a better word. You know, that becomes certainly really easy, really essential to think about, right? How has the condition of poverty changed in the United States, that might lead someone to become more or less mobile, right? Our stories say that poor people used to move. You know, we had Grapes of Wrath. We had -- you know, one of my favorite series of books is Little House on the Prairie, right? You know, the crops failed, so Pa Ingalls had to walk 300 miles to go find work or whatever. And, you know, the question is: do we see that today? You know, of course those are just stories. We may not have seen that very much in the past or not where we're influenced by the stories we tell that may or may not reflect reality. But, you know, that's another explanation for this problem.

Stitzel: So, there's a couple of things there. One I want to bring back something you said earlier. If the jobs are all the same, in all the same places, [and] if I'm in Oklahoma and my crops fail, and I go to California, [then] the opportunities are different there at that time. If tomorrow I lose my job, [then] why would I go to California? The opportunities might be the same there. So that could be a small…

Pjesky: I mean, I hadn’t even thought about that. I hadn’t even thought about that. So, you know, maybe my two explanations -- neither one of them are right. And maybe the poverty scenario that I gave you is just an extension of the decrease in economic geographic segregation is what you call it.

Stitzel: Right.

Pjesky: Right. So, well you know, if there's no opportunities for me in the Texas Panhandle (to be a whatever), then why would I expect there to be any opportunities in California (for there to be whatever)? But, you know, a hundred years ago, if the wheat crop failed in Oklahoma, then, well maybe the grapes didn't fail or whatever, [but] they grow in California. You know, maybe the grapes didn't fail there so I can go. You know, instead of harvesting my wheat that's not there anymore, I can go do the grapes. But, you know, if you sell insurance and nobody's buying insurance in Oklahoma, then probably nobody's gonna be buying insurance in California either. So, there's no reason to move. So that's a third expla[nation] -- I actually like that explanation better than the two I gave.

Stitzel: I think that poverty explanation also has another -- I don't know if it's underlying or simultaneous -- we do have probably greater (definitely than the time period that would be talking about the Dust Bowl but), greater safety nets and not just social ones but actual welfare which can sometimes be location-based. Do you view that as part of your poverty story, or do you think those are separate things, or maybe not related at all?

Pjesky: I don't know. That's a really hard question. I don't know.

Stitzel: Yeah, I put you on the spot…

Pjesky: Yeah.

Stitzel:…on something that's somewhat tangential we’re talking about. I wonder sometimes if there's an extra cost to moving, because so many things now are tied to/are tied to my location -- whether that's job, or my physical residence, or something. And it's costly to get everything redone. Now maybe in the grand scheme of things that's a small cost. But especially if you live in a city, right, we talked about sort of this Tiebout sorting idea, that different towns might ought to be different. If they are different, [and] if I'm wrong and they are more different than I think, [then] part of that could be what it's like to be a poor person in the different cities. Right, so I can't be right about both of those things at the same time.

Pjesky: Yeah. Well, I think I've got, you know, some thoughts on that. Now it's, you know, what you're describing here is [that] two things are happening simultaneously, right? it's costing you more to move and it's benefiting you less to move.

Stitzel: Good summary.

Pjesky: All right. It's, and so people are doing it less. And that covers everything that we've talked about in this podcast. So, you know, regardless of what kind of social safety net that we have -- either through government policy or whatever alright (let me just use government policy as a as an example of this) [and] let's say, you know, you're poor and you're on food stamps, well you're going to get those food stamps no matter where you are.

Stitzel: Right.

Pjesky: So, you don't get any benefit from moving. Does it make any difference? So, because that becomes part of your experience [of] being poor, all right? There's no benefit in that context of you moving. But then you still have all these costs to moving, all right? So, when you're doing the cost-benefit calculation, all right, that leads you to move less. That leads you to move much less, perhaps. And the same thing is true with your home. The same thing is true with everything else, all right? So, you know, if the mix of jobs in the new place is the same as the old place, you know, [then] all of the benefits from moving seem to be going down, all right? And the costs of moving are either going up or staying the same. So again, economists shouldn't be surprised to see this trend. We just don't know. You know, we just don't know in some non-generic sense why they're happening.

Stitzel: So, I've/we're not seeing many cases then where sort of this regulation intervention government policy --well obviously we're talking about trade-offs, but from the perspective of labor mobility -- are helping. So, are there potential policies that could be put in place that are gonna help this? For example, this would be something radical (it just popped into my head, [and] I haven't thought about it much) but -- if this sort of again my pet explanation is about housing -- if I think that mobility is a problem and nobody has the incentive (no policymaker has the incentive) to do this, so it's a silly example. Why not subsidized selling your house or something like that? Which of course, I think provides many/maybe all sorts of bad incentives…

Pjesky: Right. Right.

Stitzel:…to other things.

Pjesky: Well, I mean again, that is it I mean that might not be a good policy, but that's an example of what a policy might be.

Stitzel: Right.

Pjesky: So, you know, you provide some sort of incentive to move. The government already does this Lee. You get your moving expenses deducted off your taxes under certain circumstances.

Stitzel: Hmm. Hmm.

Pjesky: Or maybe you used to.

Stitzel: O.K. that’s...

Pjesky: Maybe you used to. O.K., this is the new tax law. Maybe that deduction went away. But if you have job related moving expenses, and you move more than 50 miles or whatever, you know, again under certain circumstances, those have tax advantages (or have had in the past).

Stitzel: Right.

Pjesky: I'm not -- this is something I should have known, but I don't -- whether or not that particular provision of the law went away. So, this is, you know, is that any different than helping someone sell their house? No, it's not.

Stitzel: It’s not.

Pjesky: I mean it's in both sense in both senses it's the government giving you money if you've had the status of moving. And it's even a big move, right? So, you can't change jobs, and move across the street, and get these tax advantages. It has to be a…

Stitzel: State law.

Pjesky:…big, big geographical switch in order for you to qualify for the, you know, (have the status to use the correct term) to qualify for the tax break.

Stitzel: My concern is when you see something and you can point out -- well land use regulations are having this kind of problem; and instead of saying well maybe we should ease up on (the land use regulations, for example, or the occupational licensing or any of) these policies that we're somewhat concerned about -- the instinct is to institute another policy that tries to patch the hole in the boat. And I think that ignores that there's some other trade-off behind that, that should always be of concern. And maybe we should stay within the realm of: O.K. we should probably ease up on land use regulations, because the trade-off is no longer favorable at the point that we're at. So, I'm always really hesitant about policies that are like: well, I mean, we created this hole in the boat, [so] let's just make a policy that that covers that up. I’m ignoring [the fact] that now I have a Swiss cheese boat full of holes that are all just patched, that are problems that are created by other policies. Some problems are fundamental. I don't mean to say that that all of them are naturally policy related. So, I want to bring this podcast in for a landing. The last question that I'd like to ask it's just sort of a broad one. We've talked about policy, [and] we've talked about economic factors. Do you think there's a social or cultural factor? It seems to me that every young person growing up wants to leave their hometown. So, mobility should be high. Now maybe that's lip service, and revealed preferences, and that people don't actually want to move out of their hometown. But do you see any room for social or cultural explanations for this? That maybe economists would overlook?

Pjesky: You know, maybe but I mean, I think I'm like you. If there were social trends at work here, [then] I would think they'd push in the other direction. You know, because people do seem to want to leave (at least they say they do). But then, you know, a lot of people end up not doing it. So, I don't know what, you know, what social trends could be keeping, you know, making people stay put more than they used to. So if you go down that road, then you've got to start thinking about what's changed, right? What changed? What's changed in the last 50 years that made people want to move then, and not want to move now? I mean, I have it. This is just shot in the dark explanation I have, you know. it may be that after World War 2, you know, so many people were displaced by the war, right? They went to Europe, they went to the Pacific, they went wherever, and then they came back. So, for that generation leaving home just wasn't that big a deal. And, you know, as that generation grew up and were replaced by previous generations, and then at that experience, then then humanity's back to -- well this is familiar to me, and I don't know anything else, [so] I'm just gonna stay here. What do you think about that? Is that…

Stitzel: That’s a…

Pjesky:…a plausible idea?

Stitzel: That's an interesting explanation. And here's why I like it -- that's like something on that magnitude of being sent out [and] going to war --- that's like a reset button, but it's happening to an adult (or somebody who's on the verge of adulthood) who comes back an adult. It's hard to think of things that are gonna give you that level of like -- I start my life from scratch at 22, then something [like] the magnitude of the war. And so, it's like, I can't think of anything that would explain that. So maybe we can trace all this decline in labor mobility. It'd be interesting to maybe see what it was even before that. Rex, you have so many things happening in the early nineteen…

Pjesky: All right, so many things are different.

Stitzel:. But that's an interesting potential explanation. I hadn't thought of that at all. I loved that, at least, as a thought to say: well now if I'm 22 [and] I'm just graduating college and, you know, maybe going off to college is my one chance to move away.

Pjesky: Right.

Stitzel: But you don't put down roots when you're at college (for the most part), even if you've gone to a very different area of the country. But then, even if you do, that's not gonna be reflected in labor mobility. There's now I'm just -- I grew up in Oklahoma and I moved to Michigan for a degree. And I just live in Michigan. Like, so there's no equivalent. Sort of, I like that idea of a sort of a reset in adulthood. Or it's like -- I can kind of be from anywhere now.

Pjesky: Yeah.

Stitzel: I'll tell a personal anecdote. And I grew up in the Texas Panhandle in the Amarillo area. When I went to school [at The] University of Oklahoma, I told people I was from Amarillo. And when I moved back here to the Amarillo area, I started telling people I was from Norman (just because it's interesting to be from somewhere else).

Pjesky: Wow.

Stitzel: You know, but I didn't go anywhere, right? And so that's kind of -- that's kind of an interesting --[but] maybe opposite of the story that you're telling, which I like very much.

Pjesky: Well, thank you.

Stitzel: Yeah. So, my guest today has been Rex Pjesky. Thank you for joining us on the Econ Buff.

Pjesky: Enjoyed it.