Are moving costs holding back the economy?
We’ve all seen those maps showing that unemployment is luridly high in places like Nevada and low in states like North Dakota. So why don’t people pack up and move to where the jobs are? Well, it’s not always so simple. For one, as Rod Dreher writes, the process of moving can often be extremely costly, as he found when he tried to move his three-bedroom house from Pennsylvania to Louisiana:
Eight thousand dollars, just to transport our stuff from here to there. And that was the best bid. Did you know that states impose tariffs to move your stuff into and out of particular states? We discovered that to hire someone to cart our stuff over the Pennsylvania state lines adds something like $1,300 to the cost of the move, because of a state-imposed tariff. And moving into Louisiana adds $300 to the bill, because of state tariffs. I had no idea.
Now, his explanation of state tariffs seems a little off. According to the American Moving and Storage Association, interstate moving companies do have to offer prices that meet various Department of Transportation guidelines. Those charges can vary based on the cost of doing business in both the origin and destination. So, for instance, there are low-cost areas (like Green Bay, Wis.) and high-cost areas (like Tucscon, Arizona or New York City) to move from and to. But a lot of this appears to be determined by prevailing local wages, rather than state-imposed border taxes.
So are moving costs keeping people from going to where the jobs are? Possibly, though they’re not as significant as the transaction costs of buying and selling a home. UCLA’s Hernan Winkler recently did a study finding that homeowners are much less likely than renters to move out of an area hit by recession. “Owners suffering from a decrease in home equity are 40 percent less mobile,” he argues. As it turns out, the effect here is modest — Winkler estimates that if homeowners didn’t have to pay all the transaction costs associated with moving, they’d be 2.8 percentage points more likely to take a job elsewhere. But at the margins, that can make a big difference.