On Wednesday I looked at data highlighting just how big the rural/urban divide is. The big cities are getting bigger and richer, while small and rural areas are losing population and declining economically as a result.
That raises the question: Why aren’t people moving to more prosperous metropolitan areas? Some of the answers are policy-based and economic. Law professor David Schleicher in an interview with American Enterprise Institute’s Jim Pethokoukis observes:
So there are two related phenomenon that are happening. The first is there’s declining mobility. That is on net, the number of people who are making moves each year has been declining, and it’s been declining pretty dramatically since the 1970s.
The second and I think more important phenomenon is that people are not moving from declining communities or moving to growing communities at the rate we would expect.
Diminished mobility is a drag on growth, increases the wealth gap, contributes to political polarization and complicates monetary policy. (“It’s a lot harder to set a single interest rate if there’s unemployment in one place and inflation in another.”)
The reason for the decline in movers, he postulates, are the disincentives to move:
State and local policy is particularly a problem for this — the problem of people not moving to boom areas and not moving from declining ones. … I categorize them into two categories: limits on entry and limits on exit.
And so the big limits on entry I discuss are land use — this is probably the most well discussed. … If we don’t build houses in Silicon Valley, people can’t move there. What you see is prices go up rather than populations going up.
But also occupational licensing. … People don’t move across state lines at the same rate as you’d expect, so moves in-state are much higher than moves across state in licensed industries compared to comparable unlicensed industries. And this makes it harder to move. If you want to be a lawyer in California, it’s hard to move there. You have to take a whole new bar again. It’s costly.
The lack of affordable housing is a big disincentive. A move is also much harder when you own rather than rent. (“The fact that we subsidize homeownership so much limits mobility because you have to sell your house and there can be lock in. There are a whole variety of other policies that have the effect of making it costly to move.”) And that goes to the efficacy of the mortgage interest tax deduction.
Schleicher emphasizes zoning policies that limit the housing stock. He’d like to see a different approach, called a “zoning budget.” He explains that “rather than deciding on individual projects, the city would decide on an overall amount of housing it was going to allow to have built. And this process would force cities to consider the broader economic considerations and kind of housing needs in a jurisdiction and not just on what’s going on in their neighborhood.”
It is certainly the case that wealthy enclaves don’t necessarily want more housing (they like their expensive and exclusive neighborhoods) and that there are geographic limits on the amount of housing you can fit into, say, Manhattan. (The latter might be addressed by some cost-effective public transportation so people can more easily commute from suburbs.) Schleicher suggests a rather tough solution: Tell prosperous cities they have to create so much new housing, and impose consequences if they fall short.
Schleicher thinks boosting mobility is “much, much more important” than the tax plan. He explains that if you move to a more populous place with more people, you’ll be the beneficiary of a more dynamic environment. (“You go to California and just get smarter by being around the heady brew of tech people, where you go to New York and your human capital develops because you’re surrounded by people in the same industry or whatever it is.”)
Now, I can hear the hollering from red America. But we don’t want to leave! We don’t want to be urban dwellers! Well, first, no one is talking about forcing people to move; this is about removing barriers to move. Moreover, with adequate transportation, people can live in leafy suburbs and exurbs.
However, the resistance to moving does relate to personal responsibility. Ironically, the immigrants whom Trump demonizes are setting the example. They bravely uproot themselves to make a better life for themselves and their families. (Because the entrepreneurial people are the ones who tend to leave their native countries, we get the benefit of hard-working, motivated immigrants. Someone should explain to Trump that this is why people leaving “shithole” countries are a gift to the United States.)
Perhaps native-born Americans should adopt the same mentality. If they want a better life, they might need to go where there are jobs already. This isn’t like getting on a clipper ship to travel thousands of miles, never to see one’s family again. (That’s why there’s Skype.) It’s a recognition of reality. Waiting for business to move forward-leaning industries to your rural community or small town may be unrealistic. Sometimes moving the workers is a whole lot easier than moving the industrial park.
This is not a simple issue, which is why Beltway politicians have so little interest in it. That does not mean states and local governments shouldn’t be thinking creatively. (Using the unemployment benefit system to fund relocation is just one example.) Unfortunately, this president thrives on dividing Americans and likes to paint blue cities as bastions of crime and illegal, non-English speakers. That’s exactly the wrong message to people who elected him and who could benefit greatly by moving into or closer to thriving U.S. cities.
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