Friday, October 21, 2016

Get Onyerbike and Ride!

A mobile workforce offers a vibrant future

In today's Financial Times, Gillian Tett writes that America needs a revival of its pioneering spirit:
The US used to be renowned for having a more flexible and mobile workforce than Europe; in previous centuries millions of people travelled in search of land, riches and jobs. But mobility has declined, not just in Appalachia but everywhere else as well. In 1990, for example, economists calculated that more than 3 per cent of the workforce moved across state borders each year; that has tumbled to 1.5 per cent.
So what makes people stay put even as local jobs fade away and better prospects beckon over the horizon?
  • Homeownership. Whether you're "underwater" on your mortgage, have too great a share of your household assets tied up in a house, or you just like your home and sense of community, homeownership ties us to one locale. Moving can cost up to 15 percent of your home's value and if you're moving for better prospects, house prices in your neighborhood are likely on the way down while the promised land offers ever higher prices.
  • Uncertainty. I know what to expect from where I live even if the local economy is tanking. If I move, will I like where I'm going? Will I like my neighbors? Will I like my new job? Will my new job last?
  • Age. This goes hand in hand with uncertainty. As we age we want more certainty – a fact I can attest to with a 99-year-old mother. Change is hard and gets harder all the time.
  • Localization. Ms. Tett points to a study by the New York Federal Reserve that suggests "when populations age, younger workers also become less willing to move." I'll let you read the study for yourself but the authors write, "A 10 percent rise in the share of middle-aged people implies a 30 per cent rise in the share of local hires."
  • Family. With more kids living at home and more parents aging in place, middle-age workers may find the prospects of moving away from family too stressful regardless of what better prospects may offer.
So how can we encourage the unemployed and underemployed to get a move on? Ms. Tett suggests:
Instead of offering retraining, the next incumbent in the White House might need to offer big incentives to companies to move. The next president may also need a 21st-century version of the 1862 Homestead Act – which offered land to settlers who went west – and find new ways to encourage workers to relocate.
While politicians are more apt to give than take away, I think the first steps have to remove the incentives to stay put including the deductibility of home mortgage interest, tax-favored employer-provided health benefits, and tax-deferred retirement savings such as 401(k) plans. Since most of the benefit of the interest deduction go to higher-income households for whom moving is less costly as a portion of household wealth, efforts that make employment benefits more portable might yield results. Virginia Senator Mark Warner is putting forth effort on portable benefits.

There's no Big Bang here to suddenly cause a surge of migration; the slow progression of putting down roots and an aging population resist a sudden reversal. And the policy focus can't be solely national; local politics and local economics may resist sending constituents off to a better life but they mustn't restrain migration. Small town America cannot offer big incentives to employers to relocate but they can offer a better, less chaotic way of life. To this end, we need employers who can envision and manage a far-flung workforce – a workforce not bound by location but mission. As the number of employees in manufacturing continue to dwindle even as total American manufacturing output increases, a mobile, dispersed service sector can make small-town living viable and vibrant.

With 10 years to go in my work-a-day life, my wife and I have started to imagine where we'd like to move: a small town with walkable stores and services whose population is ready to live, not waiting to die. While hard to foster, that local attitude is part of what will make America get back on that horse.