BY MATT WEIDINGER
The list of supposed inequalities among Americans is long, and getting longer: income inequality, food inequality, housing inequality, education inequality, and even death inequality. Many see unequal outcomes in every facet of American life, and along with them, new government spending programs to alleviate these inequalities, despite the fact that rising federal spending on low-income families seems to never prevent old inequalities from getting worse, or new inequalities from emerging.
The latest, geographic inequality, has been defined by presidential candidate and former New York City Mayor Michael Bloomberg as the “widening gap between wealthy coastal cities and the lagging heartland.” To address that gap, Bloomberg is promoting “place-based policies” to help midtier inland cities catch up with the more prosperous coasts. Though the types of policies he is endorsing — which are similar to enterprise zones, opportunity zones and similar tax subsidies, transit subsidies, and government R&D funds — are not new, and don’t have a great track record.
Not one of these policies addresses a key cause of the “widening gap”: Americans are not moving away from the places where jobs have disappeared to where work is plentiful. Today, Americans are moving at the lowest rate in 70 years.
Historically, Americans have always been willing to move to boost their earnings, especially compared to foreign peers. So why the declining mobility today? Among the key reasons are the increasing share of two-earner households (it’s harder to find two new jobs rather than one) and higher housing costs.
And, in a classic case of unintended consequences, the lure of existing government benefits also may encourage Americans to stay put despite poor job prospects. Researchers in a 2014 National Affairs article noted that “low-income people, especially those born into poverty, have a particularly difficult time moving. This is largely due to…programs that aim to help the poor where they already live.” After struggling to get access to complex safety net benefits, why risk moving and starting the process all over again if a new job doesn’t work out?
Previous welfare and unemployment programs had helped people move to areas with better job prospects.
For example, starting in 1998, the Kentucky Relocation Assistance Program (RAP) offered qualifying households on welfare up to $900 for moving costs. A preliminary analysis of the program found that the average earnings of participants nearly doubled just two quarters after receiving the relocation subsidy. In the 1970s, the “Federal Job Search and Relocation Assistance Program” operated in eight southern states, testing similar relocation subsidies for unemployed workers. Many of them did find new jobs, especially young men, and those with, at most, a high school diploma.
Today would be a good time to replicate those efforts, with unemployment at 50-year lows and labor shortages in some areas and industries. While a lot of time has passed since the 1970s, reviving and updating such policies wouldn’t have to involve large, bureaucratic, and expensive new programs. For example, the average unemployment insurance payment in Kentucky is $381 per week, available there, as in most states, for up to 26 weeks. Instead, if the state offered half of the unemployment benefits a laid off worker is eligible to receive in the form of a lump sum, it would provide the worker who is willing to move for a job almost $5,000 toward moving expenses, a security deposit, and first month’s rent. Some might accept the challenge, and in the process improve their income immediately, and their family’s trajectory in the long run. Companies are increasingly using such payments to attract new workers. If employers are getting creative, why can’t government? Germany does the same, and even some U.S. cities are paying workers to move there.
Moving assistance is not a cure-all. As my AEI colleagues recently noted, high housing costs in big cities pose an increasingly steep hurdle for moving blue collar workers, though these costs may not be as bad in the “lagging heartland,” to use Bloomberg’s term. The Census Bureau notes that most current moves are within the same county, and even those who cross county lines usually stay in the same state. The RAP program in Kentucky also found that most moves for work were within, and not across, state lines. Think rural Kentucky to Frankfort or Louisville, not New York or Boston.
Not everyone can move to where opportunity is greater. But for those willing to do so, now is a great time for policymakers to rediscover past lessons and help workers move to where the jobs are.
Matt Weidinger is a Rowe Fellow at the American Enterprise Institute.