American restlessness is written into the national DNA. In the 19th century, families moved toward opportunity, whether it came in the form of open, fertile fields or smoky urban factories. Americans didn’t just see their westward migration as a trivial preference for sun and space. They saw it as the important work of a nation, a Manifest Destiny.
But if Horace Greeley were alive today, his advice might be something more like, “Move back home, young man.” Americans today are strangely averse to change. They are less likely to switch jobs, or move between states, or create new companies than they were 30 years ago. In economist-speak, “the U.S. labor market has experienced marked declines in fluidity along a variety of dimensions.” In English: America has lost its mojo. Manifest Destiny has yielded to manifest dormancy.
Why are Americans stuck in place—and why are these stuck Americans less likely than their forebears to switch jobs and start companies? These are huge questions, and they don’t necessarily have to be connected. There could be one explanation for why Americans stopped moving and another for why Americans are starting fewer firms. But in fact the reasons are intertwined. They are a driving force behind regional inequality, and the phenomenon stems from a significant root cause: the cost of having a place to live in America’s most productive cities.
To unravel the mystery of declining U.S. dynamism—fewer moves, fewer quits, fewer startups—start with most well-documented mystery: why Americans stopped migrating.
Between the 1970s and 2010, the rate of Americans moving between states fell by more than half—from 3.5 percent per year to 1.4 percent. “It’s a puzzle and it’s the one I wish politicians and policy makers were more concerned about,” Betsey Stevenson, a former member of Obama's Council of Economic Advisers, told The New York Times this week. Fewer Americans moving toward the best jobs and starting fewer companies could lead to a less productive economy. On Thursday, the Financial Times reported that productivity “is set to fall in the U.S. for the first time in more than three decades.”
It is impossible to simultaneously and conclusively explain 120 million decisions by 120 million American families. But there are several explanations that economists have offered (and rejected).
Is it because of the Great Recession? No. It would be satisfying to say that the decline in American moxie is directly related to the Great Recession. But the decline in mobility predates the housing crash, and since 2008, the rate of people moving between states declined similarly for both renters and homeowners.
Is the decline in dynamism concentrated in the stricken areas of Appalachia and the Rust Belt, whose struggles some some have tied to the Trump phenomenon? Nope. The decline in dynamism isn’t a regional quirk. It’s happening in every state, particularly in the west, not the Rust Belt.
Technology has changed the mix of jobs and the way that people work: Is automation somehow to blame for the decline in mobility? Nope. States with more workers in routine-intensive tasks, like administrative duties, actually saw smaller declines in labor-market fluidity.
Is it about the rise in dual-earner households, since now, instead of one partner having to a find a new job in a new city, both do? This seems like a smart explanation, except it doesn’t explain much. “Today’s two-paycheck married households are about 46 percent less likely to move across state lines than were their counterparts in the 1980s,” Timothy Noah reported in Washington Monthly. In other words, whatever forces are depressing American mobility aren’t disproportionately affecting dual-earner households.
Has America simply lost its verve as the working force got older? Not really, but this would seem like the obvious explanation, so it’s worth spending a bit more time on why it’s incomplete. Young people are more likely to switch jobs and move around. After all, it's much easier to graduate from Penn State and move to San Diego alone than to raise a family in San Diego and move all four of them to Pennsylvania. If young people are tumbleweeds, adults are like trees: They grow roots, and they tend to stay put. So, as a country ages, it should become less dynamic.
But while this seems like the strongest explanation, it’s not a very complete one, because mobility rates have fallen across every level of education and marital status, and they’ve actually dropped the most for young workers.
Is it about the growth of government regulations and occupational licensing? Perhaps partly. The fraction of workers required to hold a government-issued license has sextupled since the 1950s, from less than 5 percent to almost 30 percent today. It’s harder to switch into an industry, especially one in a new state, that’s larded with licensing. Meanwhile, the rising cost of health care, combined with the employer health-care subsidy, has made workers afraid to leave their company or start their own because they would lose good subsidized health care.
Are people moving less because they assume correctly that the U.S. as a whole is more homogenous? As strange as it seems, this might be an important factor. Geographic mobility was very high in the U.S. in the 19th century. This was initially due to the settling of the western frontier. But even after the “closing" of the frontier in 1890, mobility remained high for decades, according to the economists Jason Long and Joseph Ferrie. That’s because Americans still poured out of farms into cities that offered unique mixes of jobs. For example, New York was the heart of the garment industry and a seaport to Europe, while 19th-century Chicago, one of the century's fastest growing metros, was a transportation hub that served the midwest’s agriculture industry.
But in today’s services economy, cities have a more uniform mix of work, particularly for low-skilled workers. In every major city, there are many stores, health-care facilities, and insurance offices. By and large, less educated workers might be less willing to move between states because they assume every area has generally the same type of work. In Long and Ferrie’s words, today’s economy has less “locational arbitrage.” There are no gold rushes anymore, and North Dakota’s oil boom and bust notwithstanding, it’s getting rarer for Americans to think they can move to get rich.
Can the internet be blamed for this, somehow? The internet can always be blamed. One hundred years ago, somebody moving from a small farm to Washington, D.C., would have to visit the capital to understand its culture, job mix, pretty falls, and humid summers. But today’s potential movers are more informed and therefore more strategic: They can research their ideal cities online before moving there, and they can easily visit by plane. In 2015, the economists Greg Kaplan and Sam Schulhofer-Wohl bolstered this theory by showing that “repeat migration”—e.g., moving from New York to D.C., and then quickly moving back to NYC—was falling even more than total migration. Perhaps workers are more satisfied with their new city after they move, they concluded.
It’s a clever theory. But it’s incomplete, because it suggests that the decline of mobility is a sign that modern workers are sorting themselves efficiently. But if labor markets were operating efficiently, workers would be moving to where their work was most valuable. Instead, the opposite is happening. People aren’t moving toward productivity. They’re moving toward cheap housing.
Can housing costs be blamed for the decline in geographic mobility? Yes, they can.
Between 1880 and 1980, people generally moved from poor states to rich states, seeking the best jobs. “The creation of a single automobile plant—Ford’s River Rouge complex, completed in 1928—boosted Michigan’s population by creating more than 100,000 workers,” as Tim Noah reported. Migration promoted geographical equality.
But today, not only are families moving less, but also they’re moving in the opposite direction, from rich areas to poorer areas, mainly because of housing costs.
Whereas the middle class used to move toward productivity and jobs, like the River Rouge complex, they’re now barricaded from the most productive places by housing costs. So they’re moving toward cheap housing, instead. Tighter land-use regulations in rich metros pushed up housing values, according to the Harvard economists Peter Ganong and Daniel Shoag. Expensive housing in productive metros priced out the middle class and created “segregation along economic dimensions, with limited access for most workers to America’s most productive cities,” they wrote.
In the larger picture, high migration rates used to be a force for national equality. Now, low migration rates, and the new direction of migration from rich to poorer states, are a force for geographical inequality.
Finally, the great sort of Americans has created a handful of startup hotbeds, where networks of entrepreneurs help each other start companies, while business dynamism in the rest of country has languished. Like smoking habits and fitness, entrepreneurship is a contagious behavior. “Exposing individuals to entrepreneurs may encourage them to start their own ventures,” the Kauffman Foundation, a nonprofit that studies entrepreneurship and education, concluded. People who know startup founders are more likely to found startups. What’s more, people who live in the richest parts of the country, like the northeast, are “more likely to know entrepreneurs overall than in other areas of the country.” Meanwhile, poorer people were less likely to say they knew entrepreneurs in the study.
This, too, is an inversion of old norms. Smaller counties used to lead the nation in the growth in new businesses even through the early 1990s. But this decade, small counties have lost businesses, while venture capital, the lifeblood of high-growth startups, clustered in a handful of metros. The Bay Area (including San Francisco and San Jose) accounts for about 40 percent of all venture investments. Including New York, Boston, and Los Angeles, four regions account for two-thirds of all VC funding.
In the larger picture, the most expensive parts of the country also have the most entrepreneurs, who learn to be entrepreneurs from the entrepreneurs around them. Meanwhile, lower-income people are moving away from those areas in droves toward sleepier economies, where they’ll be surrounded by more static businesses, making them less likely to start their own companies.
Every dimension of declining American dynamism is connected. The slowdown in most areas’ business development comes from a shifting tide in American migration. For 100 years, population flowed from poor areas to rich areas. Now the trend has reversed. Land-use policies prevent more middle-class families from living in productive areas, because housing becomes too expensive. Meanwhile, the rich can afford to cluster in a handful of metros where entrepreneurship is a norm, while business dynamism falls in the rest of the country. There used to be too much land to settle. Now there’s not enough land to share.