In the 20th century, one of the standout features of the U.S. workforce was Americans’ willingness to chase economic opportunity to new cities, regions, and states. Geographic mobility makes for a more flexible workforce, and that flexibility can be a boon for an economy, with workers going where they’re needed. But in recent years, the U.S. labor force has undergone a substantial change, becoming less likely to move. In 2016, 1.5 percent of Americans moved out of the state they were living in. Between 1950 and 1990, that percentage was more than twice as large.
This raises a host of interesting economic questions. Is geographic mobility related to social or economic mobility? Do people who move get better jobs? Better pay? If so, for whom?
Since early career success is a major factor in determining lifetime earnings, these considerations, whether to move and where, are especially pressing for young Americans who came of working age during or immediately after the Great Recession. For this group, small salary changes can make a big difference down the road, and the positive effects of securing a good job can accumulate over decades, as the effects of losing a job can too.
A new study sheds light on the importance of location, looking at whether a worker’s proximity to his or her parents affects long-term earnings following the loss of a job. To study this, the researchers compared the earnings of people who lost their jobs with parents nearby versus those whose parents lived farther away. The researchers looked at data collected from roughly 35,000 people from the Panel Study of Income Dynamics, the longest running longitudinal household survey in the world, between 1968 and 2013. Parental proximity certainly matters for something: For example, it was found that people who live outside their parents’ neighborhood tend to, on average, be younger, be more educated, and earn significantly more than those who stayed in their parents’ orbits.
As for whether proximity to one’s parents affected long-term earnings following a job loss, the researchers looked at workers who were employed full-time for at least two years and then lost their jobs due to layoffs or closings. They found an interesting pattern that held for young adults between the ages of 25 and 35: Those who lived away from their parents saw a large decline in earnings of $15,000 a year on average, and that’s just right after losing their jobs. Even after 10 years, they failed to catch up to peers who didn’t suffer a job loss during that crucial period. For those who lived near their parents, the story was different: Their earnings took a big initial hit as well after a job loss—around $10,000, on average. But importantly, their earnings recovered and caught up with their continuously employed peers within five years. And for older adults, aged 36 to 55, living close to or far from one’s parents tended not to make a difference.
One reason this might be the case is that those living close to their parents are working lower-paying jobs—if they’re making less to begin with, it’s easier to return to where they were. This hypothesis isn’t explored in detail in the paper, though the researchers note that this phenomenon could in principle account for why those living close to their parents see their wages bounce back.
The study’s authors mention a couple of other reasons why having parents nearby might result in better financial outcomes for young adults who lost their jobs: First, parents might be providing “informal insurance” when their adult children become unemployed, in the form of child care, food, or housing. That in turn could provide the resources necessary for a more ambitious job search, giving their kids the support to get back on the right track instead of having to take lower-paying jobs to get by. Second, living in one’s parents’ community likely means a better social network to locate job openings. And lastly, parents can provide emotional support, which may also aid the job search process.
Whatever the explanation, the researchers explained that proximity to parents is an important component of thinking about why Americans move. “Although this correlation does not demonstrate causality, our findings suggest that parents play an important role in adult children’s labor market outcomes and that family connections are, therefore, potentially important for the labor market decisions of adult children,” they wrote in the paper. They added that the earnings pattern they documented might “explain [young people’s] sometimes surprising reluctance to move, especially among those who are less educated.” There’s no one explanation for why Americans aren’t moving as much as they used to, but this data points at a possible cause.