What is “economic migration,” and why is it important enough for economists to study?
As appeared in the Cleveland Fed Digest's Ask the Expert on 08.06.2019
Economic migration is the term used when people move from one region to another for a job. They could be moving any distance from their current residence, within a state, from Erie to Pittsburgh, for example, or cross-country, from Boston to Los Angeles. The people most likely to relocate for a job are people 25 to 54 years old, or “working-age adults.” Younger adults are more likely to move to attend school, and seniors most often move for family reasons.
Economic theory suggests, and a lot of historical experience has confirmed, that migration can be good for economic growth and productivity. We’re more likely to get highly productive, good matches between workers and firms when people can relocate freely and when a firm can expand its hiring search across the country to hire the best worker for the job.
The opposite also holds true. If a worker is not able to move out of his city or state, he has to accept the best job locally that he can find, whether or not it’s a good match. This puts a burden on the hiring firm, too; it also has to settle for what it can get. This issue is important because having mismatched skills and jobs keeps productivity lower than it could be otherwise. Higher productivity means economic growth that benefits everyone.
Personally, I’ve been intrigued by this. I grew up in this area of the country, a region that has been grappling with deindustrialization, which is closely tied to the migration issue. National policymakers want to see people migrate out of areas that have lost thousands of jobs because this helps alleviate unemployment and poverty. Regional policymakers always want to retain and attract educated workers for the local firms in growing industries. In recent years, all types of migration, including economic migration, have slowed down. Right now, economists are trying to determine how much of the slowdown is due to a lack of regions offering great economic opportunities or a growing similarity between job markets across the country.
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Stephan Whitaker is a research economist in the Cleveland Fed’s Research Department. His current work includes research on housing markets and studies of state and local public finance.
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