- A new study confirms, once again, the ill effects of an inelastic housing supply. Tweet This
- The biggest beneficiaries of local wage hikes tend to be workers who would have lived there regardless, who are far greater in number and didn’t have to take on the cost of moving to get paid more. Tweet This
- At age 26, about 30% of young adults are still in the very same census tract, 70% are still in the same commuting zone, and 80% are within 100 miles. Tweet This
You might have already seen the new “Migration Patterns” website, a collaboration between the Census Bureau and two Harvard-based research projects (Opportunity Insights and Policy Impacts) that has been popular on social media. With the click of a mouse, you can see where Millennials who were raised in various American “commuting zones” ended up, and even subdivide the results by race and parental income.
The calculations are based on nearly comprehensive census and tax records, so if you were born between 1984 and 1992, you can even find your own group. In my case, that’s middle-class white kids who were living in the Green Bay area at age 16: We had a 65% chance of still being around at age 26, and only a 0.19% chance of being in or around New York City at that point. (Though at least one of us, I can attest, went to New York but managed to end up back in town later.)
Most of the media headlines about this research focused on how many young adults stay put over this crucial 10-year period of their lives—at age 26, about 30% are still in the very same census tract (small geographies with a typical population of just a few thousand), 70% are still in the same commuting zone, and 80% are within 100 miles—as well as the fact that the numbers vary by demographics, with blacks, Hispanics, Appalachian whites, individuals with lower levels of education, and those from lower-income families staying closer to home. Other scintillating details include the top destinations: White people are unusually likely to move to Denver, black people to Atlanta.
But these facts are only one aspect of the research, and I would argue not the most important part. There is also an academic study spelling out some key factors behind American migration—including wages and the supply of housing. It explains how cities attract new residents, who responds to those incentives, and who captures the gains from a booming local economy.
A fairly obvious result of the study is that when wages rise in a local area, people become more likely to move there. (The migration increase is especially pronounced from areas that were already sending a lot of movers, typically located nearby.) Specifically, treating the recovery from the Great Recession as a natural experiment, the authors find that a roughly $800 annual-wage increase “causes a 1% increase in the number of 26-year-old migrants who move to that area.” Existing residents become less likely to move out as well.
However, the biggest beneficiaries of local wage hikes tend to be workers who would have lived there regardless, who are far greater in number and didn’t have to take on the cost of moving to get paid more. And because most migrants come from shorter distances, rising wages in one location offer little value to Americans who live far away, a concept the authors call the “radius of economic opportunity.”
In addition, landowners capture a lot of the gains from rising wage—thanks to more competition for housing and more money available to spend bidding up prices. Overall, the authors estimate, if wages go up by about 80 cents an hour for full-time workers, landowners will get about 30% of those gains.
Importantly, this number varies depending on whether the area’s housing supply is “elastic,” meaning that more housing is actually built when the population rises. As I’ve discussed in this space before, many big cities with booming economies basically refuse to allow new housing, which drives up rents and makes it less profitable to move there. Lately this has been particularly harsh on those with lower levels of education, who, despite higher wages in denser cities, can often lose money from moving once the higher housing costs are factored in.
This study confirms, once again, the ill effects of an inelastic housing supply. When places don’t allow new housing, they lavish the benefits of growth on existing landowners—who see their property values and rent income rise at the expense of newcomers (not to mention the loss to those who’d like to move in but can’t afford it). They also reduce the number of people who move there at all.
This is important work for those of us who’d like to see Americans have a lot of good options when it comes to where to live, especially in those crucial years when young adults are getting their careers established and their families started. There are many advantages to staying close to family and friends, as shown by the high percentage of young adults who do just that. But there should also be the option of pursuing good jobs and reasonable housing costs elsewhere, especially for kids from struggling areas, and public policy is falling short on that front.
Robert VerBruggen is an IFS research fellow and a fellow at the Manhattan Institute.