Americans used to be exceptional for how often they moved. But that once-powerful source of both efficiency and upward mobility is now in steep decline.
Consider the mystery of the “San Berdoo” population boom. Between 2005 and 2009 the nation’s biggest county-to-county migration was from Los Angeles County to San Bernardino County. These counties are both in Southern California, but they’re sufficiently far apart (sixty miles) that they constitute separate labor markets. Before the recession, unemployment in San Bernardino and Los Angeles Counties was about the same. After the recession hit, unemployment in San Bernardino County rose higher, topping out at about 15 percent compared to LA County’s 13 percent.
Moving from LA to San Bernardino would not have improved your chances of finding a job. We’re talking about a city that declared bankruptcy last year. Nor would San Berdoo be the place to escape big-city crime; after it laid off cops in droves, it experienced a 50 percent increase in its homicide rate. Among the white population aged sixteen to twenty-four, 18 percent are neither in school nor have a job, a number that rises to 19 percent for Latinos and 25 percent for African Americans. Yet a huge flow of migrants continues from LA. Why? Mainly because housing is cheaper. Gloria Santellan recently wrote on the Facebook page of the Victorville Daily Press, a local paper, “I was paying $750 for a studio in the San Gabriel Valley area, and out here I was in a two-bedroom for $25 less!”
Exclusionary zoning at the local level is one way people like Santellan get priced out of those parts of the country where jobs are most lucrative and plentiful. This is the theme of two recent e-books, The Gated City by the Economist’s Ryan Avent and The Rent Is Too Damn High by Slate’s Matthew Yglesias. Here’s a brief rundown by Avent:
In some cases, there are explicit zoning limits. Buildings can only be so tall or can only be used for commercial or industrial purposes. In many cases, neighbors opposed to new developments in their neighborhood lobby the government to change either the zoning rules or historical designations in order to block development projects. And in some situations, no actual law or regulation is necessary to limit redevelopment—community opposition is sufficient to do the work of curtailing supply.
San Jose, the de facto capital of Silicon Valley, has a metropolitan-area population of 1.7 million inhabiting about 1,300 square miles. But in 2005 the metro area approved permits for only 5,700 new units. The city’s tallest building, Yglesias notes, is a mere twenty-two stories high. Average earnings in the valley grew by nearly 40 percent between 1997 and 2000. That’s a lot. But home prices in nearby San Francisco grew even faster, doubling during the same period.
Tight restrictions on housing construction don’t keep out the affluent (who continue to migrate to places like Boston and New York and San Francisco). But they do reduce available housing for working people. In its most extreme form, zoning has, in certain gaudily affluent neighborhoods, become a tool for maximizing the size of single-family McMansions. In Dallas’s luxury gated community of Enchanted Hill, for example, you aren’t allowed to build a house that’s less than 4,000 square feet, according to Affluent magazine. Bungalows need not apply.
Another factor driving up the cost of real estate in at least some high-income cities is underinvestment in transportation infrastructure. In metro areas such as Washington, D.C., for example, suburban commuting, particularly by car, has become such an ordeal that proximity to a Metro stop will send home prices into the stratosphere. An answer to that problem is more Metro lines.
The underlying problem, however, isn’t the price of housing per se so much as its relationship to income. Since 2009, when the recession ended, the median price of a new house in the United States has risen 13 percent, even as median household income has fallen by about 4 percent. That doesn’t pose much of a problem for a migrating architect whose income is already well above the median, and who is likelier to have existing home equity that he can transfer to another state. But for construction workers, for example, it’s likely to be a big problem, and a reason why they can’t easily move to where the best-paying jobs are.
A construction worker can generally make more money in San Francisco than in suburban Fresno. But it won’t likely be enough more to make up the difference in the relative cost of living. Indeed, few working-class people earn enough money to live anywhere near San Francisco anymore, to the point that there is now a severe shortage of construction workers in the Bay Area. David Hayes, CEO of Skyline Construction, recently told the local business press that his biggest challenge is “[r]ecruiting, recruiting, recruiting. We have started relocating candidates from Southern California and recruiting out-of-state candidates, along with asking retired workers to return.”
If labor markets were operating efficiently, construction workers, along with electricians, plumbers, nurses, nannies, elementary school teachers, and other working-class Americans, would receive enough compensation to live near the places where their work is most needed. But our labor markets are not efficient; rather, they are rigged and skewed, offering too much compensation to people with some skill sets (merging companies and writing derivatives, for example) and not enough to others whose skills are often just as hard to learn (e.g., brick laying and teaching children to read) and often more vital to society.
Ganong and Shoag provide a data series that captures the bottom line. In 1940, the income of “lower-skilled” workers captured 88 cents of every dollar increase in state per capita income. That share began to decline in the 1970s, and by 2010 it was down to 36 cents. Put another way, working-class people in the richest regions of the country have a much lower share of the income around them than they once did. That, more than any other reason, is why they have such a hard time moving to where incomes are highest. Incomes aren’t high for them.
Yogi Berra supposedly once said, “Nobody goes to that restaurant anymore. It’s too crowded.” We might similarly observe, “Nobody moves to that state anymore. It offers too much economic opportunity.” It doesn’t make any sense, but that’s life in our present post-migration era. For all his historic foresight, Greeley could never have imagined an outcome so undemocratic and economically perverse.
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