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Moving On Up

by Jing Wei, Tim Fernholz

June 1, 2012

"The biggest problem we have in all migration research is that migration is a choice," says David McKenzie, a senior economist at the World Bank and an expert in migration. "Most people don’t make that choice. People stay where they’re born."

In 1932, Ørnulv Ødegård, a Norwegian psychiatrist doing fieldwork in Minnesota, published an influential study called "Emigration and Insanity" that offered one answer. Ødegård reported that his countrymen who immigrated to the United States were more likely to have been diagnosed with schizophrenia than Norwegians who stayed in their native fjords. His findings—essentially, that people who migrate are more likely to be crazy—were replicated by other researchers over the years. Other studies supported his finding that migrants are likely to have poorer mental health than their new neighbors who are natives.

Eventually social scientists came up with a raft of explanations; dock no points for lack of thoroughness. The reasons ranged from the issues of selection—cultures that tend to send citizens abroad seem to have high rates of schizophrenia—to more interesting diagnoses: that schizophrenia influences people to move, or that moving triggers schizophrenia.

Pinning down the real answer is difficult indeed. It’s easy for researchers to find people who wanted to move and did so. It’s hard for researchers to find a good sample of people who want to move but haven’t. That is, it was hard until 2002, when New Zealand started holding an annual lottery that would allow 250 residents of Tonga, a tiny Pacific archipelago a thousand miles away, to move to the more developed country for work.

With more people entering the lottery than winning it, McKenzie, a native New Zealander, realized that a perfect natural experiment had arisen—a rarity in the world of economics—giving him and his fellow researchers the ability to compare the experience of emigrants to people who wanted to emigrate but could not. McKenzie and his colleagues had already employed data from the program to discover that migration made economic sense—migrants’ incomes increased dramatically—but did it also make people crazy?

They found, just as previous researchers did, that the Tongans lining up for the opportunity to work in New Zealand generally had lower levels of mental health than their countrymen. But when they checked in after eight months, they discovered that the winners of the lottery, especially women, saw their mental health improve markedly in New Zealand compared to the people who were left behind in Tonga. Researchers attribute the results to reasons financial (people had better jobs or earned more money in New Zealand) and social (sometimes the impetus to migrate was a desire to be closer to family and friends already in New Zealand).

The experience of the Tongan lottery winners turns over the long-dominant narrative about emigration, making a compelling case that it’s not leaving their homeland for another place that makes people crazy— staying at home might.

Today, as the global economy emerges from a downturn and new technology makes migration easier than ever, economists and city planners are stumped by the opposite question: Why don’t people move?

* * *

There’s a reason we call successful people movers and shakers. In the United States, our economic golden eras generally coincide with movement—the westward pioneers who built a continent-wide agricultural economy, or the waves of European immigrants who drove the Industrial Revolution. Free markets, it turns out, benefit from free movement.

Today, of course, we aren’t in a golden era, and not coincidentally, Americans aren’t moving. More than half of Americans live in the state where they were born, and the Census Bureau reports that the percentage of people changing their residence in the United States is dropping—just 11 percent of Americans moved between 2010 and 2011, the lowest level since 1948.

One of the most depressing developments is the lack of movement among young college-educated adults—the most likely group to migrate and the lifeblood of our labor market—at the same time businesses are having trouble finding highly trained workers. Unemployment is too high across the United States, but people aren’t moving to where the jobs are.

The opposite is true of China, which is poised to eclipse the United States as the world’s wealthiest country. Not coincidentally, the Chinese are on the move. In fact, the last decades have seen the largest migration in world history take place within China’s borders. Workers from the country’s rural interior are moving to the coast, where factories manufacturing a range of products—most infamously, high-tech gadgets—have driven a boom that the World Bank estimates lifted 600 million Chinese out of poverty in a 24-year period.

China’s strategy for growth has depended on movement. Enabling workers to easily move to where the jobs are results in greater economic gains—10 to 100 times greater—than the gains associated with brokering more free-trade agreements or making it easier to invest money around the world, said Michael Clemens, an economist at the Center for Global Development, in a recent interview on the power of migration. This is something that’s "little known even in the economics profession."

In 1958, the Chinese government undertook the Great Leap Forward—an ironic name for a set of policies that included restrictions on movement—in a misguided attempt to shape an economy around collective agriculture. Citizens were classified as either rural or urban residents based on their hukou, red passbooks that detailed their official residencies and family histories. Washington University geographer Kam Wing Chan argues that this system created an underclass of agricultural peasants. At its height, peasants could be arrested for simply entering a city. Transitioning from an agricultural society to a more prosperous industrial one demands movement to urban centers, but China’s central planners stood in the way.

Gradually, as China turned to manufacturing and exports, the government allowed more and more citizens with rural hukou to come to cities like Dongguan and Shenzhen—home to China’s manufacturing industry, including the Foxconn factories that make Apple’s iPhones. Today migrants make up 70 to 80 percent of workers in coastal cities. China’s internal migrants earn far better wages in city factories than they would on country farms, as evidenced by long lines of job seekers outside the factories. While the suicide of workers at Foxconn plants has attracted international attention, the suicide rate among rural Chinese is far higher than that of urban migrants.

Still, migrant mental health isn’t perfect. Their rural hukou restrict them from accessing social services and alienate them from their neighbors. Even the children of migrants are often kept from attending school with urban children. A full 160 million rural Chinese, about 12 percent of the population, live and work away from home. Migration is already starting to slow in China as development moves into the interior and the youth population peaks, but another 100 million Chinese will move to cities by 2020.

"Chinese migrants face somewhat unique legal obstacles to get themselves integrated into the population," Chan says. "Of course, the Chinese migration story also has a universal dimension. Look at the story of African-Americans in the late 19th century—the difficulty getting on trains, leaving their homes, staying in unsatisfactory housing conditions in the industrial North is similar. Both Chinese migrants and African-Americans want to have a better life. That comes out very clearly."

If China wants a real middle class to develop, it will have to reform the hukou system to give rural migrants true freedom of mobility—including all the rights of the local community they land in.

* * *

If the Chinese are leaving their homes for better jobs, why aren’t Americans, who have a far easier time moving, doing the same? Traditionally Americans are among the most mobile people in the world. And a bad economy should prompt a spike in movement—which in turn would help spur a recovery. But the country’s migration rate has been slowing for the last several decades.

If you’re young, the most likely demographic for migration, you’re facing a tough job market wherever you go—unemployment for people in their 20s is nearly twice as high as the population at large. More problematic is that a college degree is often a prerequisite for better jobs, and student loan debt makes it harder for people to leave a less-than-ideal job in search of a better one. And it’s not just young people. With the crash of the housing markets, one in four American homeowners currently owes more money than the home is worth, which makes migration a near impossibility without foreclosure, bankruptcy, or a money-losing short sale. It’s hard to be nimble, look for jobs, and support your- self in a new place if you’re carrying tens of thousands of dollars in debt.

Some say Americans’ reluctance to get up and go is either a character flaw—too much time on Facebook is making us complacent—or a result of a too-generous safety net, with unemployment insurance, food stamps, and Medicaid preventing people from descending to the requisite levels of desperation to abandon their communities to pursue opportunity elsewhere. While blaming the internets is nonsensical—Facebook also makes it easier to find friendly communities in new places and stay in touch with those you left behind—it’s true that today’s higher standards of living make it easer to stay put. Yet the answer to our jobs stagnation can’t be creating more misery to induce people to move.

Is it possible to reap the same internal-migration benefits as China while treating our citizens humanely? No, in part because we already reaped them: China today is doing what the United States did at the beginning of the last century, shifting its economy from agriculture to industry at a rapid pace. If China decides to reform the hukou system and try to build a middle class, it will be expanding access to many of the same features of the social safety net that make Americans less likely to migrate.

We don’t need to push people into poverty to entice them to move. One similarity with China is that many of America’s jobs are in metropolitan areas. True, rural states have some the lowest unemployment rates, but that’s partially an artifact of their low population growth. North Dakota’s shale oil boom means jobs are easy to come by, but the state is already straining under the weight of all those job seekers as rent shoots through the roof.

Striking oil is not a long-term plan for the economy—or the environment. Neither was the construction work that was propelled by the housing bubble—those jobs aren’t coming back. The cheap houses built during the bubble led people to move from high-cost cities to lower-income suburbs over the last decade. There are more Americans living in poverty in the suburbs than in the cities. Author Ryan Avent calls this "moving to stagnation" because the suburbs and exurbs are less dynamic than the metro areas, where education, industry, and high-skilled labor come together to fuel the modern economy.

Cities make people more productive. Denser living spaces create more network effects among like-minded people and businesses, leading to greater innovation and more opportunity. A few concentrated sectors—whether technology in San Francisco, finance in New York, or government in Washington, D.C.—can support a broad array of jobs in food service, retail, media, and entertainment, which means more jobs but also more options. That’s why cities have more restaurants, theaters, museums, and stores. Dense cities are also more efficient.

"There’s something about place that matters vastly more than people in determining economic productivity and earnings," says Clemens, the economist. His research has found that even low-skilled foreign immigrants see major gains when they move to American cities.

You probably don’t think that public officials in the United States would impose a kind of informal hukou system, but they do: Local policies about land use and transit make America’s most productive places—our largest, wealthiest cities—prohibitively expensive for many people. The people already residing in those cities have enacted policies that have, in essence, built a wall around them. Limits on the size of buildings mean that fewer apartment units are built; demands that the needs of cars take precedence over the needs of people create vast parking lots that take up valuable land; zoning restrictions make it harder to create thriving neighborhoods with many types of housing and businesses. In his polemic, "The Rent Is Too Damn High," Matt Yglesias notes while residents fight to preserve the character of iconic neighborhoods like Brooklyn’s Park Slope or Washington, D.C.’s Georgetown, those neighborhoods would be illegal to construct today.

What does all this have to do with jobs? Consider the cities with the most hiring last year. Austin, Texas, saw unemployment trending down thanks to an educated workforce, strong tech sector, and relatively affordable rent; in high-cost New York, which has many of the same advantages, if not more, tech startups can’t find developers. San Jose is growing, too, as people seeking employment in San Francisco and Palo Alto’s tech industries look for cheaper rent near the city. Other growing cities like Houston, Detroit, and Pittsburgh have an advantage thanks to their low cost of living. Imagine if we lifted the cost-of-living barriers in more cities to match those advantages!

It’s true that cost-of-living barriers exist in China, too, but they’re not as big a problem—now. Many Chinese workers live in dormitories provided by their employers. Chinese cities are rapidly expanding to accommodate the new workers—Shenzhen was a fishing village as recently as the 1970s. This is possible because of the sheer amount of space and funding China has with which to build, and the willingness of the government to simply throw out current residents to build more densely. In the United States, we don’t want the government throwing people out of their homes, but we don’t want "it’s always been this way" to stand in the way of progress when most of our cities aren’t surrounded by farmland ripe for redevelopment.

So why aren’t Americans moving? The answer is twofold: They are so debt-burdened that they are reluctant to take a chance at a better life, and they’re unable to afford the high cost of living in the most productive places in the country. It doesn’t have to be this way. The federal government could make it easier for people to shed student loan debt and mortgage debt, and cities could work wonders on our job market if they allowed taller buildings and more flexible neighborhoods.

The policies holding back China’s rural-to-urban migrants have something in common with the invisible web of restrictions that makes it harder for Americans to move: They both favor the lethargic over the dynamic, the status quo over change, and the past over the future. We’ve forgotten that it’s not just where we are. It’s where we’re going that matters.

We need to apply the Tongan lesson: Migration isn’t crazy; staying put is in.

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