UNIVERSITY GRADUATES MORE MOBILE THAN LESS-EDUCATED PEERS

Young university graduates are much more likely to move cities in search of work than young people with less education. What’s more, wages in graduate-dominated jobs, such as in law or banking, are more sensitive to local housing rents – in other words, graduates are better compensated for local living costs because of their greater mobility,which improves their bargaining power.

Theseare among the findings of research by Michael Amior, to be presented at the Royal Economic Society’s 2011 annual conference. The study, which analyses surveys and census data from the US, finds that:

  • The difference in mobility between high- and low-skilled workers is largely among those with less than 12 years of work experience.
  • The gap is substantial. In 2005, for example, around 9% of recent college graduate workers moved to a different citycompared with only 4% for workers with lower levels of education.
  • This difference is entirely due to job-motivated migration.A natural explanation is that successful career progression is more likely to entail migration for college graduates. For example, an aspiring banker might do well to move from Detroit to New York or from Glasgow to London. In contrast, a retail assistant might not benefit so much from migrating.
  • In occupations with almost no college workers, wages are totally unresponsive to changes in local housing rents.Wages in college-dominated occupations are much more sensitive to local housing rent.

In the US and UK, traditional manufacturing cities have been particularly badly hit by the recent financial crisis. These results suggest that the low levels of labour mobility in these cities will mean that unemployment remains concentrated in these areas.

The results also matter for housing policy and regional development policy. For example, popular regional policies aimed at attracting skilled workers should be pursued with some caution. Where gentrification triggers local house price inflation, the low skilled will bear the brunt of the economic pain.

More…

In the US (and around the world), college graduates move city for a new job more frequently than the low skilled. But why? There are two possible explanations:

  • College educated workers are more likely to have better job opportunities elsewhere.
  • Or college workers face weaker constraints on the act of moving itself – that is, they are more mobile.

This study presents strong evidence in favour of the second explanation.

The possibility of low skilled mobility matters greatly, particularly in the context of the recent recession. In the US and the UK, traditional manufacturing cities have been particularly badly hit. And, if labour is immobile, this would hasten the development of persistent local pockets of unemployment. Indeed, it is an established fact that regional disparities in unemployment are much larger for the low skilled.

The difference in migration rates is largely due to workers with less than 12 years of labour market experience. And the gap is substantial. In the US, in 2005, about 9% of college graduate workers in this experience bracket moved to a different city. But, the figure is only 4% for workers with lower levels of education. Survey evidence, on the reasons for moving, shows that this difference is entirely due to job-motivated migration.

A natural explanation is that successful career progression is more likely to entail migration for college graduates. For example, an aspiring banker might do well to move from Detroit to New York, or from Glasgow to London. In contrast, a retail assistant might not benefit so much from migrating.

But it is also possible that college graduates are simply more mobile. Perhaps they face lower social or psychological costs from moving; they suffer less from credit constraints for home purchases; they can search more effectively for jobs outside their home city; or there may simply be more jobs available in high skilled labour markets.

This research argues that college workers are indeed more mobile, and that this can explain most of the difference in migration rates. This conclusion is based on the result, from US census data, that wages in college-dominated occupations are more sensitive to local housing rent. That is, college workers are better compensated for local living costs. Using an economic model, this research arguesthat this must be because they are more mobile, which improves their bargaining power.

Specifically, in those occupation groups with almost no college workers, wages are totally unresponsive to changes in local housing rents. In contrast, in the most college-dominated occupations, a 1% increase in local housing rents causes a 0.3% increase in wages. For comparison, perfect compensation for housing costs would require a 0.5% increase in wages.

Beyond the question of mobility, these results open the door to new work on the interaction between local housing and labour markets. This is of particular relevance in the current era of turbulent housing markets. Significantly, they tell us that more expensive cities will have larger earnings inequality.This is because poorer workers (in lower skilled occupations) struggle to recoup their living costs in such cities.

This is clearly pertinent to the ‘living wage’ debate. But, it also matters for housing policy (which can greatly affect local living costs) and regional development policy. For example, popular regional policies directed at attracting skilled workers should be pursued with some caution. Where gentrification triggers local house price inflation, the low skilled will bear the brunt of the economic pain.

ENDS

‘Why do College Graduates Migrate More for New Jobs?’ by Michael Amior

Contact:

Email:

Web: sites.google.com/site/michaelamior/