Essay on Labor Markets and Mobility

The EconBuff Podcast entails Lee Stitzel, the host, and Dr. Rex Pjesky, an economics lecturer at West Texas A&M, discussing labor markets and mobility. Stitzel questions Dr. Pjesky on various matters pertaining to labor mobility such that by the end of the podcast, the duo ends up discussing what labor mobility is, reasons why labor mobility is essential, the declining trend of labor mobility, and the visible factors that are influencing the prevailing low labor mobility. In the discussion, the two offer detailed insight on how the prevailing trend of labor mobility is affecting the broader market, the potential causes of decline in labor mobility, the implications of labor mobility decline in the economy, such as how creative destruction could be influenced by decline mobility, and the nature of labor mobility in geographic and occupational markets. Generally, the podcast explores what Dr. Pjesky considers the best way for economists to perceive and analyze the topic of declining labor mobility in the US.

Dr. Pjesky starts by explaining what labor mobility is, and he defines it as the rate at which a worker will move to take a new job either in the same economy or in a different economy. For instance, a doctor can work in one hospital for two years and then relocate to another hospital in another state or country. The movement of the doctor to another workplace thus represents labor mobility. In other words, labor mobility represents the movement of a laborer from one occupation to another. The movement can either be geographical mobility, referring to change in location, or occupational mobility, referring to change in occupation. Therefore, labor mobility can be understood as the movement of people in search of new jobs.

In regards to prevailing trends in labor mobility in the US, Dr. Pjesky confirms that the US is experiencing low mobility rate. In other words, Americans are moving less to get new jobs. Regardless of how you measure labor mobility, statistics reveal that Americans are moving less than people from the 1950s to the 1980s. For instance, statistics on the movement of American laborers from one state to another have declined by 50% compared to data from the 1980s. In regards to people moving from a different county within a state, there is still an evident decline of about 30% compared to data from the post-war generation. The same decline in labor mobility can also be seen among people in different economic classes, consequently revealing that labor mobility is declining regardless of which demographic. Therefore, Dr. Pjesky claims that people are currently moving less for their jobs based on previous and current statistical records.

In regards to the declining labor mobility, Dr. Pjesky argues that most economists view low labor mobility as a problem since it may be reflective of some underlying tendencies in the economy that can be worrisome. For instance, in his book The Great Stagflation, Taylor Colen describes that declining labor mobility is a reflection of the economy becoming less dynamic in terms of laborers taking fewer chances and preferring to entrench than moving around. Therefore, if declining labor mobility is reflective of broader economic trends, it could signal slow economic growth. In this sense, low mobility causes low innovation, reduced GDP, less productivity among laborers, and generally limits the spillover effects of having increased labor mobility.

On the other hand, Dr. Pjesky cautions that the adoption of bad policies could also cause labor mobility decline, consequently debunking the argument that low labor mobility reflects the economy’s performance. In this sense, the economy affects labor mobility and not the other way around, as most economists perceive. All in all, it is difficult to determine how labor mobility relates to other economic factors since it also involves a personal choice that economic factors may not influence. For instance, a doctor may want to work in the same town they grew up in based on sentimental reasons which do not encompass economic factors. Therefore, economists cannot determine if low labor mobility is necessarily a problem from an economic perspective.

According to Dr. Pjesky, one has to determine the reasons for declining labor mobility to establish any prevailing concerns in the economy. For instance, if low labor mobility is a personal choice, there are no prevailing economic concerns since laborers simply exercise their freedom of choice. In such a case, non-economic factors such as the development of the internet can influence labor mobility since people can easily search for information about other places more efficiently before moving, unlike in the 1950s where one had to move then acquire information gradually through the experience. However, economic concerns can arise if low labor mobility results from economic factors such as inefficiencies in job matching, which consequently reduces productivity. On the same note, Dr. Pjesky explores the possible winners and losers in a declining labor mobility market. He argues that high labor mobility promotes people to be more productive due to better job matching, enhances innovation due to diversification, and promotes more economic opportunities in the form of spillover benefits. However, there are no evident losers that can be identified in regards to labor mobility.

Dr. Pjesky also explores the potential causes for the decline in labor mobility in the US, in which he identifies four dominant factors. These factors include: increase in homeownership among Americans, occupational licensing, regulatory policies, and poverty conditions. Homeownership results in declining labor mobility since it increases the cost of moving in comparison to its benefits. Owning a home is a costly endeavor that does not allow people the flexibility of moving around since their assets are geographically bound to one location, unlike assets such as vehicles which are mobile. On the other hand, renting a house does not limit one’s flexibility since their cost of moving is relatively low compared to a homeowner who has to sell their house to liquidate their assets which will provide the capital to start moving to another job. In addition, owning a home is usually a long-term commitment that reduces the flexibility of homeowners from moving to search for a job. Statistics also reveal that home renters have higher labor mobility than homeowners, supporting the theory that increased home ownership in the US contributes to declining labor mobility. Therefore, the cost-benefit calculation causes homeowners to move less for work since the costs outweigh the benefits.

Occupational licensing is also highlighted as among the main factors that lead to low labor mobility in the US. Some occupations require a license to operate, and these licenses are only valid within specified states. Therefore, if a laborer wanted to relocate their job, they had to get another valid license in the state in which they are moving in. The licensing regulation and process thus discourage laborers from relocating, consequently leading to low labor mobility. For instance, a doctor licensed to operate in Texas is less likely to move around than a doctor who does not need a specific license for operating in another state.

Regulatory policies also significantly contribute to the declining labor mobility as it limits the available options. For instance, land use regulation can make people less likely to move based on the restricting nature of how land can be used. The argument is that people react negatively to restrictions and would prefer areas with fewer restrictions. These regulatory policies could stem from social norms, government policies, or environmental factors. Dr. Pjesky also mentions conditions of poverty as a significant contributing factor to the decline in labor mobility. Previously, an economic crisis would result in massive movements of people in search of new jobs. However, most states currently benefit from aid programs that support people when they are jobless, consequently reducing the rate of labor mobility. For instance, free food programs for the jobless reduces the pressure for unemployed laborers to go out of their way to search for new jobs, as in the 1980s when hundreds of Americans would move to different states in search of work.

Other factors that were included as causal factors of low labor mobility include standardization of labor in different states such that laborers don’t get any significant differences working in different states as it were in the 1950s. Other mentioned factors include labor destruction, decreased rates of start-ups, occupational differences in work patterns, and the fact that a lot of things are tied up to one’s physical location. For instance, most people develop ties to their close-by friends, family, businesses, culture and address such that leaving these things behind becomes difficult for people. Therefore, numerous factors may be influencing the low labor mobility rate in the US, depending on specific situations.

In conclusion, the podcast provides a broad analogy on the declining nature of labor mobility in the US and elaborates how gaining a proper understanding of the topic promotes problem-solving. By the end of the podcast, one is well informed on labor mobility, why it is essential, and the nature of the declining labor market in the US.

Work Cited

Pjesky, Rex. “Labor Mobility” The Economics of the Marvel Cinematic Universe – EconBuff Podcast. (2019). https://www.youtube.com/watch?v=08ORZi2KyaM