The New Geography of Jobs by Enrico Moretti

Author:Enrico Moretti [Moretti, Enrico]
Language: eng
Format: mobi, epub
Tags: History
ISBN: 9780544028050
Publisher: Mariner Books
Published: 2012-05-22T07:24:54+00:00

Figure 10. Unemployment rates by level of education

Source: Adapted from a graph by Bill McBride, calculatedriskblog.com.

This distinction between causes is important, because it suggests a policy reform that could end up helping those workers whose lack of mobility is not a choice. The unemployment insurance system, which was introduced during the 1930s, is essentially the same now as it was then. Currently, an out-of-work person who qualifies for unemployment insurance receives a check from the government that covers part of his previous salary. What is striking about the system is that it does not provide any incentive for unemployed workers to look for jobs in places with better labor markets. If anything, it discourages mobility from high-unemployment areas to low-unemployment ones, because it does not compensate for the difference in cost of living. If you are living off an unemployment check in Flint, you do not have a lot of incentives to move to Austin to look for a new job, because your housing expenses would double but your check would still reflect the cost of living in Flint.

The unemployment insurance system should be adjusted to reflect the vast and growing differences in economic fortunes among American cities. Unemployed people living in areas with above-average unemployment rates should receive part of their unemployment insurance check in the form of a mobility voucher that would cover some of the costs of moving to a different area. In other words, instead of encouraging out-of-work residents to remain in Flint, the federal government could help them relocate to Texas (or wherever they might choose to go) with financial support that covers a portion of their moving expenses. This would help those who would like to move but are stuck because they lack cash.

Remarkably, this policy would also help those who are not willing to move. The reason is simple, although not widely recognized. If there are one thousand unemployed workers looking for jobs in a city where there are only one hundred job openings, the probability of each worker finding a job is one in ten. But if five hundred of these unemployed workers are encouraged to relocate by a mobility voucher, the probability that each of the remaining workers finds a job is doubled. In a climate of high unemployment, the fewer people like you who are looking for a job, the better your chances of finding one. This points to a surprising conclusion: unemployed workers who stay in a local labor market with high unemployment effectively impose a cost, or negative externality, on everyone else in that market, while workers who move away generate a positive externality. A mobility voucher is a way to deal with this. By increasing the number of workers who are willing to relocate, the voucher benefits both those who move, who end up with better jobs elsewhere, and those who stay, who end up with a better chance of finding a job. (Of course, this only works for the nation as a whole if the externality

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