This project explores not only migration patterns but also how they change in response to new economic opportunities.
We study this question by looking at the geographic variation in the recovery from the Great Recession. By examining differences in the rates of local wage growth between 2010 and 2017, we can examine whether young adults migrated to places that were offering higher wages.
The potential for better pay has a clear and detectable impact on migration decisions. We find individuals moved to places that offered higher wages.
We also find that the degree of responsiveness to higher wages differed across demographic groups. Average migration responses differed by both race/ethnicity and parent income.
We find that, compared to White young adults, Black young adults were less likely to relocate in response to the prospect of higher earnings. We also find that young adults raised in high-income families were more likely than those raised in low-income families to migrate in response to higher wage offers.
While some young adults may change their migration decisions in response to economic opportunities, the magnitudes of these effects are not particularly large.
For example, consider a case where a commuting zone experiences a $1600 increase in average annual wages. (This increase is on par with the type of wage growth successful cities experienced during the recovery from the Great Recession.) We estimate that this increase in wage growth would, on average, lead to a 1% increase in the number of residents.
This means that 99% of the residents of the CZ would have lived there even if it hadn’t experienced the strong wage growth. It also means that 99% of the benefits of the local wage growth flows to those same individuals.
Given that eight in 10 individuals live within 100 miles of their childhood CZ, these results also mean that benefits of wage growth primarily flow to individuals who grew up in or nearby the affected CZ.
Taken together, these findings have implications for assessing the impact of local investment.
We can think of an individual’s “radius of economic opportunity” as the geographic area within which they might benefit from economic growth. If individuals are highly mobile and highly responsive to wage opportunities, that radius is quite large. If the geographic mobility is limited, that radius may be quite small.
Our results suggest that individuals who benefit most from local wage growth are those who grew up nearby, and that those born in a given place are unlikely to benefit from local investment in faraway locations.
In other words, for many, particularly Black and Hispanic individuals and/or those from low-income families, the “radius of economic opportunity” is quite limited.
Article Courtesy of the U.S. Census Bureau.