There is no place like home, and the job market has to adapt

Conventional economic thinking tells us that people go where the jobs are. In America, there is a long history of expanding westward in search of opportunities. In the UK, Margaret Thatcher’s employment secretary, Norman Tebbit, liked to talk about her father’s people who, when he was unemployed, “I got on my bike and looked for work, and kept looking until he found it. “Clearly, it’s easier to find work when you have cell phones. But what happens when people can’t or don’t move to where the work is?

It’s an issue that U.S. policymakers are focusing on after the destruction of pandemic-related jobs. Covid-19 hit different groups of people in very different ways, with virtual knowledge workers working much better than those in professions that require face-to-face contact. Statistics that point to declining income inequality during the pandemic are misleading, some scholars say, because they reflect short-term responses to government policies, such as the distribution of stimulus controls. In the long run, it is clear that the nature of the work will change radically, with the possibility of many more jobs being done anywhere, be it Bangalore or Bangor.

This can open one new globalization of white – collar labor markets, which could benefit workers in emerging markets advancing digitally, but it could also put pressure on the labor force of richer countries. On the other hand, American workers who cannot afford housing, child care and schooling in expensive coastal cities could move to one of the least expensive “Zoomtowns” which have grown during the pandemic.

It is impossible to know yet how this arbitration will develop over jobs, place and work. But what we do know is that place matters a lot more in terms of job markets than we once thought. Economists have traditionally thought in terms of people, not geography. But a more location-based approach to job creation is gaining strength. Research shows that communities adapt very differently to the economic downturn, so a variety of tailor-made approaches need to be made, rather than just policies designed to create employment growth nationwide.

Harvard and Berkeley economists have, for example, is shown that intergenerational mobility varies quite substantially in the United States. A 2014 study showed the probability that a child born in the 1980s who reached the top quintile of the national income distribution, when he left a family in the lower quintile, would be 4.4% in Charlotte, North Carolina. (not a pond, but a thriving southern service center). In contrast, the chances of the same group in San Jose, California, were 12.9%. Higher mobility areas like San Jose featured some combination of less residential segregation, less income inequality, and better elementary schools. They also had greater social capital and family stability.

The point about social capital is very important. Think about the book Hillbilly Elegy, when workers without a college degree lose their jobs, they do not usually move, but cling to the little social capital that exists in their home or community. The facts respond to this narrative. How “Shock of China” authors, economists David H Author, David Dorn, and Gordon H Hanson have found that classic economic assumptions about labor market adjustment in response to trade and technology-related labor displacement have not been met in recent decades. “For reasons that economists still don’t understand,” Hanson wrote in Foreign Affairs recently, less educated workers rarely “choose to move elsewhere, even when local market conditions are poor”.

The result is localized recessions and the dangerous politics it entails. What to do about it? For starters, Hanson and many experts advocate greater payback of workers in areas experiencing especially dramatic changes, through trade assistance. But again, the solutions should be local, rather than solely. Some people may need money to pay bills, while others want to recycle or help themselves with new job searches. All this should be done in conjunction with private sector assistance. When the pandemic hit, European governments did a better job of keeping people working because they worked with the private sector on short-term work plans and wage subsidies. American companies had just fired people and left them to defend themselves.

This raises the point that any government subsidy or local and regional incentives need to be designed for the benefit of both business and employment. Typical corporate subsidies granted to attract employers to besieged cities are usually erode the tax base and not helping regions with long-term problems. This is an issue that the Biden administration must think carefully about reviewing the tax bonuses of the Trump-era “opportunity zone”.

In short, better education is the best protection for work. I would love to see a high-tech version of professional high school programs than liberals thrown recklessly in the 1970s, out of concern that poor kids would end up being welders and richer, say, opinion columnists (about that, I’d just remark that my plumber in Brooklyn earns more than I do in FT). We need both liberal education and learning in the workplace, and there are currently models that combine both, such as the P-Tech program, which has been scaled nationally and internationally.

Even in a globalized world, place matters. We need to create jobs. But we also need to take them to where people are.

rana.foroohar@ft.com