The fear of failure is a substantial disincentive for embarking on a risky adventure. Many people prefer not to try. After all, most of us want to protect an image of ourselves as intelligent, hard-working, morally upright individuals, both because it is simply not pleasant to admit we might in fact be dumb, lazy, and unscrupulous, but also because maintaining a good opinion of ourselves preserves our motivation to keep trying in the face of whatever life throws at us.
And if it is important to hold on to a certain self-image, then it also makes sense to burnish it. We do this actively by filtering out negative information. Another option is to simply avoid taking actions that have at least some chance of rebounding badly on us. If I cross the road to avoid passing by a beggar, I won’t have to reveal to myself that I lack generosity. A good student may fail to study for an exam in order to have a ready-made excuse that will preserve his perception of being intelligent, should he not do well. A would-be migrant who stays home can always maintain the fiction he would have succeeded had he gone.68
It takes an ability to dream (Albert, Esther’s grandfather, was seeking adventure rather than escaping from a bad situation), or a substantial dose of overconfidence, to overcome this tendency to persist with the status quo. This is perhaps why migrants, at least those not pushed out by desperation, tend to be not the richest or the most educated, but those who have some special drive, which is why we find so many successful entrepreneurs among them.
AFTER TOCQUEVILLE
Americans are supposed to be the exception to this rule. Most of them are willing to take risks and move toward opportunity, or at least that has always been the myth. Alexis de Tocqueville was a nineteenth-century French aristocrat who saw America as a model of what a free society could be. For him, restlessness was one of the things that made America special: people moved all the time, both across sectors and across occupations. Tocqueville attributed this restlessness to the combination of a lack of hereditary class structure and a constant desire to accumulate.69 Everyone had a shot at striking it rich, and therefore it was their responsibility to follow the opportunities wherever they might be.
Americans still believe in this American dream, though as a point of fact, heredity plays a greater role in the fortunes of today’s Americans than it does in Europe.70 And that may have something to do with America’s declining restlessness. For at the same time as they were becoming less tolerant of international migration, Americans became less mobile themselves. In the 1950s, 7 percent of the population used to move to another county every year. Fewer than 4 percent did in 2018. The decline started in 1990 and accelerated in the mid-2000s.71 Furthermore, there is a striking change in the pattern of internal migration.72 Until the mid-1980s, rich states in the US had much faster population-growth rates. Sometime after 1990, this relation disappeared; on average, rich states no longer attract more people. High-skilled workers continue to move from poor states to rich states, but now low-skilled workers, to the extent they still move, seem to be moving in the opposite direction. These two trends mean that since the 1990s, the US labor market has become increasingly segregated by skill level. The coasts attract more and more educated workers, while the less well educated seem to concentrate inland, particularly in the old industrial cities in the east like Detroit, Cleveland, and Pittsburgh. This has contributed to the divergence in earnings, lifestyles, and voting patterns in the country and a sense of dislocation, with some regions left behind as others pull ahead.
The pull of Palo Alto, California, or Cambridge, Massachusetts, for highly educated software or biotech workers is not surprising. Wages are higher for educated workers in those cities, and they are more likely to find friends and the amenities they enjoy.73
But why don’t less-well-educated workers follow them? After all, lawyers need gardeners, cooks, and baristas. The concentration of educated workers should create a demand for uneducated workers and encourage them to move. And this is the United States where, unlike in Bangladesh, almost everyone can afford the bus fare across the state, or even across the country. The information is much better and everyone knows where the boomtowns are.
Part of the answer is that the wage gain from being in a booming city is lower for workers with only a high school degree than for high-skilled workers.74 But this can only be a part of the reason. There is a wage premium for low-skilled workers too. According to websites that post salaries online, a Starbucks barista makes about $12 an hour in Boston and $9 in Boise.75 This is less than the gains for high-skilled workers, but still not negligible (and, in addition, in Boston they get to have an attitude).
However, precisely because there is such demand from the growing numbers of high-skilled workers, housing costs have exploded in Palo Alto and Cambridge and other similar places. A lawyer and a janitor would both earn much more in New York than in the Deep South, although the difference between the wages in New York and in the Deep South would be higher for the lawyer (45 percent) than for the janitor (32 percent). But housing costs are only 21 percent of a lawyer’s wages in New York, while they are 52 percent of a janitor’s. As a result, the real wage after subtracting the cost of living is indeed much higher for the lawyer in New York than in the Deep South (37 percent), but the opposite is true for the janitor (he would make 6 percent more in the Deep South). It makes no sense for a janitor to move to New York.76
The Mission District in San Francisco has become a symbol of this phenomenon. Until the late 1990s, the Mission District was a working-class neighborhood dominated by recent Hispanic immigrants, but its location made it attractive to the young workers of the tech industry. Average rents for one-bedroom apartments have been going up steeply, from $1,900 in 2011 to $2,675 in 2013 and $3,250 in 2014.77 Today, the average rent of an apartment in the Mission District puts it entirely out of reach for someone earning minimum wage.78 The “Mission yuppie eradication project,” a last-ditch effort to drive tech workers away by vandalizing their cars, drew considerable attention to the gentrification of the Mission District, but ultimately was doomed.79
Of course, more houses can be built near booming cities, but it takes time. Moreover, many of the older cities in the United States have zoning regulations designed to make it hard to build up or build densely. Buildings cannot be very different from what exists, property lots have to be a minimum size, and so on. This makes it harder to transition to high-density neighborhoods when housing demand goes up. As in the developing world, this presents the new migrant with a rather dire set of choices: live far away from work or pay through the nose.80
Recent growth in the United States has been concentrated in locations with strong educational institutions. These places also tend to be the older cities with expensive and hard-to-expand stocks of real estate. Many are also more “European” cities, which tend to have stronger incentives to preserve their historical endowment against the forces of development, and hence have restrictive zoning regulations and high rents. This might be one reason why the average American is not moving to where the growth is happening.
If a worker loses his job because his region is hit by an economic downturn, and he contemplates moving to get a job elsewhere, the real estate question gets even more complicated. As long as he has his house, even if its resale value may be very low, at least he can live in it. If he doesn’t own the house, it is still true that he will benefit more from the fall in rents resulting from the meltdown in the local economy than a high-skilled worker, since housing is a larger part of his budget.81 The collapse of the local housing market that typically accompanies a downturn therefore tends to, perversely, keep the poor from going other places.
There are other reasons to stay put even if opportunities are scarce at home and better elsewhere; childcare, for one, is expensive in the United States, due to a combination of strict regulations and lack of public subsidies. For someone with a low-wage job, buying childcare at market price is often out of the question; the only recourse is grandparents or, failing that, other relat
ives or friends. And unless you can get them to come with you, moving is out of the question. This was less of an issue when most women did not work and could provide the childcare, but in today’s world it can be a clincher.
Moreover, the job may not last. Job loss leads to eviction, and then it is hard to get another job if you don’t have an address.82 In such times, family also provides a safety net, both financial and emotional; unemployed young people move back to their parents’ house. Among unemployed men in their prime working age, 67 percent live with their parents or a close relative (up from about 46 percent in 2000).83 It is easy to understand why one might be reluctant to leave that comfort and security behind and move to a different city.
For people who just lost a job in, say, manufacturing after spending most of their career working in their hometown for a single employer, all this is compounded by the trauma of having to start over again. Instead of going from comfortable employment to graceful retirement as many of their fathers did, they are being asked to reset their expectations, move to a town where no one knows them, and start at the bottom of the ladder in a job they never imagined they would have to do. No wonder they’d rather stay put.
THE COMEBACK CITIES TOUR
If it is hard for people to move from distressed areas, why aren’t jobs coming to them? Surely firms could take advantage of the newly available labor force, lower wages, and lower rents in the counties where other firms have closed. This idea has been floated. In December 2017, Steven Case, the billionaire co-founder of AOL, and J. D. Vance, the author of Hillbilly Elegy, a lament for America’s lost heartland, started the investment fund Rise of the Rest. It was funded by some of the best-known billionaires in America (from Jeff Bezos to Eric Schmidt), to invest in states traditionally overlooked by tech investors. A bus tour (the Comeback Cities Tour) took a group of Silicon Valley investors to places like Youngstown and Akron, Ohio; Detroit and Flint, Michigan; and South Bend, Indiana. The fund promoters were quick to point out this was not a social impact fund, but a traditional money-making venture. In the New York Times, when reporting on the trip84 and the fund itself,85 many Silicon Valley investors emphasized the congestion, the insularity, the high cost of living in the Bay Area, and the great opportunities in the “heartland.”
But for all the chatter, there were reasons to be skeptical. The size of the fund was only $150 million—pocket money for people in this group. Bezos backed the venture, but not enough to put Detroit on the shortlist of possible headquarters for Amazon’s HQ2. The hope clearly was to create some excitement, to get some enterprise started, and to start some buzz around the early investors to encourage others. It worked for Harlem, so why not for Akron? Except that Harlem is in land-scarce Manhattan, with all its excitement and its many amenities. The Harlem revival was bound to happen one day. We are less optimistic about Akron (or South Bend or Detroit). It is difficult for those places to provide the kinds of alluring amenities most young affluent people look for these days: nice restaurants, glitzy bars, and cafes where they can buy overpriced espressos from high-minded baristas. In other words, there is a chicken and egg problem: young educated workers will not come unless these amenities exist, but the amenities cannot thrive unless there are enough workers like them around.
In fact, firms in almost every industry tend to be clustered. Suppose you threw darts at random on a map of the United States. You’d find the holes left by the darts to be more or less evenly distributed across the map. But the real map of any given industry looks nothing like that; it looks more as if someone had thrown all the darts in the same place.86 This is probably in part because of reputation; buyers may be suspicious of a software firm in the middle of the cornfields. It would also be hard to recruit workers if every time you needed a new employee you had to persuade someone to move across the country, rather than just poach one from your neighbor. There are also regulatory reasons: zoning laws often try to concentrate dirty industries in one place, and restaurants and bars in another. Finally, people in the same industry often have similar preferences (techies like coffee, financiers show off with expensive bottles of wine). Concentration makes it easier to provide the amenities they like.
Clustering, for all these reasons, makes sense, but it means it is that much harder to start small and grow. Being the one biotech firm in Appalachia is always going to be hard. We hope the Comeback Cities Tour succeeds, but we are not holding our breath (or buying real estate in Detroit).
EISENHOWER AND STALIN
The real migration crisis is not that there is too much international migration. Most of the time, migration comes at no economic cost to the native population, and it delivers some clear benefits to the migrants. The real problem is that people are often unable or unwilling to move, within and outside their country of birth, to take advantage of economic opportunities. Does that suggest that a forward-looking government should reward people who move and perhaps even penalize those who refuse to?
This might sound outlandish, given that the current conversation is mostly focused on how to limit migration, but in the 1950s the governments of the United States, Canada, China, South Africa, and the Soviet Union were all heavily involved in more or less forced relocation policies. Those policies often had unstated but brutal political goals (suppression of troublesome ethnic groups being one), but they tended to be cloaked in the language of modernization, which emphasized the economic deficiencies of traditional economic arrangements. The modernization agenda in developing countries has often taken inspiration from these examples.
There is also a long tradition in developing countries of governments using price and tax policies to benefit the urban sector at the cost of the rural. Many countries in Africa in the 1970s created what they called agricultural marketing boards. This was a cruel joke, since many of the boards were intended to prevent the marketing of produce so the board could buy it at the lowest prices, thereby stabilizing prices for city dwellers. Other countries, like India and China, banned exports of farm products to keep prices where urban consumers wanted them. A by-product of these policies was to make agriculture unprofitable, encouraging people to leave their farms. Of course, these policies hurt the poorest people in the economy, the small farmers and the landless laborers, who may not have had the wherewithal to move.
This unfortunate history should not, however, blind us to the economic rationale for promoting migration. Mobility (internal and international) is a key channel through which standards of living can even out across regions and countries, and regional economic ups and downs can be absorbed. If workers move, they will take advantage of new opportunities and leave regions hit by economic adversity. This is how an economy can absorb crises and adapt to structural transformation.
For those of us (including most economists) who already live in the richer countries and the most successful cities, it seems so obvious that we have it so much better where we are that we assume everyone else would want to come. For economists, the economic magnetism of successful places is largely a good thing. For city dwellers in developing countries or the residents of rich countries, on the other hand, the assumption that the whole world will be drawn to their areas is a scary prospect. They imagine masses of people coming and fighting them for the scarce resources they have, from jobs to spots in public housing to parking spaces. That central concern, that migrants lower wages and employment prospects for natives, is misplaced, but the fear of overcrowding, especially in the half-built cities of the third world, is not entirely unwarranted.
The fear of being overwhelmed is also what gives rise to worries about assimilation. If too many people with a different culture come (from country cousins moving within India to Mexicans settling in the United States), will they assimilate or will they change the culture? Or, for that matter, will they assimilate so well that their culture will vanish, leaving us all with a uniform globalized tasteless blend? A utopia of perfect and instant movement in response to any difference in economic opportunities might
become its own dystopia.
But we are nowhere near such a utopia/dystopia. Far from being irrepressibly attracted by economically successful places, people struggling where they are often prefer to stay home.
This suggests that encouraging migration, both internal and external, should indeed be a policy priority, but that the right way to do it should be not by forcing people or distorting economic incentives, as has been done in the past, but by removing some of the key obstacles.
Streamlining the whole process and communicating it more effectively, so workers have a much better understanding of the costs and rewards of migration, would help. Making it easier for migrants and their households to send money back and forth to each other would also help by making migrants less isolated. Given the outsized fear of failure, offering migrants some insurance against failure would be a possibility. When this was offered in Bangladesh, the effects were almost as large as the effect of offering a bus ticket.87
But the best way to help (and therefore perhaps encourage) migrants while making locals more accepting is probably to ease their integration. Offering housing assistance (rent subsidies?), pre-migration matching to a job, help with childcare arrangements, and so on would ensure that any newcomer quickly finds a place in society. This applies both to internal and international mobility. It would make those who hesitate more likely to make the trip and allow them to become more quickly a part of the normal existing fabric of the host communities. We are almost in the opposite situation now. With the exception of the work done by some organizations to help refugees, nothing is really done to make it easy for someone to adjust. International migrants face a real obstacle course to get the right to work legally. Internal migrants have no place to stay and often struggle to land their first job, even when there seem to be many opportunities.
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