Britain has become a less mobile nation – why?

Published on Housing, Wealth and Debt, Intergenerational Centre

Donald Trump tells us there are no protesters. He says it so often, he probably believes it. Which is worrying, but also fairly normal. There are stories we hear so often that we simply assume they are true. Here’s one. Our communities are changing ever faster as more and more people move around for work, driven in part by growing economic gaps between richer and poorer places.

That’s the story – and then there’s the reality. In fact we are almost a third less likely to move for work than our predecessors at the turn of the millennium. This is particularly true of the supposedly ever more footloose and fancy free youth. The number of young people (aged 25-34) moving home and starting a new job has fallen from 30,000 in 1997 to 18,000 in 2018.

So why is everyone no-longer heading cross-country for work? There are many potential reasons, going far beyond the economic incentives we focus on in new research, to our family structures and social norms. There can be good reasons that job mobility has fallen, if people are no longer forced to upsticks. And there can be bad reasons, if we’re trapped from taking up opportunities we would like to seize. A look at how our country has changed suggests that economic change, both good and bad, explains part of our tendency to stay put.

 

First the clearly good. Repeating Norman Tebitt’s supposed call to “get on your bike” to find work in the 1980s would be a bad idea politically today, and it wouldn’t make much sense economically either. Ours is a much higher employment country than it was then – over 76 per cent of us are in work. This success reflects both the post-crisis jobs boom and a longer term trend of reduced worklessness. Crucially, recent jobs growth has been strongest in areas that have long lagged behind employment wise – the fastest growth has been in Merseyside and South Yorkshire. The result is a more equal country jobswise. 39 local authorities had employment rates 10 per cent below the national average in 1999. By 2018 this had fallen to 18. While there are still places where a good job is too hard to come by, there are far fewer places where people have to move away to find any job at all.

But moving for work isn’t just about getting a job, it’s often about getting a better job – doing something you’d prefer or earning a higher wage. Ours is a country with big gaps in earnings between places – the typical weekly wage is £670 in Richmond upon Thames but only £360 in Kingston upon Hull. But those gaps have shrunk in recent times, in part as the minimum wage has pushed up earnings at or near the bottom. Of course there are different stories for different groups, with different qualifications or in different industries. But the big picture is smaller earnings and employment gaps across Britain, adding to the picture that labour market incentives to move for a new job have decreased.

But what about beyond the labour market? Here we get to very bad reasons for reduced job mobility – housing. We might expect rents to move in line with earnings in each area. If so rent rises would be annoying, but they wouldn’t impact on financial incentives for people to move for a better paid job. But in fact, rents have risen fastest in areas that have the highest earnings levels – not the fastest earnings growth – rising by almost 90 per cent the among highest paying local authority areas, compared to 70 per cent among the lowest paying. This has reduced the living standards boost that people might receive from moving to higher paying parts of the country – and yes this is about far more than London.

To make this concrete we can provide some (very simplistic) illustrations of how the incentives to move from lower to higher paying places has fallen over time. While moving from a typical paying job in Scarborough to one in Leeds in 1997 might have seen a living standards boost of 29 per cent, today that figure is 4 per cent. Moving from Sunderland to York in 1997 would have meant a 6 per cent boost, today that move would entail a sizeable after-rent earnings fall of 24 per cent fall.

Our analysis focuses on rents, because that is the more likely housing cost faced by young people who move (or not). But rising house price gaps between places, relative to earnings gaps, also lock older and home owning workers out of moving should they wish to do so. Housing shifts may be trapping baby boomers, not just millennials, from moving for work.

These financial incentive shifts do appear to be changing our behaviour. Not only are we moving less for work, but those that are moving are more likely to head somewhere with lower housing costs. That may bring relief via lower costs, but it could also mean a lower paying job, or a longer commute to work. On average we’re spending 12 minutes more a day commuting than we were in the mid-1990s.

So where does that leave us? Fewer people moving for work, which is good news when people are no longer forced to move for any work, but bad news for those trapped by housing costs so that they cannot take up opportunities they would love to seize. The latter problem matters for individuals – the typical pay rise for those moving areas for work is over three times higher than for those who stay in the same job – but it also means lower productivity for the economy as a whole, as fewer people move from low productivity firms to higher productivity ones.

Three lessons for policy makers stand out. First, they should seek to further close earnings and employment gaps. Second, housing is needed in high demand areas so that higher productivity delivers higher living standards not just higher rents. And third – remember to dig deeper to understand our country rather than just believing the stories we’re told.