I saw an interesting tweet by Joe Weisenthal, discussing the question of what determines interstate migration:
This is the classic chicken and the egg problem—which comes first?
I view this question as an example of the fallacy of composition—what is true for the individual is not always true for the group. I suspect that Weisenthal is correct that when specific people move, they are motivated by the availability of jobs. However, that’s not the entire story. Jobs are also moving to specific states, mostly in the Sun Belt. And that migration is at least partly driven by the ready availability of labor fleeing areas with high housing costs, such as California.
And housing is not the only factor. Illinois is also losing residents, despite housing costs in that state being quite reasonable. Taxes and regulations are also more business-friendly in states like Texas.
When a firm considers where to locate a business, the availability of skilled labor is one important consideration. Suppose that a firm is able to pay lower wages in Texas due to its lower taxes and housing costs. In that case, a firm may decide to locate a new headquarters in the Lone Star State, even before a single new employee has been hired. From the perspective of the individual worker, they see their move as motivated by job availability. But the jobs are available precisely because employers know that there is a large inflow of workers into states like Texas, motivated by low housing costs and taxes.
At the aggregate level, it probably makes more sense to think in terms of employers following the workers—moving to where there is a large pool of workers willing to take jobs at a reasonable salary. But at the individual level it is often the case that the worker is following the employer, moving to where the jobs are.
As is often the case in economics, it is an equilibrium phenomenon. For instance, shoppers often like to visit an area that has a half dozen car dealers in close proximity so that they can compare several different models. Car dealers like to locate their dealership next to other dealers because they know these areas have plenty of shoppers for new cars.
Are the dealers drawing the shoppers? Or are the shoppers drawing the dealers? In equilibrium, the answer is “both”.
READER COMMENTS
Matthias
May 24 2025 at 7:10am
Perhaps an analogy from chemistry makes sense.
Look at a typical chemical reaction like 2*H2 + O2 => 2 * H2O. We use a directed arrow, but in reality, the reaction occurs in both directions. It’s just that for this reaction under normal conditions, the right side is very much energetically preferred. (If you increase the temperature a lot, like well above 1,000C, you see our example reaction go in the ‘backwards’ direction more often.)
Now in our economic example, a few people are always moving between states. Both from Texas to California and from California to Texas (and to and fro all the other places).
I don’t know whether those people are lining up jobs first or not. As Scott suggested, it doesn’t really matter in the aggregate.
At the moment, it seems like moving from California to Texas is the ‘energetically’ preferred way. But the reverse still happens. Just with much fewer people.
As California becomes less attractive, more people will move to Texas. Even if nothing changes in the Texas job market. I guess you can think of it as average Californians gradually lowering their standards of what job they’d accept in Texas. At the extreme end, look at would-be undocumented migrants who are willing to accept extremely crappy jobs (that they haven’t even secured up-front before upping sticks) just to escape even worse places.
Craig
May 24 2025 at 9:59am
Of note is remote because while the trend is back towards RTO that class brings jobS, [plural emphasized!] with them. Secondly more than a few can simply bank out and live mortgage free so they don’t have to show employment to qualify for a mortgage. Of course some can buy a second home before moving, slide into it and then sell or possibly rent the first one. Banks give better interest rates to those buying a home that will be your primary residence but you’d still be qualifying for that mortgage based on employment in city you’re moving from.
David S
May 25 2025 at 10:05am
Another sign of a healthy housing market is a drop in the sale price or rent value of older and decrepit homes. This phenomenon is so rare in the U.S. that we have several generations of homeowners who are convinced that their home value should always be trending upward at a pace that exceeds inflation. Florida, which is a large and robust real estate market, has been seeing some corrective price declines. Some media sources point to this and say: “Florida is doomed, doomed!” without realizing that market forces are actually working.
Andrew_FL
May 27 2025 at 12:09pm
Weisenthal also ignores that movers may be retirees who are indirectly moving away due to high housing costs because they can’t afford their increased property taxes. They don’t need work lined up for them where they’re going.
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