Relocation Subsidies Deserve a Chance

Tuesday, 04 Feb 2014 11:38 AM

 

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The latest Washington policy solution to the problem of the long-term jobless is to pay them to move somewhere else where there are more jobs.
 
It’s been tried in other contexts. For years some cities have been offering homeless people one-way bus tickets out of town. The Bloomberg administration in New York City reportedly went so far as to pay for one-way airfare to Paris or San Juan to send homeless families out of the city.
 
Relocation subsidies are attracting new attention these days not as a response to homelessness, but as a response to unemployment. The chairman of the Senate Republican Conference, John Thune, recently announced plans to offer an amendment to give low-interest loans of up to $10,000 to out-of-work individuals who use the money to move somewhere to start a new job or to look for a job in a place with a lower unemployment rate.
 
“Part of a dynamic, mobile workforce is ensuring that those who have been out of work the longest have the resources to relocate for better job opportunities,” Senator Thune said.
 
A resident scholar at the American Enterprise Institute, Michael Strain, has an article in the Winter 2014 issue of the journal National Affairs calling for subsidies in the forms of grants as well as loans. “Moving is a major investment that requires a fair amount of up-front cash,” he writes. “Many of the long-term unemployed just don't have the money and don't have much access to credit.”
 
Mr. Strain’s article makes the case that the relocation subsidies may help even those who don’t end up moving: “If a significant number of unemployed workers leave a city, then the odds of landing a job go up for those who stay, because there are fewer job applicants for every vacancy.”
 
Strain’s idea has the attention of his boss, AEI president Arthur Brooks, who mentioned it favorably in his own article in the February issue of Commentary. “Obviously, not everyone will pick up and move, however generous the voucher. But at a time when economic conditions vary wildly between regions, the opportunity is a powerful one,” Mr. Brooks wrote.
 
“Thousands of low-income families would probably prefer to pursue hope and prosperity in booming states such as North Dakota (where unemployment sits at 2.6 percent) than continue cashing government checks and despairing in, say, Michigan (8.7 percent) or Rhode Island (9.0 percent),” Brooks said.
 
There are plenty of reasons to be skeptical of these ideas.
 
Those skeptical of government spending can point out that people move to places with better employment prospects all the time, even without government subsidies. Others may worry about the dislocating effects on people who leave their families and friends behind far away in pursuit of a job.
 
Structuring the subsidy as a loan, as Sen. Thune’s amendment does, runs the risk of saddling individuals already loaded with debt with even more of it. A 1981 evaluation of a 1976 federal relocation assistance program found that some program participants, those who moved and then couldn’t find a job even in their new home, were disappointed.
 
The subsidies may encourage people to move to places that appear to be full of jobs at one moment — like Las Vegas in 2005 or Wall Street in 2007 — but are actually about to crash.
 
Mr. Strain, who has a Ph.D. in economics from Cornell and who moved from Ithaca, N.Y., to Washington, D.C. to join the center-right American Enterprise Institute, wrote to me in an email responding to my skeptical questions: “Skepticism is important! As a conservative, I am skeptical of new policy innovations, too. But this is such a serious problem that something must be done, and it seems to me that going with reasonable, prudent measures is the proper course.”
 
If federal moving vouchers are to catch on anywhere, America may be the place for it. So many of our forefathers moved here from foreign lands in part for economic opportunity, and after arriving, they or their descendants often moved again. It may not be clear if this is a good idea or a bad one until after it’s tried on a limited scale and evaluated. But it sure is newsworthy.
 
Ira Stoll is editor of FutureOfCapitalism.com and author of "JFK, Conservative." Read more reports from Ira Stoll — Click Here Now.
 
 
 

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