#685 – How Bad is the Labor Shortage? Cities Will Pay You to Move There

There isn’t just a shortage of manufacturing labor – other industries are struggling to fill positions as well. Some smaller cities and towns are trying different things to bring people, especially young people, to their communities.

How Bad is the Labor Shortage? Cities Will Pay You to Move There
David Harrison, Shayndi Raice, Wall Street Journal, 30 April 2018

HAMILTON, Ohio—Jobs at the paper mills and safe manufacturers on this stretch of the Great Miami River mostly dried up by the early 2000s, leaving behind closed factories and an abandoned downtown.

Today, a spruced-up waterfront, loft apartments and help-wanted signs give the appearance of economic renewal. All that’s missing are workers—and that has prompted a novel experiment.

Relocate to Hamilton and the city promises $5,000 to help pay student loans. Pack up for Grant County, Ind., and claim $5,000 toward buying a home. Settle in North Platte, Neb., and the chamber of commerce will hold a ceremony in your honor to present an even bigger check.

In this new phase of the U.S. economy, one marked by a shortage of workers rather than jobs, civic leaders in Hamilton and elsewhere are asking themselves: Why not pay people to move here?

The idea has spread where a strong economy, an aging population and an exodus of younger workers have triggered severe labor shortages—often places with very low unemployment rates and higher-than-average wage growth. That’s why small towns across America, instead of offering incentives to employers, such as Amazon.com Inc., are giving it to workers—one by one.

Mike Allgrunn, an economist at the University of South Dakota, calls the financial incentives “a modern-day Homestead Act,” referring to the 1862 law offering public land to settlers willing to move West. A similar deal now stands in Marne, Iowa, where free parcels are available to people who move there.

Some of the relocation programs show promise, but it is a tall order. The pull of opportunity and amenities in large cities is hard to resist.

The 2007-09 recession spurred the movement of young people to big cities, particularly those from rural America. The number of people in prime working years, ages 25 to 54, grew almost 6% in larger metropolitan areas since 2008; it fell in towns and rural areas, and stagnated in smaller cities and suburbs.

Through the first years of the recovery, with jobs still scarce, many places could ignore the shift. With the U.S. economy now fully recovered, smaller communities face a badly shrunken labor force, a condition likely to worsen.

The 4.1% U.S. unemployment rate is at a 17-year-low. Federal Reserve officials forecast 3.6% by next year, which would be the lowest in half a century. Small business ranks labor shortages as the biggest concern for the first time since 2000, the National Federation of Independent Business found.

Having too few workers is a deep threat to communities. If employers can’t fill jobs, they may leave, pushing towns into a downward economic spiral.

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