As a policy response to unemployment and structural change, incentives for workers to relocate in search of work have been pushing higher up the policy agenda.
This has been the trend since the World Bank’s 2009 World Development Report, “Reshaping Economic Geography”, which abandoned the longstanding idea that governments should attract firms to sites where labour is abundant, and instead proposed that workers move to sites of job creation.
Worker mobility, spurred by the market forces of labour supply and labour demand, was celebrated as a means to unleash growth by enabling specialisation to flourish.
It follows that when job seekers find themselves living in areas with high unemployment, they are increasingly encouraged to move to places with more job opportunities. Labour mobility reduces labour market frictions and increases the quality of job matches. It also gives workers a wider pool of possible employment options.
The government’s Relocation Assistance to Take Up a Job program, announced earlier this month, embodies this logic. It offers assistance of A$6000 to eligible jobseekers who move to a regional area to take up a job and A$3000 for those moving to a metropolitan area. An additional $3000 is available to support the relocation of families.
To qualify, the new position must require more than 90 minutes travel; if the position is in a different capital city the destination city must have a lower unemployment rate. The funds can be used flexibly - for rental bonds, rental payments, removal costs and travel costs - but penalties apply if the job ends prematurely without an accepted explanation. To be eligible, a jobseeker must be registered with a Job Services Australia provider, have been in receipt of income support for at least 12 months, and be subject to activity test requirements. This programme replaces the under-subscribed 2013 Move 2 Work program.
Good in theory…
There are both practical and theoretical reasons to be wary of relocation as labour market strategy. Practically speaking, relocation is not an option for most job seekers.
The most important issue is the interaction of labour markets and housing markets. In places offering a range of skilled jobs, housing prices and rents are higher than they are in places with fewer jobs and less demand for housing. In places that are shedding jobs (Geelong, for example), house prices will be falling, so job-losers who sell to relocate are likely to absorb capital losses. Renters will face higher rents and difficulty finding suitable accommodation.
Consequently, jobseekers facing a move to a place with higher housing costs often discover they are better off – both financially and socially – by staying put and working in a less skilled and less well-paid job. This was the experience of former textiles workers in Camperdown and Warnambool in the early 1990s, former energy workers in the Latrobe Valley in the 1990s, and former Ansett Airlines workers in Sunbury in 2002.
There are other complications. Job vacancies have different spatial reaches depending on the skill demands – a rocket scientist might operate in a global labour market, a sales manager in a national market, a teacher in an urban market and an office cleaner in a local market. This means, contrary to the new policy, that job opportunities might be plentiful in an occupationally specific labour market, even if that town has a higher overall unemployment rate.
But in less skilled and less well paid occupations employers tend to recruit locally, a practice that makes practical sense. Even for higher skilled jobs, many firms now often recruit for multiple casual and part-time positions, offering reliable full-time work only to the best recruits. It would make no sense to relocate a family for a job that is not guaranteed to last, especially when an unsuccessful match risks draconian penalties.
The social impediments to relocation are no less important: people in relationships may be reluctant to move if the other partner does not wish to leave a career position; those with teenage children are unlikely to wish to be blamed for disrupting their children’s school performance; and those with young children, who rely on others to cope with the everyday emergencies of traffic jams and cancelled trains, are unlikely to risk losing their support networks.
Benefiting the advantaged?
All this means that encouraging relocation is another way of saying that policy will give preference to those who are able to relocate without difficulty - a cohort of younger, skilled and unattached jobseekers; people who are less likely to meet the new program’s eligibility conditions but are more likely to relocate on their own initiative.
The theoretical concerns about relocation policies warrant careful debate. Increasing worker mobility does not increase the total number of jobs in the national economy. What it is likely to do instead is sharpen recruitment, allocating jobs to the most qualified candidates in a larger applicant pool. But this might end up eroding the flexibility of the labour market as employers respond by demanding more exact skill set portfolios.
What relocation-led employment policies do not consider is the long-term implications of encouraging an exodus of skilled workers from lagging regions into already-crowded centres.