Migratory Stimulus, Revisited

Remember this post? A few months ago, I was wondering whether heavy migration might not have a stimulative effect sufficient to boost a metropolitan area, and perhaps a regional or national economy, out of recession. The argument was pretty straightforward — people need to be accommodated. Even if everyone is cutting back on spending, introducing a lot of new migrants into an area will support revenues at businesses, increase housing demand, and so on. Eventually this might create investment opportunities, which would create jobs, which would create additional opportunities, setting off a virtuous cycle.

The idea is being tested, according to a piece from the Saturday Wall Street Journal. A handful of metropolitan areas have continued to enjoy net in-migration of educated workers despite deteriorating employment pictures. So what can we expect to see from places with net in-migration, relative to those with net outflows?

It’s a little hard to say. While the Journal seems to have collected recent anecdotes, the data on migration ends with 2007, and subsequent data releases have suggested that migration everywhere in the country has slowed considerably in 2008 and 2009. Reduced numbers of migrants would complicate the fact that the numbers at issue are relatively small compared to the size of the population as a whole. The Journal has Portland importing some 7,000 educated adult workers per year between 2005 and 2007 — into a metropolitan population of 2.2 million. Reduced spending by all Portlanders may swamp the contribution of the few thousand migrants moving in and spending out of savings.

It also seems clear that new migrants have the effect of temporarily depressing the labor market still further. Every new job applicant makes it a little more difficult, in the short term, for current Portlanders to find work at a high wage. In a tight labor market, we’d probably expect the migrant multiplier — a migrant’s new spending and contribution to agglomeration externalities — to outweigh the negative effect on labor markets of an additional worker. In a very slack market, that may not be the case.

So while the Portlands out there will clearly benefit from the addition of new, educated workers once the economy recovers, the effect of this migration during recession is hard to determine. To get a real migratory stimulus, you’d have to have an influx of people large enough to swamp current capacity constraints in housing and retail. That’s almost certainly too much to expect from natural movements alone.

Comments

  1. Dan Miller says:

    Depending on how you define “natural”, a good place to start looking might be Washington DC in the ’30s and ’40s. As I recall (not personally) it grew extremely quickly, especially with the war effort.

  2. Ben Ross says:

    Isn’t the migratory stimulus going to come, if it comes, from migration within metropolitan areas more than migration between areas? If recovery has to wait for the excess supply of exurban McMansions to get soaked up, we have a very long wait indeed. But there is latent demand for transit-oriented living spaces.

    I would imagine the 1919-1920 slump produced a horrible horse-and-buggy oversupply. We got out of it by building automobiles, not restarting the buggy business.

    You could argue (in a twist on Keynes’ famous comment) that we’re lucky that the housing bubble produced mostly worthless buildings. It would be much harder to restart the construction business if all the foreclosed housing units were condos near transit stops.