The below is a somewhat random write-up I had about an idea to enable more liquid labor markets and address geographic income inequality. I since have been made aware (and become friends with) the founder + CEO of Placement, which is doing incredible work that most closely addresses the problem I describe below. That said, I still think it’s a cool idea + wanted to share how I thought about a big opportunity, just for fun.
It’s crazy how location can often dictate economic opportunity.
Income inequality is a hot-button issue, as are topics such as workplace pay equality, diversity, etc etc.
Yet even with all this focus on equality of economic opportunity, our society systematically underestimates the impact of geography on economic opportunity.
I went to college at University of Pittsburgh. While running a company in college (that imploded), I met a serial entrepreneur who gave me an opportunity to help run a tiny startup he was spinning up.
The only catch? I had to move to Vegas to build the sales / support / marketing / account management team.
I had no money and knew nobody in Vegas. But made the move because the serial entrepreneur was willing to cover my move + hook me up with housing.
With that experience, I’ve seen firsthand the impact geography can have on career opportunities. And how finances + social concerns (Where will I live? Who will I network with?) keep people from fulfilling their career + economic potential. Had I not had my move to Las Vegas covered, I couldn’t have said yes to the biggest learning experience of my career.
These experiences gave me an idea – why couldn’t a 3rd party fund exist to enable other individuals to move and take advantage of economic opportunity outside their hometowns?
That’s why I’m introducing the concept of the Economic Moving Fund – a fund that helps cover costs (social and financial) for talented individuals and families to move to areas with greater economic opportunity.
Is this really a problem?
Economic opportunity is highly geographically concentrated. Salaries for web developers in San Francisco are ~50% higher than for the same role in Pittsburgh, PA (according to Glassdoor averages). This applies to careers of all sorts, and does not 100% revolve around moving to NYC or San Francisco. On a cost of living adjusted basis, there are career and job mispricings all over the US: in manufacturing, retail, executive positions, manual labor… the list goes on.
Research backs this up. There have been multiple papers on the topic of how economic opportunity is highly concentrated in some areas and not others (tech in Silicon Valley, biotech in Boston, etc), and the career returns to being in a highly productive city continues to grow.
I believe a primary reason many people do not maximize their economic potential is a financial inability to move to economic hubs and take advantage of higher-earning opportunities in a city’s labor market. The average American has very little in the way of savings, and often can’t afford a $3k+ move coupled with 30-60 days of job hunting uncertainty. Even if the expected ROI made such a move WELL worth it, moving is still too large a risk for many talented employees.
As a result, the number of Americans moving between cities and states to chase economic opportunity is at an all time low. When you add the higher cost of living in many cities, it makes a leap of faith even less financially feasible.
As a nation, we are losing out on billions of dollars in lost productivity due to high costs (financial + social) associated with moving. Given this, my proposal is to establish a fund – The Economic Moving fund – that covers the costs associated with moving to a new location, and 2-4 months of living costs while a talented individual chases better economic opportunities.
This fund would have 2 primary functions:
- Provide capital to cover moving expenses and 30-60 days of living expenses in a new place. This grant would likely come out to $6-10k per person, depending on the area moving to.
- Introduce EMF candidates to others who’ve relocated, provide suggestions around housing and living, and provide a professional network as soon as someone hits the ground. Eventually, the EMF could develop a robust alumni network of individuals eager to help others who come to their area.
I believe this combination of social + financial capital would drastically lower the barriers an individual faces when thinking of moving, and make many more Americans open to moving to take advantage of financial opportunities.
Even better, I believe this fund could be self-sustaining, even profitable. I propose these grants come with an income share agreement as part of the arrangement, where individuals would share their higher earnings upside with the EMF.
- Web developer in Des Moines, Iowa makes $65k/yr.
- EMF provides a $10k grant to make the move to San Francisco, and connects them with several recruiters and companies in the area.
- The individual gets hired as a web developer making $85k/yr.
- In this example structure, the EMF could get $5k/yr for 4 years, effectively making 2x their investment in just 4 years.
Additionally, cities, states and companies could be incentivized to work with the EMF to provide additional incentives to get people to move. For example, in Austin, TX (where I currently live), there’s a major shortage of general contractors. I can easily imagine a scenario where a local trade organization (or the city itself) works with the EMF to provide additional incentives – tax breaks, backstopping EMF losses, etc – to get more general contractors to move here.
I believe that providing short-term loans and career support to those looking to chase economic opportunity would have a monumental impact on the US economy, and positively impact GDP. In short, something like the EMF would add a great deal of liquidity to a very illiquid, opaque market that’s currently rife with inequality of access to opportunities. The EMF (or something like it) could substantially change that.