People Stay in Communities After Jobs Disappear

Surprisingly (to economists, anyway), even though these communities remain decimated, many people have still refused to leave them. Autor, Dorn and Hanson find that it was only foreign-born workers and native workers ages 25 to 39 who were likely to leave. Everyone else basically stayed, even if the economic rug was pulled out from under them. It contradicts the standard economic model, which says people will rationally move to where better opportunities present themselves.

Why did so many people who lost their jobs stay? It speaks to the power of friends and family and people's identities being intertwined with their communities and former occupations. In short, sociological and psychological complexities that economists traditionally haven't studied. But, Hanson says, there may also be some economic factors at work as well. For example, the housing markets in these places tanked after manufacturing dried up, and that likely left many people underwater on their mortgages. This may have made them reluctant to move and lose what equity they had.

The China Shock saga, Hanson says, seems to be a general story about what happens when a bomb explodes on a community's main industry. The community doesn't just bounce back. Workers don't just shift to new sectors or move to new places. The social fabric of the community gets ripped apart. Destitution, squalor and depression set in.

Autor, Dorn and Hanson draw a direct analogy to what happened to coal-mining towns in the 1980s, after the sinking price of oil and gas led to a catastrophe for the coal industry. "Those coal-mining towns had experiences that were remarkably similar to what happened in former manufacturing towns in the U.S.," Hanson says. "Job loss in one sector translated into lower overall employment rates and social breakdown: families being less likely to form, more kids living with single moms and poverty, and then more drug and alcohol abuse and substance-abuse-related mortality."