Encouraging labor market mobility among job seekers can be counterproductive

Regional employment disparities are the cause of a wide range of policy interventions. By reducing workers' mobility costs, such policies can reduce geographic mismatch, offset adverse shocks to local labor demand, and thereby improve overall welfare. But despite this attractive prospect and the widespread use of such policies, until now there had been no scientific evidence of their intended effect.

"Indeed, our research shows that job seekers do indeed respond and start searching and applying for distant jobs," Künn said. "But what it also shows is that this ultimately leads to lower employment and income. This is because many unemployed job seekers never accept a remote job, and so the remote job search is somehow a waste of time that would be better invested in local search."

So what should/could policymakers do to rectify this? "Policymakers should stop offering such programs to all unemployed job seekers. Instead, they should focus more on job seekers who are actually able to find work and willing to accept work in a distant region. In addition, policymakers could improve remote job search assistance, since the research shows that local employment agents at temp agencies seem to be limited in their ability to support job seekers seeking employment in a distant labor market," Künn concludes.