Worker Mobility Across Regions in New Zealand: The Role of House Prices and the Impact on Earnings

Abstract

This thesis investigates the complex relationship between house prices, geographic worker mobility, and earnings growth within New Zealand. Geographic worker mobility – defined as the movement of workers across regions within a country as they change jobs or seek better employment opportunities – plays a critical role in driving economic activity and social integration. However, the interplay between housing prices and worker mobility remains underexplored in the New Zealand context. This thesis specifically examines how regional house prices influence inter-regional worker mobility and how such mobility affects short-term individual earnings growth. By addressing this gap, the research aims to provide insights into three interconnected questions:

1. In any given year, how many workers move to a different region to take a new job, and how does this geographic mobility vary across different worker characteristics? 2. How do house prices affect inter-regional worker mobility? 3. How does geographic worker mobility influence individual earnings growth in the short run?

The empirical analysis leverages data from Statistics New Zealand’s Integrated Data Infrastructure, which provides a large and de-identified dataset on employment, housing, and demographic trends across regions of New Zealand. The study employs advanced econometric techniques, including gravity models, to analyse worker mobility patterns and their determinants. Between 2000 and 2020, the average geographic worker mobility rate was 4.5 per cent. Analyses of worker demographics reveal that younger workers and those of non-European ethnicity are more likely to relocate compared to other groups. In terms of destination preferences, workers predominantly move to large urbanised regions (e.g., Auckland, Wellington, and Canterbury) or neighbouring regions. These patterns highlight the importance of agglomeration and proximity in shaping inter-regional mobility decisions.

Findings reveal that house price fluctuations significantly impact worker mobility decisions. Higher house prices in the region of origin increase outflows, while higher house prices in destination regions deter inflows. These effects, however, vary considerably across worker demographics. Notably, older workers are more responsive to rising house prices. One possible reason is that they have greater equity in their homes and are more likely to capitalise on higher property values to fund migration. Younger workers, who may have less equity or face higher barriers to relocation, are less affected by changes in house prices.

Worker mobility correlates positively with earnings growth, but outcomes vary. Migrating to large urban regions – particularly those aged 25-29 and 40-54, males, European and Asians – saw faster earnings growth, suggesting urban wage premiums. Conversely, workers leaving large regions experience slower growth, potentially trading earnings for housing affordability or limited high-paying jobs in smaller regions.

This research underscores the importance of integrating housing affordability into regional economic policies and migration strategies. By understanding how house prices influence worker mobility, policymakers can design targeted interventions to support workers affected by housing market challenges while fostering sustainable regional development.