Sun Belt Luring Young Workers

Today’s young workers, those aged 25 to 34, are much more mobile than previous generations. So where are the young workers going? The answers, based on statistics from …

Today’s young workers, those aged 25 to 34, are much more mobile than previous generations. So where are the young workers going? The answers, based on statistics from U.S. Census data, might surprise investors. While many baby boomers have publicly fled to the Sun Belt, today’s young workers have quietly followed.

Between 2000 and 2006, the population of this demographic in certain cities dropped dramatically—San Francisco lost 28 percent of its young workers, while Pittsburgh lost 29 percent. Detroit lost 20 percent of those aged 25 to 34, a decline perhaps caused by significant workforce reductions in local manufacturing. (Read more about Detroit’s overall population loss in Top 5 Declining U.S. Markets.)

Other cities are also losing this age group in droves: Philadelphia lost 16 percent, while San Jose lost nearly 17 percent. Both coasts are showing decreases: New York City lost 9.3 percent and Boston lost nearly 13 percent, while Los Angeles lost 10.1 percent and Seattle lost 14 percent.

The Midwest isn’t faring much better, with Chicago losing nearly 14 percent of its young workers and Indianapolis nearly 10. So, if this age group isn’t going to the coasts or the Midwest, where are they going?

Like baby boomers, young workers seem to be flocking to the Sun Belt. Of the 40 largest cities in the U.S., only nine have seen gains in the 25 to 34-year-old population. Washington, D.C., with an increase of 2.7 percent between 2000 and 2006, is the only city outside the Sun Belt to have seen a population increase of that age range.

The rest—Phoenix; San Antonio; Austin, Texas; Fort Worth, Texas; Las Vegas; Oklahoma City; Tucson, Ariz. and Albuquerque, N.M.—have all been touted as retirement havens for baby boomers. Apparently the 25 to 34-year-old crowd would like to see some sunshine, too.

For investors in the Sun Belt, particularly in Texas and Arizona, the population shift may be great news. Investing in prime retirement locations is an excellent idea while retirees are plentiful, but eventually the baby boomer population will taper off, potentially leaving retirement-oriented investors in the lurch.

Fortunately, investors can now look forward to renting their investment properties out to a younger population as well. After 25 to 34-year-olds start settling down, they are much less likely to move, according to The Young and the Restless, a study by Impresa Consulting and Coletta & Company.

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“In their mid-20s, [young adults] are…at the peak of their mobility and more likely to move across state lines than at any time in their lives,” according to the study. But once people reach their mid twenties, they typically settle into careers, families and locales. “Once rooted in place, the likelihood of their moving to another state or metropolitan area will decline precipitously,” the study said.

This decline effectively puts cities in competition with each other to attract young workers, who will boost the workforce of the cities in which they settle for the long term. Right now, the Sun Belt is miles ahead of the competition.

Between 1990 and 2000, the top five metros in terms of growth in the 25 to 34-year-old population were Las Vegas—whose growth was nearly double that of any other locale—, Austin, Texas; Phoenix; Atlanta and Raleigh-Durham-Chapel Hill, N.C., according to the study. Three of those cities are still attracting this generation, though the rate of growth has slowed, according to the U.S. Census.

Atlanta has lost nearly 15 percent of its young workers since 2000; however, it appears that this demographic is merely moving out to the surrounding suburbs and rural areas rather than away from Atlanta entirely.

The counties close to Atlanta—Fulton, Cobb, DeKalb and Clayton—all posted losses in the 25 to 34-year-old population, while every surrounding collar county (meaning a county surrounding a larger city) in the greater Atlanta area posted gains from 1 percent all the way up to 47 percent, according to the U.S. Census. (For more information on Atlanta, see Atlanta Lights Up.)

Atlanta has plenty of land surrounding the city to develop outward, which keeps prices low on the outskirts. Low prices attract first-time homebuyers, including many 25 to 34- year-olds, who move to locations they can afford when they are ready to settle down or start a family.

But in Seattle, San Francisco and other places, geographical barriers such as mountains and waterways prevent a significant amount of outward development and effectively drive up real estate prices.

In these cities, prospective first-time homebuyers, who more often than not fall into the 25 to 34-year-old category, typically keep renting or find creative ways of buying real estate, such as buying a property with others as part of a tenants-in-common purchase. In the most expensive markets, mobile young workers may simply move away.

Still, the migrations of the 25 to 34-year-old population comprise only part of the story; certain cities simply have larger shares of the 25 to 34-year-old population than other cities, even when the migrations are taken into account.

New York City, despite having lost 9.3 percent of its young workers, still has the largest number of 25 to 34-year-olds. New York, Los Angeles, Chicago and Houston held the top four spots in terms of the highest percentage of 25 to 34-year-olds in both 2000 and 2006.

The Sun Belt migration is evidenced by the rise of cities such as Mesa, Ariz., which jumped from 44th to 32nd between 2000 and 2006, and Fort Worth, Texas, which rose 10 spots to 18. Typifying the Midwest’s declining young worker population, Cleveland, Ohio, dropped 14 spots to 51.

While in some locales the lack of job growth has caused declines in populations of young workers, in other areas young workers are simply being priced out. Expensive cities such as New York City, Los Angeles, San Jose and San Francisco are losing young workers. This may reflect a growing migration into the outlying areas from the expensive city centers.

Meanwhile, statistics show that young workers favor geographically large cities, such as Mesa, Arizona, where developers can keep prices down simply by spreading out into the surrounding vicinity. This may be of particular note with regard to large metropolises with significant undeveloped land available in outlying areas, such as Atlanta and the Dallas-Fort Worth metroplex.

For a more complete look at population statistics for 25 to 34-year-olds in major U.S. cities, please see our Young Workers Population Growth Chart.


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