Millennials: Where Should You Live If You Want More Financial Security?

Losing your job is never a good thing. But younger workers who live close to their parents are more likely to recover financially from that job loss, according to a new study published by the Federal Reserve Bank of Minneapolis.

The study looked at what we might consider “older millennials,” aged 25-35. It found that the wages of millennials who lose their job while living near their parents will eventually catch back up to the wage level of their peers who never lost their job in the same time period. In contrast, most people who lose jobs tend to have a permanent or long-term loss of income, relative to those with job stability.

“If people who are 25 to 35, who live in the same neighborhood as their parents, lose their job, about 8 to 10 years later, they will be earning about the same amount as if they had not lost their job,” Mike Zabek, a PhD candidate at the University of Michigan and one of the study’s authors, told International Business Times. “If people were living further away from their parents, then they ended up earning substantially less — between $5,000 to $12,000 per year less.”

The benefits of living closer to one’s parents did not apply to older workers, which stands to reason as parents’ networks are more of an asset earlier in life. Importantly, the authors found that the benefit applies to those living in the same census tract (a measure of proximity) and not only those physically living in the same house as their parents. So the study was not just about the economic benefits of crashing on your parents’ couch or living out of your childhood bedroom. The benefit also seemed to drop off very rapidly: When the study authors expanded beyond census tract to look at the same metropolitan area, they found some benefit compared to millennials further-flung from their parents, but nearly as much as those living in the same neighborhood.

“We think that the best explanation for why this happens is that people are able to find better jobs closer to their parents’ homes, essentially,” said Zabek. “There’s something about living close to your mom and dad that brings you better offers for employment. That could just be that they have a professional network, which refers you to new jobs.”

Crucially, however, the study found that this effect did not just apply to those working in the same fields as their parents, benefiting from a direct kind of parental connection to a network. The effect is more generalized, beyond just children who share industries with their parents.

The study found that millennials living close to their parents spent about the same amount of time looking for a new job as those living further away. So the difference in making up their earnings wasn’t about finding a new job faster. Rather, it seems that people living closer to their parents find qualitatively better — or at least, higher paying — jobs.

The significance of the study might seem fairly straightforward: those living close to home tend to have more financial security. But Zabek also believes there are policy implications for how we think about unemployment benefits. While some might be inclined to say that parental support already exists so we don’t need government assistance, he argues instead that a better benefits regime would help people move out of economically depressed areas, which can trap people in the same communities because they don’t want to leave the sense of security their nearby parents provide.

“One perspective might be that since parents will help children after they lose their jobs, we don’t need the government to do that for them,” said Zabek. “If you have a governmental program that is portable, though, so everyone would get assistance that is as good as what they would get from their parents, then people would be more willing to move away. For example, people would be more willing to move away from areas, like southeastern Michigan, that have had a tough time historically because they know that they would have this help in bad times, even if they moved somewhere else.”