Manager recruits in the industrial Midwest are shunning offers to move to the American south — in part because they’re locked into super-low 30-year mortgages.

A tight labor market that’s allowing workers to stay closer to home, rising housing costs and a post-pandemic shift toward remote or hybrid-work arrangements are making it a challenge for employers to entice managers, according to Andy Challenger, the senior vice president of Challenger, Gray & Christmas Inc., an executive coaching firm.

What’s more, recent data signals the amount saved on potentially lower taxes and costs by moving south is shrinking. All that helps explain why the number of US job seekers who relocated for a new job fell to 1.5% in the fourth quarter last year, the lowest level on record, according to a Challenger survey.

Domenic Calagna, a sales director for a major automotive supplier in Macomb County, Michigan, said he turned down an offer last year to relocate to South Carolina. Recruiters still reach out at least a few times a month, but his family is established in Michigan — plus he’s got a low-interest mortgage.

“The incentive wasn’t significant enough,” he said.

Potential hires paying low-interest mortgages are often reluctant to move unless they’re offered relocation packages that account for the differential in housing costs, said Janet Rivera Jones, founder of Florida-based 5 Star Global Recruitment Partners.

About one-fifth of US homeowners have a mortgage with less than 3% interest, and almost 35% have a rate between 3% and 4%, according to a Bloomberg analysis of Federal Housing Finance Agency mortgage data. Current rates for a fixed, 30-year mortgage are at around 7%, and have more than doubled since hitting their historic lows of 2.85% in December 2020.

“They don’t want to sell that house that they bought for a 2% or 3% interest rate and buy down here at 8%,” Jones said. “Companies have to offer relocation, that is a must.”

At the same time, the cost of worker relocations is on the rise. For mid-level managers, the average US relocation costs have been increasing since 2020, hitting $78,330 for homeowners last year and $33,349 for renters, according to data from ARC Relocation, a consultancy that relocates employees for federal agencies and corporate clients.

“You have to offer relocation, and then it’s still a 50-50 shot that the person will take it,” Jones said. “They don’t want to move at this time.”

Then there’s the matter of pay. The average annual pay for an automotive plant manager in the southeastern US can run from $150,000 to $250,000 in salary, bonuses and other perks, according to Jones. Other managers can earn $120,000 to $130,000 annually, and senior-level managers can make more than $160,000.

But salaries in Michigan for all manager roles are typically around 15% to 20% higher than for comparable roles in the south, she said.

The problem of attracting talent to the US south is being felt most acutely by automakers and suppliers, who are building anew or expanding massive campuses across the region. Companies like Hyundai Motor Co., Kia Corp. and Ford Motor Co. have steered billions of dollars of electric-vehicle-related incentives into building or expanding manufacturing facilities.

Automakers announced $133 billion in EV-related investment alone in the United States between 2018 and 2023 — more than half of which went to southern states, according to the Center for Automotive Research in Ann Arbor, Michigan. The investments have translated into new or expanded electric vehicle and other automotive plants across the region.

To fill entry-level positions at these facilities, recruiters have found local workers. But hiring experienced senior and mid-level managers in the region has been a much steeper challenge.

So they’ve turned to the Midwest, said Alan Amici, the president and chief executive of the Center for Automotive Research.

“You’re going to fish in the pond that has the fish, and the experienced people are generally going to be in the Midwest,” he said.

Michigan led the nation in 2022 with 182,256 motor vehicle and parts manufacturing jobs, versus 28,534 in Georgia, according to the Bureau of Economic Analysis. There were 1.5 times more automotive jobs in the Great Lakes than the southeast, federal data show.

But while automotive employment in the Great Lakes has increased by 6% since 2015, the number of all motor vehicle and parts manufacturing jobs in the southeast has increased by 13% during that time, according to Bureau of Economic Analysis data.

Brad Holden, co-founder of search firm Holden Richardson in Austin, started a new unit specifically to help clients looking for mid-level managers, especially to work at the factory level.

Most of the plant management jobs pay at least $200,000 and the automakers are willing to pay $30,000 or $40,000 more than suppliers, he said.

“The demand is really high. It drives up cost and competition,” Holden said.

This article was provided by Bloomberg News.