Thursday, Jan 07, 2010
Too much homeownership destroys labour mobility, causes unemployment
Bloomberg: Job Growth Erodes as Housing Bust Pushes Mobility to Record Low
The ability to relocate for employment, which helped the U.S. recover quickly after previous deep recessions, is the latest victim of the housing bust. About 12.5pc of Americans moved in the year ended March 2009, the second-lowest ever; after a 60-year record low of 11.9pc the previous year. Some households are staying put because they owe more on their mortgages than their properties are worth; others have trouble selling houses in depressed areas.
“One of the hallmarks of America’s labor market is a high level of mobility,” said Joseph Stiglitz, a Nobel Prize-winning economist, at a recent economics conference. “We are about to lose that.”
Posted by drewster @ 11:20 AM (700 views) Add Comment
9 Comments
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1. growler said...
... which is a point I made about the UK (to some dissent on here IIRC). If you're in rented, you're even more flexible. The UK home-ownerism binds you to your work and your mortgage. If tha value of the house goes down, the job becomes even more invaluable.
2. drewster said...
To put it in homeownerist terms, we clearly need to build more railways and tube lines so that people don't have to move house.
Where's Mark Wadsworth? He's usually first to jump on articles like this!
3. dbc reed said...
As one of the co-discoverers of the Homeownerism conspiracy, I may be able to anticipate some of MW's comments ,chief amongst them perhaps that Prof Andrew Oswald pointed all this out years ago in a famous "non-technical paper" which pretty well nailed it that homeownership makes labour immobile and so causes unemployment.
It does n't have to be an effect of the Credit Crunch: nobody can afford to move even in the good years from areas that have suffered the shut-down of older traditional industries to places with high-paid work because of the house-price differential. Miners in Yorkshire had been induced to buy their pit cottages then could n't sell them when the industry was butchered.No chance of moving to London where there might be work: work for casuals sharing accommodation but no chance to move families down.The political parties,homeownerist ( or homeonanist in my version) in the extreme ,don't give a stuff.
4. 51ck-6-51x said...
I would agree, although would conjecture that it is not home-ownership per-sé and that minimising the financial cost of moving would minimise such an effect ( yes there would still be the effects of such things as the love of one's current abode, but I think it would be much the same for a rental property; although I don't think this minimisation would necessarily equate the two, as time to sell will no doubt still be greater than average time left on tenancy contract sometimes. )
Of course, as dbc reed points out by example, renting may still be a hedge in the case that one works for one of a relatively low number of local employers.
5. Bigben7826 said...
Yes but why should we have to constantly move to search for work what happened to putting down roots in an area becoming part of a community having stability something sadly lacking in modern society
The destruction of communities brings with iy a host of problems there is nothing desirable in my mind about " labour mobility" becoming some kind of rootless nomad flowing the next job with your boxed up belongings in tow
6. drewster said...
@dbcreed - I remember reading Oswald's paper years ago. That and his Times article (Jan-2003) telling us that house prices had peaked. The paper on labour mobility was very good; but the article on house prices was frightfully wrong!
There are plenty of young Northerners (and Welsh, Scots, Poles, Slovakians...) working in London, living in shared accommodation, with the intention of saving up for a deposit on a house back home. If you're a former miner who owns a house in a depressed area then you're probably stuck; but if you're the son or daughter of a miner, then you're free to move about. Sadly our current tax & benefits system means that young people in former mining towns are more likely to stay put and join the queue for a council house, rather than moving to where the jobs are.
@666 - Minimising the cost of moving would be a good thing, certainly. That still doesn't address the difference in property value though. If you have to move house for work purposes, it implies that there are fewer jobs (and hence lower house prices) in the town you're leaving.
No matter what the question is, LVT is the solution :)
7. 51ck-6-51x said...
drewster, maybe it should* cost one to move to an area with more jobs?
* by 'should' I mean for the most economically efficient economy.
...I have not thought it through logically and know it sounds a little counter intuitive, but something along the lines of it forcing house prices down in the area where there are jobs etc...
I agree that, if we are to have a government and taxation, then we should move towards taxing unproductive use of resources (e.g. LVT); but, as you are no doubt well aware, I think no government and no tax would be better.
8. drewster said...
666 - How would that work? You could impose a super-stamp-duty, e.g. 20% on houses above a certain price level; but all that achieves is to entrench people and prevent labour mobility (the original point of this article). Transaction costs should be as low as possible, surely?
9. 51ck-6-51x said...
drewster said "how would what work?"
- I am not suggesting imposing any extra cost on transactions ( far from it!): I agree minimal transaction costs are best. I was suggesting that if it were left to optimization by free markets that there may end up being a cost to a transaction where one is moving from an area with downward price pressure to an area of upward price pressure (maybe it could be thought of as a kind of natural inertia, or a turbulence between the housing and labour markets?) - that's what I meant by should*; not that we should try to make it so!