Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them. - Laurence J. Peter

Thursday, January 29, 2009

Home ownership and labor mobility: a trade-off

Governments tend to promote/subsidize home ownership. Why? Rourke O'Brien and David Newville write in the Washington Post (January 11, 2009):
Studies have shown that families who own their own homes are more likely to be involved in their communities, to report higher satisfaction with their lives, and to vote. Homeownership also has positive impacts on children, such as increased high school graduation rates, fewer behavioral problems and better job outcomes after school, and these effects have been found to be strongest among low-income homeowners.
Citation needed, but ok...
What's more, homeownership has been and will continue to be the single biggest source of wealth for low- and moderate-income families. Even if housing prices don't rise much, the forced saving that comes from paying down a mortgage can help families build equity that can then be leveraged to finance a child's education, provide financial security in retirement or pass wealth on to the next generation.
"Even if housing prices don't rise much"? What if they fall by 40%?

We should consider the costs of promoting home ownership too. Arguably, it contributed to an enormous financial crisis. (Note: don't believe that explanation - or any other explanation of the financial crisis - unless you have a good reason to think you're better at economics than Nobel Prize-winning economists, because Nobel Prize-winning economists disagree on this.)

Also, home ownership reduces labor mobility, as Will Wilkinson points out. And with a labor force more heterogenous than ever before*, America needs labor mobility more than ever.

Maybe governments should pursue policies that promote labor mobility. (Or maybe governments should leave people the hell alone.) One downside to that might be that labor might mobilize itself to some other country (say, to Taiwan - it's a great place to do business), or even to some still further frontier.

*That is, the skills of the labor force are more specialized than before. Fifty years ago America had more factory jobs than it does now. My understanding is that one high school dropout could work in one factory about as capably as another factory. But you can't easily switch from being a website developer to a biotech engineer, or whatever it is people are doing in America these days.


Post a Comment

<< Home