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Is It a Terrible Time to Move?
The amount of the tax is open to question, but it has plausibly been argued that cutting mobility rates in half across the US economy would slice 0.4 percent or so off domestic GDP. While not huge, it is still a sizable number, and another blow to an already reeling US economy.
It doesn't stop there, of course. People locked into their houses probably aren’t any happier or wealthier. They're less likely to spend money on renovations on houses they plan to eventually leave. They may also be less integrated into their community, as they wait in a sort of real estate-induced limbo, neither planning to be locals for a long time nor knowing where they will go if and when real estate markets improve and they can exit their home-cum-prison.
Should we do anything about it? Does it make it any more important to think about modifying US mortgages? Well, for the sake of argument, if poorer labor market matches could lead to as much as a 0.4 percent reduction in GDP, that is about $520 billion, more than has been spent on the TARP bailout plan to date. And that cost comes alongside the many other consequences of a busted real estate business, which we are painfully experiencing today, from foundering banks to messed-up equity markets. These are, in other words, big numbers. So while we have been focused on the cost of having people thrown out of their houses, maybe we need to spend at least a little time worrying about the cost of having them stuck there.
Paul Kedrosky is the editor of Infectious Greed, one of the best known business blogs. He's currently a senior fellow at the Kauffman Foundation, where he is focused on entrepreneurship, innovation, and the future of risk capital. He is also a strategist with Ten Asset Management, a Southern California institutional money management firm.
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Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
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Paul Kedrosky is the editor of the business blog Infectious Greed. He's a senior fellow at the Kauffman Foundation, where he is focused on entrepreneurship, innovation, and the future of risk capital. He is also a strategist with Ten Asset Management, a Southern California institutional-money-management firm.
One thing that might help mitigate this problem is an increase in telecommuting. With video conferencing software and other internet based business apps on the rise, telecommuting seems a more viable option with every passing day. Of course, with some jobs, telecommuting is impossible. But, still, it's a significant factor to consider in this situation.
Wait, I'm confused. On the one hand, money-losing householders are (relatively speaking) less likely to move. On the other hand, householders who are so money-losing that they're upside-down on their mortgages *are* likely to walk away from those mortgages... or, in other words, to move. Those two effects look to me like they at least pull in opposite directions with respect to labor force mobility. Is the walk-away effect negligible in comparison to the other? If so, why mention it? If not, don't the two have to be considered in tandem before we get alarmed about mobility?
In terms of total mobility, the two effects (upside-down/walk-away and money-losers/no sale) may net out to a degree, but the impact on GDP from labor mobility decreases would be largely confined to the latter.
Somebody who is upside-down in the mortgage may not hesitate to walk away from their home and move to accept a new job in a different city, but GDP could be impaired by somebody who declines a new job (where there skills are better utilized) because they'd be selling their residence for a loss.
Comparing the effects in tandem would be necessary if there were a correlation between accepting a new job which requires a move and being upside down in a mortgage.
"Less mobility means worse matches in the labor market-the best person for the job isn't always hired;"
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Whatta steamin' pile of crude!
LESS mobility means actually BETTER matches in the labor market - workers won't be treated as DISPOSABLE by their employers anymore and won't be replaced on a whim by a faraway phony scam artist masquerading as "the best person for the job". Seen way too many honest workers treated as garbage in this phony country of yours.
Thank you.
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