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Home Publications Blogs Beat the Press Homeownership Also Discourages Workers from Moving to Get Jobs

Homeownership Also Discourages Workers from Moving to Get Jobs

Monday, 23 May 2011 04:58

The Washington Post reports that Portugal is changing its rent control laws at the insistence of the European Union and the IMF because they impede the movement of workers looking for new jobs. While there can be cases in which workers will be reluctant to give up a rent-controlled unit in order to get a job in another city where they will have to pay higher rent, homeownership also can pose the same obstacle to moving.

If there is a price to rent (annual) ratio of 15 to 1, and sale costs average 6-7 percent of the house price, then a worker moving to a new city can basically expect to give up a year's worth of rent to cover the cost of the move.

This article also includes the assertion that employment protection legislation, that prevents employers from firing workers at will, impedes growth. Actually, there has been considerable research on this topic and most of it suggests that these measures have little impact on employment and growth.

Comments (9)Add Comment
Employment Protection
written by Bill Turner, May 23, 2011 6:46
Hey Dean,

I really like it when you present information that disputes what is being said. There is no question of your integrity, but it would be nice if you could cite research when you make an assertion, as in this case. It would help me when I discuss the issues with others. Besides, it just makes the arguments more credible.
written by PeonInChief, May 23, 2011 8:28
The rent control laws go back to 1910, so it's back to the 19th century.
Other impediments
written by Jeff Z, May 23, 2011 8:38
There is also the difference between "hard rent control" which strictly caps rents by imposing a price ceiling, and "soft rent control" which limits the amount by which a landlord can increase rent each year.

A worker's social network can also be an impediment to a new job in a new city. Family, friends, church, etc. are usually localized. A worker can build a new network in a new city, but it takes time.

It would also seem that the type of job might make difference. Can welders, production line workers, etc. find jobs on Monster.com or Careerbuilder.com? In any event, there is the typical search costs that are involved.
written by PeonInChief, May 23, 2011 12:45
Yes, Jeff Z, it's as though the entire being of the worker is to be a cog in the productive machinery, and that things like lives don't matter much. Sometimes people do move for better jobs, and give up rent-controlled apartments in the process, but eliminating rent control won't make it more likely that people will move. It will, however, make landlords richer.
Worker Mobility
written by Jeff Z, May 23, 2011 1:06

Who Wants to Move Just to Find Work?
written by Hugh Sansom, May 23, 2011 2:55
Unless a person is already in a given place for purposes of work alone, why would any person move solely to take work elsewhere? If it's a better job, more attractive location, close to family — fine. But how many want to move for no other reason than to find a job. Even cultural nomads live within a comparatively well-defined area. Humans are not migratory. So, a house or a very good rental might provide incentive to stay, or disincentive to leave, but unless we're already down on our luck, we are probably in a location that we have chosen. Thus there is always going to be a hurdle for workers that smaller, if it exists at all, for those firms that can move production easily. And if the picture is filled out (companies moving to lower-wage regions, the unequal distribution of firm profits, etc.), the picture for workers is even gloomier.
written by denny, May 23, 2011 7:55
They would like a society of people that will move from one impersonal white box to another to another, away from the support of extended family and long-term friends, uprooting their children, never able to plant a tree and see it grow, never becoming part of the communities in which they live. Who could ever think this is a good thing?
written by Michael, May 24, 2011 5:25
I also would love to see the backup for this: "Actually, there has been considerable research on this topic and most of it suggests that these measures have little impact on employment and growth." It makes discussing it a lot easier when we have the documentation and the actual studies to back it and you up online casino
This has certainly been true in my case
written by Eat the Babies, May 24, 2011 8:30
I expect to sell my house very shortly, but owning one made me very reluctant to look for work outside of Philadelphia

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.