The Mixed Message Economy

by New Dealer

I often see two contradictory messages in the media about what is ailing our economy and why we have a so-so recovery even in the age of record making corporate profits. Also why unemployment is still relatively high among people of a variety of socio-economic and educational backgrounds. These messages are:

1. Young people (20 and early 30-somethings) are not buying houses and cars at the same levels as previous generations. Previous generations bought houses at a much younger age. The long term mortgages and projects associated with big purchases like house ownership are really what driver the economy. Derek Thompson at the Atlantic is usually a good go to source for this kind of article/theory.
2. People need to move more to take up jobs or just move to find work. Matt Yglesias is a good source for this argument. Other proponents of this argument include people opposed to rent control because low rent ties people to their apartments and they can’t move elsewhere. Also various people with upper-middle class or above lives who like to lecture 20 and 30-somethings who finish their educations during bad economies.

Both these arguments strike me as being paradoxical and contradictory. I suppose in a nation of 300 million people you can have people buying cars and houses and moving to find work but even on their own both arguments are filled with problems. These problems are usually obvious to ordinary people but the chattering classes have a hard time shifting them out. Or the chattering classes choose to ignore the obvious issues because they are more of a social and psychological nature and cannot be addressed in a quantifiable and technocratic way or the policy solution is just too socialist. This essay will attempt to address the obvious problems and come up with possible solutions. Most of which are not very likely to be implemented because of the just too socialist for the United States reason in the previous sentence.

Young People are not Buying Cars and Houses

The argument here is that the American economy for past few decades has largely been robust because of car-ownership and house-ownership. People would finish their educations, start working, and start families within a relatively short time period. This was true for people in most educational backgrounds and socio-economic levels.

I think that one factor that helped with early home ownership was probably job security and a relative likelihood of lifetime employment. Also companies used to help employees relocate. These days are gone. Now young people are likely to go to undergrad in one city, move to another to work for a few years, attend grad school somewhere else, and then settle down after a few more career moves possibly.

than an economic marker or investment. To most people housing signifies if not a sense of permanence than at least a place where they are going to spend the next decade or so. The whole idea of a 30-year mortgage is that people would be in one location for a long time. They are meant to convey a sense of permanence. Not an investment that you build up and flip for some more money. It should be obvious that young people are not going to want to buy houses when they have a distinct place that this location is not going to be where they end up.

I also question whether a nation is economically healthy if economic health is based on successor generations wanting the same status-markers as the previous generations. Perhaps newer adults are just not interested in cars or homes as much as previous generations. An economy should be able to adapt to new generations having different priorities and wants as compared to their parents and grandparents.

People Need to Move

This one vexes me the most because the answers about why people not moving seem to be obvious to everyone but pundits and pundits love to plead ignorance and treat this as a genuine mystery.

First, you can’t have it both ways. If a young person or family just got their first mortgage, they are not likely to want to move for a new job.

Second, the reasons why people do not move are really obvious and rent control is the least among them. The people with really low rents because of rent control are most likely to be older retirees who are too old to move anyway. I live in a rent-controlled apartment but my rent is not low. The people I know with rent-controlled apartments and really low rents moved into their apartments sometime before Woodstock generally. Or maybe by 1980 at the latest.

People do not move readily for jobs because people are more than economic creatures. We are not even primarily economic creatures but psychological and emotional ones. People need support structures of friends and family. This is not just for emotional reasons but economic ones. Local friends or relatives can pinch in when you need to get to work but your child is sick and the babysitters are busy.

I’ve discovered it is generally really hard to make new friends outside of the school setting. This is not a very original revelation. Most people seem to think something like this after they finish their educations and are starting in their careers.

I think it is asking a lot of people that they move to an unfamiliar area without friends or family for the sake of a job or career. Education is slightly different because being a student provides an automatic social structure and companions.

Doing job searching from afar is also very difficult. I know this from personal experience. It takes a very brave person to move to an area for the chance of finding a job especially if they don’t have much in terms of a safety net or savings to live on. A person either needs to be coming from a more horrible situation like being a perpetual outsider in their current area and just wanting to get out of Dodge; or it takes being a kind of person that the media loves to mock. The latter type of person is normally seen as the overly precocious young person who just has to live in “Brooklyn, San Francisco, Portland, Los Angeles,…” or any other cool city you can think of. Whether we like it or not it is that kind of somewhat entitled attitude that is going to get someone to move without a job or plan, just a sheer desire.

Most people need a job to move and most people are stuck in the paradox that they cannot move without a job and that it is very hard to get a job in an area without living there. This is going to cause a lot of people to simply stay put and look for work locally. That this is not obvious to the chattering classes or that the punditry chooses not to address it is revealing. It shows a lack of human imagination and compassion to not see or choose to address what is not technocratic, “rationally” economic, or obvious to everyone else. The other option is that they live in their own bubble and they are truly blind to the plights of those who have never been actively recruited for a job or those who desire a bit more stability in their lives.

SOLUTIONS

The solutions to this to me are simple to come up with but probably impossible to implement.

If you want people to move from their support structures, you need to provide support structures by other means. This means government-subsidized day care including for sick children or you need employee protections that will allow people to take off from work to take care of their children and not worry about losing their jobs. You also need equivalent psychological support for single people and that their new job will be relatively secure and not gone a week or two after it started.

If you want people to buy houses at relatively young ages, you need to make every local economy robust and healthy and able to support a wide variety of socio-economic statuses and education levels. You also need job security and that people will not be asked to move in three years or required to do so without aid or support from their employers in relocation.

I’m rather cynical about either of these happening in the immediate future. All I know is that you can have policies that support and encourage community and family or you can have a free for all economy that requires people to move frequently and suddenly for work and career. You cannot have both.