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Labor Economics #2 - Labor Mobility

Labor Economics #2 - Labor Mobility
by Alex Merced

 There is usually a decent job somewhere out there waiting, but the ability for someone to take advatage of that oppotunity also has to do with their willingness and ability to move to where the job is located. Like all capital, labor can be mal-invested for many reasons and this problem occurs out of the laborer actions themselves. Capital usally naturally moves to where it's needed, but if it does not in the form of labor or can't it can slowdown growth or a recovery. While many people will always be hesitant to move due to family, friends, and the life they'd leave behind I want to explore how policy can and usally makes this problem well... more problematic.

Problem #1 - Housing

In the US in particular they've made the pursuit of something they like to call an "Ownership Society" where more and more of the population owns homes. Although ownership of the land or house that you live in, can make it quite encumbering to make changes and follow the demand for labor leaving someone stuck in a bad labor market. So while well documented are all the bad loans, derrivatives, etc. from all the housing incentives in the US, less talked about in the media is reduction in mobility caused by pushing for more housing ownership by more and more people.

Problem #2 - Employer Benefits

If your someone who really enjoys the benefits that your current job provides you you may forgoe a better opportunity elsewhere (I guess it wouldn't be better if you didn't choose it). So one thing the government can do to make things worse is to make more and more services that you may have purchased individually intrinsically attached to employment such as what was done with healthcare and retirement in ERISA in 1974. So if legislation and at the time much higher tax brackets cause an overwhelming incentive for employer to take care of you instead of you yourself, then it'd be difficult to cut ties with an employer in order to keep those non-monetary benefits.

Problem #3 - Local Wage Laws and Taxes

Sometimes Labor doesn't need to move where the demand is, the demand can move to where the labor is. A good example of this is where people start web start ups in cupertino cause it's know for having a base of technology oriented labor. Although some businesses may not move their offices or operations to somewhere with a huge supply of labor with certain skills if the taxes are too high or labor laws too penalizing which actually tend to be the places that give labor the kind of government benefits where they wouldn't want to move from (I'm looking at you California), this is a bad combination of mobility reduction.

The interpersonal reasons why one may move or not move somewhere are endless, but government policy can often create harfmful manipulations of these incentives.

Posted Aug 14 2010, 09:12 AM by Alex Merced


Alan Gingles wrote re: Labor Economics #2 - Labor Mobility
on Mon, Aug 16 2010 3:08 AM

I would like to add also that , increasingly , people are buying cars on credit from banks etc. They are not allowed to sell these cars until they have paid the balance , furthermore , there are mechanisms in place in the uk anyway that prevent one from removing ones car from the country. I believe this is to stop international criminals coming here to buy cars on credit and then whisking them off to Romainia or somewhere like that where it is difficult to locate them.