I can’t recall if I’ve mentioned this before, but I have a theory as to a big part of why our economy is still sputtering along, instead of motoring nicely. Â That theory is basically this:
The professional class is mobility impaired.
Not something most people think about, really, but I keep hearing about all these companies with tons of jobs and they can’t find bodies to fill them.
Partly I think it has to do with a lack of qualified people (since we as a society tend to worship entertainment heroes over intellectual ones), but I don’t think, for the most part, that training is the issue.  I think it’s the fact that during the housing bubble, people like me bought houses we could afford.
Wait, what?!
Turns out, not everyone was an idiot & bought a house where the payment was 50% of their take home on the hope that they could flip it in 9 months for an extra $100K. Â Some of us bought a home. Â Problem was, when the bubble burst, my home lost 30% of it’s value. Â Now if I stayed there for 10-15 years, it wouldn’t be a problem. Â I’d have paid down the mortgage enough that I could sell and move on without a profit, but also without bringing anything to the table.
But an opportunity appeared that I couldn’t pass up, and then my son was born, and the realities of personal & temporal economics demanded that my family relocate to Bellevue, WA (it was going to be Los Angeles, but I dodged that bullet!). Â Now I’m lucky, as the rental market in Everett is doing very well, & we contracted with a management company & rented out our house. Â Granted, we can’t demand enough rent to cover the mortgage, but it covers most of it, and we get a nice write off (I reckon this year, I will do well at tax time). Â We also found a very nice place in Bellevue that is just 2 miles from my office, & five from my wife’s. Â So all is good.
Still, a lot of professionals like me are stuck in cities where the housing market tanked hard, jobs vaporized, and they are unable to relocate. Â They can make the payment on the house they own, but they can’t unload it, and they can’t rent it out. Â They can’t chase opportunities, and companies can’t attract talent (except for kids fresh out of college). Â And if they walk away from the mortgage, they trash their credit & risk losing the new job, & many new opportunities (since companies use credit checks nowadays).
I think everyone made a critical error when they focused on helping people stay in their homes that they could not afford, and did nothing for the people who wanted to unload and keep the economy moving by keeping the human capital in motion.
Astute observation I hadn’t considered or heard discussed before.
One observation regarding the young though–they may dodge this pitfall, but they are similarly weighed down by college debt which limits the jobs they feel they can take. Also, because of the size of the unemployment pool, young graduates have trouble finding jobs they are even welcome applying to. Because there are so many unemployed, many professional jobs require 3 or more years of experience. In Tennessee and Virginia, this means unprecedented numbers of law students going solo for one example.
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Which is why employers are still having a hard time filling jobs. College graduates can not replace experienced workers who are leaving. Each company can only afford to have so many fresh faces, and the fewer veterans they have on hand, the fewer fresh faces they can support & train.
Honestly, what I think the government should have done is helped to lessen the credit sting of a short sale or a foreclosure. Really, the short sale is the one way Obama has severely fucked us, in that if your mortgage got bought by Fannie/Freddie, before they will authorize the servicing bank to do a short sale, you have to miss one mortgage payment. The kicker – if you miss one payment, your credit is almost as trashed as if you foreclose. Banks who still hold the mortgage will happily discuss a short sale prior to any missed payments.
In the NPR link I included in the OP, they talk about how each mortgage has an escape clause for the home owner, i.e. they can hand the property back over to the bank. Of course, as a private person, you do that, you get to suffer bad credit for a few years, and no mortgage for you for 7 years. I often wonder, what kinds of penalties do businesses that default face? I’m sure they take a credit hit, but is it as severe as a homeowner who forecloses?
You are right, it’s not a thing that gets discussed a lot. But I do vaguely remember something about it a year or two ago. And I think there are two related ideas here. Physical immobility, of the “locked into place” sort that you describe, which is a real issue (that could be addressed with policy / legal changes), and a “psychological immobility,” where people are unable to accept that mobility is a two way street, and they might need to back up for a while before heading in a new direction, so they lock themselves into a situation because they cannot accept a reduction in status, trading a some lower income for increased security, or a moving to a lower status job even if it’ll pay the bills. Failure isn’t painful enough to really fight hard to avoid it, and taking risks is not properly rewarded. for example, right now, apple farmers desperately need pickers, but people would rather hunker down here, west of the mountains, drawing unemployment, than take a bus back there with a dozen unemployed friends and work their butts off there for the next two weeks.
The problems you describe every time the government intervenes in the free market trying to achieve some sort of “social justice” goals, by distorting the true costs of things.