Worker Mobility and Exploitation
The other day I commented on an interview with an author who felt that seniors living in RV's and "work camping" were somehow more vulnerable to exploitation.
Imagine a person in a small town with a home and she works in the local factory, really the only major employer in that small town. If she thinks she is getting hosed at work, what can she do? She can certainly quit, but then she likely must sell her house, find a new place to live, move to a new city, etc. Basically, she has high job switching costs and thus probably would have to put up with more cr*p before she would leave. Now imagine our work campers. I once had an employee tell me that I had to treat him well, because he had wheels on his home and could leave any time. And he was right. Work campers, being more mobile, have much lower job switching costs. Economically, this should make them less, rather than more, vulnerable to exploitation.
As a side note, this is one reason (beyond the obvious ones highlighted by the 2008 crash) that I have always thought the government promotion of home ownership was counter-productive. I call this cargo cult economics -- legislators observe that successful people own homes, so therefore pass legislation on the assumption that having people own a home will make them successful. But in fact I think for many classes of workers, home ownership is counter-productive because it reduces their mobility and greatly increases their job switching costs. I personally, between the ages of 24 and 40, had jobs in 7 different cities in pursuit both of opportunity and employment that matched my interests and skills. Had I locked myself into my first location (Baytown, Texas) I can't imagine I would be as well off today.
kidmugsy:
I have found that I can cause consternation on British blogs by suggesting that our government should equalise the tax positions of the owner-occupier and the landlord who lets residential property to tenants. Even people who indulge in endless moaning at the house price rises of recent decades seem to take fright at the idea of equitable treatment of the two sets.
Under our present dispensation, the owner occupier pays no income tax on his imputed rent and pays no capital gains tax when he sells his house at a profit. His "estate" even avoids some inheritance tax if he, or his widow, leaves the house to direct descendants. The landlord, however, is exposed to those taxes, the incidence of which is presumably shared between him and his tenants.
November 17, 2017, 9:41 amtmitsss:
This has been called Reynolds' Law for Glenn Reynolds (Instapundit)
"Reynolds’ Law: “Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.” It’s easy to see why. If people don’t need to defer gratification, work hard, etc., in order to achieve the status they desire, they’ll be less inclined to do those things. The greater the government subsidy, the greater the effect, and the more net harm produced."
http://bit.ly/149gH1L
November 17, 2017, 9:45 amme:
Great point - in addition, the increasing restrictions place on RV camping are counterproductive here, it would be great if we deregulated for greater mobility. It's amazingly hard to find a place to stay with an RV around where I am at, especially if you desire to commute to work
November 17, 2017, 10:11 ammarque2:
I think the home ownership push you cite is caused by slightly different motives. First motive - constituents seem to like the concept so they motivate congresscritters to make ownership easier even if it is detrimental.
Second, long ago housing starts, and the stock market were considered a leading economic indicator so whenever rhere is a downturn congresscritters print money to inflate stocks and start programs to help home builders. Not.realizing if you goose the items in the leading indicator index it makes those components invalid. That would be the cargo cult economics.
November 17, 2017, 11:03 ammarque2:
Landlord also gets breaks home dwellers don't. For instance I can't write off all the interest on my home loan. I need to beat the standard deduction first. Repairs I make to my home are also notmtax deductible. if I took my home and rented it out - all repairs, all interest, all improvements, all taxes, all fees, all services, etc would be tax deductible and I would get to write off depreciation of the property. This is standard business stuff - but it should be obvious to you that the typical homeowner can't do any of these deductions.
In fact everyone would be better off if we traded houses with our neighbors and charged each other rent.
November 17, 2017, 11:21 amkidmugsy:
I was discussing the British situation but it sounds as if US has comparable inequities.
"I can't write off all the interest on my home loan": it's many years since we could write off any of the interest on our owner-occupation mortgage loans in the UK.
"everyone would be better off if we traded houses with our neighbors and charged each other rent." What a wonderful idea. Why don't you?
November 17, 2017, 12:30 pmCapitalistRoader:
As a side note, this is one reason (beyond the obvious ones highlighted by the 2008 crash) that I have always thought the government promotion of home ownership was counter-productive.
Another government housing program that can be counter productive is senior property tax exemptions. In Illinois when the homeowner hits 65 their property tax is frozen. That's really great until the homeowner needs to move to a different house due to age related issues. I urged my parents to move from their two-story house–stairs front and back–20 years ago, when they were in their early-70s. But moving to a patio home w/o stairs would mean starting all over with the property tax exemption, which would have cost them about ten percent of their annual income. Golden handcuffs kept them locked in a dangerous house.
November 18, 2017, 9:29 amConqueror of All Foes Cheese:
I teach a course in state and local government. Early on we discuss what the goal of a local govt should be if it wants to continue indefinitely. Eventually the students arrive at "keep the community a place people want to live bad enough to continue to pay taxes to live there" or some variation.
We then discuss what it takes to reach that goal (generally speaking making it a place that balances four activities [live, work, shop, play] for enough people. The live part is safety in one's home and person (police and fire mostly). The work is to be within 30 minutes or so of places of employment. The shop is to access necessities and desirables. The play is recreational possibilities of all sorts. A decent ground transportation network (both streets and mass transit if a large enough community) is necessary to all four.
We then discuss what happens when any one of these is not delivered well enough (or more than one of course) to satisfy the taxpayers? People leave. Who moves out first? Student invariably say, "the rich" until they think about it. The rich are already insulated from most of the problems. Even in Detroit many rich remained in very nice communities.
They eventually figure it out. The upper-middle 'segment' of the taxpayers leave first. Why? They are more sensitive to the balance. They tend to be aware of the trade-offs. But most importantly, they relatively easily *can* leave. They can sell their house (even a small loss) and go elsewhere. Or they can move and rent or lease elsewhere, either breaking their lease or not.
But what about the lower economic levels? Many of them cannot afford to move, or don't know that they can. They may need 2 months rent deposit up front while losing their current deposit. They have to actually look and find a new place. They may lack lots of things it takes to make moving a realistic choice.
So, for the poor, something like RV communities would actually be preferable to remaining in a declining community, no matter what the reason for the decline is. The general reason, of course, is disappearing employment opportunities."
Maybe the answer is financing good RVs for the poor.
November 18, 2017, 10:02 amDon:
"...I have always thought the government promotion of home ownership was counter-productive."
That depends on which constituency you believe the Pols are serving.
November 18, 2017, 1:53 pmMike McDonald:
I have seriously considered putting my own house into a corporation and paying myself rent. Not being a tax lawyer, it would probably cost me more than I save to set it up in a way that insured that I didn't run afoul of some obscure self dealing tax law. Rental property is a great way to convert income into long term capital gains (US) if you have the aptitude for running rental property business.
November 20, 2017, 7:22 amMilo Minderbinder:
Another problem with the tax freeze is that it makes seniors ambivalent about tax increases. My friend ran for Boro Council in NJ last year. Rising tax rates were one of his issues. The attitude among the 65+ crowd was "Who cares. My taxes aren't going up". Needless to say, he lost.
November 20, 2017, 12:37 pmmlhouse:
The lack of worker mobility is not limited to RV's. There are thousands of jobs that go unfilled because people will not move even 50 miles to take them. The mobility of domestic labor is that limited. Immigrants, on the other hand, have virtually infinite mobility. TO them, what is 50 more miles and since many of these jobs have cheaper living costs they are even more happy to take them.
Instead, our citizens choose to be on welfare rather than work.
November 20, 2017, 7:00 pm