If you hate America and approve of unemployment, buy a house.....

11 May 2013
en route, Singapore to Brisbane

There was a completely fascinating article on the back page of yesterday International Herald Tribune by Floyd Norris, Chief Financial Correspondent of The New York Times. The article was so interesting that I'm going to paraphrase most of it.

Generally, whether Democratic or Republican, American politicians are united in the view that home ownership is good for the country. They have concretely expressed this belief by providing generous tax breaks to home buyers.

Recent research by two economists - David Blanchflower of Dartmouth and Andrew Oswald of the University of Warwick -- concluded that rising levels of home ownership are a precursor to eventual sharp rises in unemployment. Essentially, they are saying that the more homes that are owned, the fewer people will have jobs.

Blanchflower and Oswald are not arguing this because homeowners are more likely to lose jobs than renters are. They do argue, though, that areas with rising levels of home ownership are less likely to be welcoming to innovation and new job creation and to have less labor mobility and longer commutes to work. Oswald said , we find that a high rate of homeownership slowly decimates the labor market'.

The authors of the study found that the five states with the greatest increase in homeownership during the sixty years from 1950 to 2010 had an unemployment rate at the end of the period that was 6.3 percentage points higher than in 1950. Those five states: Alabama, Georgia, Mississippi, South Carolina and West Virginia.

The five states where home ownership went up the least over the period - California, North Dakota, Oregon, Washington and Wisconsin - saw a rise in unemployment of 3.5% over the same six decades.

There are a lot of different issues around these numbers and lots of things influence unemployment rates, not just home ownership. But, and this is important, when the two professors controlled for other variables, the same pattern emerges: more home ownership means higher unemployment. Turn the question around: what about home ownership and employment growth? Same answer, higher home ownership, lower employment growth. Even the 2007 housing market crash are accounted for; the pattern was there before investment banks found a way to drive the economy into a wall.

You would wonder why no one else has notices this but Oswald says that's because the time lags are long. There is data as far back as 1996 which suggests a correlation between home ownership and higher levels of unemployment in Europe as well as the US. Researchers did not dig too deep into the reasons behind these results, they didn't find any evidence to support the notion that unemployment rates for homeowners are lower than for renters.

So, if there is a correlation here, what is it? Well, it may be a fairly mundane explanation but one with profound implications. Homeowners tend to stay put and commute farther and farther to their jobs which creates additional cost and congestion for businesses and workers. Zoning regulations may be another factor; homeowner dominated communities tend to be against new industrial investment - 'not in my back yard'.

In econ-speak, homeownership creates 'negative externalities' for the labor market.

Until the credit crisis I believe that the vast majority of us regarded home ownership as something akin to both a sacred right and a sacred duty. There were lots of positive externalities: Norris points out that realtors were publishing data which showed that homeowners were better educated, there were fewer dropouts amongst the children of homeowners, etc., etc.

Norris' article goes on to suggest that this article has helped the halo of homeownership to slip slightly and may prompt more debate about the mortgage interest deduction. This deduction was described as 'one of the largest tax subsidies in the Internal Revenue Code' by a tax expert in congressional testimony last month.

By the way, the percentage of Americans who own their own homes has dropped since 2006 from 69% to 65% at the end of Q1 this year.


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Sexual Assault Prevention -- the US Air Force

Wednesday - 8 May 2013

Jeffrey Krusinski is a fox. Not the sexy kind, he is an actual, feral, fox. The United States Air Force is the hen house:

Can this be so? The officer in charge of sexual assault prevention programs for the US Air Force, the aforementioned Jeffrey Krusinski, has been arrested and charged with sexual battery.

Late on Sunday evening, just after midnight, Jeffrey, a Lieutenant Colonel and head of sexual assault prevention programs for the Air Force, approached a woman he did not know in a parking lot in Crystal City, near the Pentagon, and grabbed her breasts and buttocks before she fended him off and called 911.

Col. Krusinski has been removed from his job as chief of the sexual assault prevention and response branch. He had been in the job for about two months. What is he going to tell the wife and kids?

There are not many bright spots to this story that I can admit to as a caring, 21st century guy. Not only do I feel bad for Jeffrey's wife and kids, I am very sorry for the woman that Col. Krusinski attacked. Obviously, though, it is a great relief that she was able to fend him off and get help.

Some might try to justify Col. Krusinski's behavior by arguing that he was taking his job seriously; this was field research: know thine enemy, walk a mile in his (or her) shoes, etc.

Could it have been that this was a sort of live fire drill?

I just don't know where to go with this. There are so many, many paths you could take. I invite everyone to send me their best explanation and I'll compile and publish them on my blog.

What I can tell you is that people who don't think Americans either 'get' or 'do' irony are entirely wrong!

I did not read this in 'The Onion'! I read it in the 'International Herald Tribune' which has no visible sense of humor at all.

Also, let me close by saying how disappointed I am in Jeffrey. He let me, and all men, down and he let us down bad! The United States Air Force expects more, deserves more!

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