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Development Regulations & Affordable Housing

Business Perspective

Labor Supply

Michael Carliner

Newport Partners LLC

May 22, 2007mcarliner@comcast.net

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Regulations: Impact on Business

Regulations

↓

Housing Supply (Total/Type)

↓

Labor Supply (Total/Type)

↓

Operating Cost (and maybe Revenue)

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Regulations: Impact on Business

Regulations

↓Housing Supply (Total/Type)

↓

Migration

↓

Metro Area Labor Supply (Total/Type)

↓

Operating Cost (and maybe Revenue)

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Measuring Labor Supply

• Wage Rates

• Benefits

• Vacancies

• Costs for Recruitment, Training, etc

• Productivity

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Measuring Labor Supply: Wages

Workers care about real wages (adj for cost of living/housing)

For employers, nominal wages are real cost

• Wages are higher in high-cost areasMix Effect? Different Occupations,Skills (some unquantified)

• For high-skill jobs, probably higher productivity

• But what about other jobs?

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Measuring Labor Supply: Vacancies

Job Opening and Labor Turnover Survey (JOLTS)

• Beginning December 2000

• National Data by Major Industry, Regions (4) Total Only

• Monthly Data Collected :

Total Employment

Job Openings (must be Vacant, Advertised, Immediate)

Hires (added to payroll during month)

Quits

Layoff/Discharges

Other Separations

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Measuring Labor Supply: Vacancies

Job Opening and Labor Turnover Survey (JOLTS)

• Interpretation/Analysis Still Preliminary—What does it mean?

Many hires occur without vacancy

Some industries always show high/low vacancies—not related to turnover or expansion

No information by occupation, wage level

Relationship to Unemployment Rate—Beveridge Curve

• Housing vacancy and search/match literature provides models for further analysis

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Beveridge Curve: National 2001-2007

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5

6

7

1.5 2 2.5 3 3.5Job Vacancy Rate

Une

mpl

oym

ent

Rat

e

'05

'04

'01

'02

'03

'06

'07

BLS CPS (Unemployment) and JOLTS (Vacancy). Values for 2007 based on Jan-Mar SA average

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Beveridge Curve: Regions 2001-2007

4

5

6

7

1.5 2 2.5 3 3.5

Job Vacancy Rate

Une

mpl

oym

ent

Rat

e

Northeast Midwest

South West

YTD 2007 is lighter color

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Measuring Labor Supply: Overdue

Lots of data measuring ability of people to find jobs, little about ability of employers to find workers. Big question for the future—not just because of affordable housing.

Impending, dramatic slowdown in U.S. labor supply growth

Like U.S., many other countries adding job vacancy surveys.

JOLTS doesn’t measure all dimensions of vacancies

Other symptoms (e.g. recruitment/training costs) not quantified

• JOLTS sample includes:

16,000 Establishments (Universe = 8 million)

12 million employees

So why no local data?

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Determinants of Labor Supply

Adjustment to Change in Labor Demand:

• Participation Rate

• Employment/Unemployment Rate

• Inter-area Commuting

• NET MIGRATION

– Blanchard-Katz (1992) “Dominant adjustment mechanism is labor mobility.” “By 5 to 7 years, the employment response [to a demand shock] consists entirely of the migration of workers.”

– Bartik (1993) “Migrants’ long-run share of the new jobs is 60% to 90%”

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What Drives Migration?

•Wages

•Employment/Unemployment

•Cost of Living/Housing

•Quality of Life

Inmigration Drivers ≠ Outmigration Drivers

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Migration Models

Equilibrium Models

• Net Migration Incentives Eliminated

• House Prices Adjust

• Nominal Wages Adjust

• Unemployment Differences Persist

Disequilibrium Models

• Migration Flows Respond to Labor Demand

• Housing Supply Adjusts

• Unemployment Deviations Short-lived

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Housing in Migration Models

Housing supply/cost often ignored or insignificant

Housing Measurement/Specification Problems:• Collinear with Quality of Life

• Inadequate local quality-adjusted data

• Proper housing cost measure? Rent Price Price/Income User Cost

• Marginal (Mover) vs Average (Nonmover)

• States/Regions aren’t Housing/Labor Markets

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Migration Studies & Housing

• More Studies in Europe than U.S.

• Housing Effects Greater for Inmigration than Outmigration

• Effects may be Greater for Less Educated/Skilled/Wealthy

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U.S. Migration: Berger & Blomquist 1992

• County-level Migration 1975-1980

• Individual probability of

– Moving from county

– Choosing destination County

• Demograhics, Wages, Qual-Adj Rents, QOL

• Rents not significant in decision to move out,

• Rent effect highly-significant on choice of destination

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U.S. Migration: Potepan 1994

• MSA Migration 1975-1980

• Total Inmigration and Outmigration for 52 Metros

• Income, Employment Growth, Unemployment Rate, Climate, Pollution, Non-housing Cost of Living, Hedonic House Price

• Employment had only Significant Coefficients

• House price effect appears greater on inmigration than outmigration, but neither statistically significant (a point that Potepan seems to ignore)

• QOL Adjustments May Have Been Inadequate

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U.S. Migration: Gabriel et. al. (1992)

• Census Division Migration 1980-81, 1986-87

• Tried several house price measures:

Average New Home

Average Existing Home

Quality-adjusted New Home – Best (Highly Significant)

User Cost (w prior 3 yr chg)

Monthly payment (w QA New Home)

• Other variables: Wage, Urbanization,Education, Unemployment Rate

• House Price more important for Destination than Origin

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U.S. Migration: Frey & Liaw (2005)

• Interstate Migration 1995-2000 – individual records

• Logit model [a] Whether to move [b] Where (if mover)

• House price : Avg of state medians in 1990 and 2000

• Other state variables: Employment Growth, Income, Unemployment Rate, Climate, Foreign Immigration

• Individual Characteristics: Age, Education, Race, Hispanic, Native/Foreign-Born

• House Price significant for Departure, Even More Important for Destination, BUT ONLY FOR NON-COLLEGE-EDUCATED

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Annual Mobility Rates: U.S. vs E.U.

0 5 10 15 20

Italy

Spain

Germany

France

U.K.

Netherlands

E.U.

U.S.

1990s average movers as share of population, from presentation by Gery Coomans to Joint US-EU Sep. 2002 Conference on Labor Markets in 21st Century

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Migration Data: CPS

Residence 1 year ago (and sometimes 5 years ago)

• Movers reported by whether same county, same state, same division, same region, moved from abroad.

• Also, current and previous state

• Previous metro not shown in microdata

• Wide range of demographic and employment data

• Only main reason for move collected

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Primary Reason for Interstate Move

0 10 20 30 40 50 60 70

Other

Housing

Misc Job-related

Seek/Lost Job

New Job

< HS HS Grad Some College BA/BS Grad Degree

Source: March 2006 CPS – Movers in past 12 mos. LIMITED TO THOSE IN LABOR FORCE

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Migration Data: AHS

Asks recent movers:

main and other reasons for leaving previous residence, choosing current residence

length of stay in previous residence

location of previous residence (but answers are not reported)

Asks all households when they moved in

Nothing about work (e.g., no occupation, industry)

Detailed housing costs and characteristics, allowing quality adjustment

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Migration Data: IRS

County-to-County Migration Based on Tax Return Addresses in Successive Years

• Number of returns ( ≈ number of households)

• Number of personal exemptions ( ≈ population)

• Total Adjusted Gross Income

• Median Adjusted Gross Income

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Industry Effects

Vulnerable Industries

Labor Intensive

Non-Profession/Lower-Skilled Jobs

Basic/Export Industries Face Competition From Lower-Cost Metros

Local Service Industries Can’t Move Out, But May Have More Low-Skilled Workers

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Vulnerability: Labor Share & Labor Type

0 20 40 60 80 100 120

Restaurants

Education (Prv)

Administrative Svc

Insurance

Trucking

Computer Manf

Food Manf

Value-Added: % Compensation Jobs: % Production/Support

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Vulnerability: Average Annual Wages

0 10 20 30 40 50 60 70

Restaurants

Education (Prv)

Administrative Svc

Insurance

Trucking

Computer Manf

Food Manf

Average 2005 Wages &Salaries

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General Conclusions

Disproportionate Effects of Regulations on Housing, Migration, Labor Supply for Less Educated, Less-Skilled, Lower-paid Population

Difficult to Measure Labor-Supply Problems

Housing supply and cost issues have greatest effects on potential in-migrants

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Research Directions

Develop/publish (or study through special access) job vacancies at local level

Measure, through surveys, employer perceptions of labor shortages, and relate these to data on wages, vacancies, etc.

Improve models of housing impact on labor force migration (with better quality-adjusted housing cost measures for metro areas)