Home owner-jobless link inconclusive
Higher rates of home ownership in New Zealand could cause unemployment to increase, a study has found.
The argument posed by the so-called ‘‘Oswald hypothesis’’ – that home ownership causes higher unemployment – has been researched since it was first raised in the 1980s.
Jacques Poot and Bill Cochrane, of the University of Waikato, have investigated whether the theory holds up in New Zealand, and presented their findings at a Massey University conference in Wellington yesterday.
‘‘[Oswald] is a famous professor from the UK who goes around the world saying home ownership is bad for the labour market. He refers to it as ‘the dark side’,’’ Professor Poot said.
The pair’s research of data from 1986-2006 found a clear correlation between home ownership and higher unemployment. Nationally, a 10 per cent increase in home ownership was linked to a 2.8 per cent rise in the number of unemployed people.
The Oswald theory runs that owning a home means people are less likely to move away to get a job, partly because of the cost of moving, and partly because they are more ‘‘embedded’’ in their community and reluctant to leave their assets. People who rent and can move around have more flexibility in looking for jobs. More of their wealth is accessible, as it is not tied up in property.
However, Prof Poot said he and Dr Cochrane were not arguing that owning a home was not desirable. There were obvious benefits from ownership – such as security and community – which economists did not quantify.
‘‘Owning gives you security. Two phases in my life when I was renting I ended up being told by the landlord, ‘Sorry, we want you to go,’ and that uncertainty makes owning attractive to people.’’
Their research is also unfinished and inconclusive. It supports the Oswald theory but does not prove it. ‘‘All our data is up to 2006, a period when New Zealand had a booming economy, declining unemployment and declining home ownership,’’ Prof Poot said. ‘‘So maybe after all our sophisticated [analysis] we’re still just picking up a simple correlation. Watch this space, because as soon as we’ve got the 2013 [census] data we’re going to recrunch the numbers.’’