Central Banks worry about capital flight – so-called “hot money” leaving a country when investment prospects dry up. The problems in southern Europe seem to be leading to a labor market flight. As might be expected, the most educated are the most mobile. Among the cited reasons for leaving:
“Job insecurity, uncertainty and fear about where Spain is heading, few opportunities for career growth, and the chance to give our daughter a good start in life,”
Labor market mobility as people chase opportunities is an important feature which helps to hold down unemployment. This is one reason why some of the richest countries in Europe have some of the lowest rates of homeownership. It’s an open research question how much the beleaguered housing market is hurting the economic recovery in the United States. Homeowners who can’t sell their homes because the have negative equity are trapped in a given area. Moving and taking on the burden of rent and a mortgage payment for an unlived-in house can be too expensive for many and seems like a bad deal when there’s only the likelihood of getting a job.
Over the next few years we’ll see how many people shift to permanent renters and the effects of this shift in the labor market. There are many papers waiting to be written.