SOUTHWEST AIRLINES SAVES ECONOMY?
Southwest Airlines and the proliferation of nationwide newspapers (like USA TODAY) were a major reason we saw so much economic growth in the 1980s.
So said an economics professor I had in the 1980s.
Airlines had recently been deregulated and Southwest was the first to offer dirt cheap flights – that most anyone could afford.
This enabled potential employees to fly to faraway locales for job interviews, after responding to employment ads in the large newspapers.
And that in turn increased incomes and expanded the economy, as employee “mobility” is a key ingredient behind all economic growth.
More importantly, for purposes of this blog, those employees could sell their homes in Michigan or Ohio and still afford to buy new homes in the hot employment centers of the time, including Denver, San Francisco, Los Angeles, and even a reviving NYC. The hot industries included finance, real estate, defense, and retail.
I bring all this up because the WSJ recently published this fascinating article, titled The American Housing Market Is Stifling Mobility.
It was so interesting because the article focused on JVM’s two primary markets (CA and TX) and pointed out that CA is killing itself slowly with its housing policies.
“Migration has always been central to the American story. In the early 19th century, New Englanders left the rocky soil of Massachusetts for the more fertile Ohio River valley. During the Dust Bowl of the 1930s, farmers fled Oklahoma for California. In the early 20th century, millions of African-Americans left the Jim Crow South to find work in the factories of northern cities.”
But now – not so much – and the reason is sky-high housing costs, as we all know.
And the reason housing costs are so high in coastal California is land use and zoning restrictions, as well as environmental restrictions (e.g. Save the Bay) and onerous building codes, as we also know.
CONTRASTING BAY AREA TO HOUSTON
What is interesting though is the contrast between the four Bay Area counties (Marin, San Francisco, San Mateo, and Santa Clara) and Harris County in Texas (where Houston is located).
The Bay Area counties have enormously high average salaries so one would think they would attract large numbers of employees, as they did in years past. They no longer do though because it takes enormous wealth to buy homes in those counties (for example, the median home price in San Jose is now $1.7mm).
In contrast, Harris County, which has 35% less land than the four CA counties, grew 175% faster over the last ten years. And – it is now a hotbed for housing growth AND entrepreneurship. While the Bay Area is an enclave of “insider privilege” given that it was the insiders who pushed through the laws that benefit them at the expense of outsiders.
Anyway, go Houston and look out Bay Area!
And the next time a local activist group or politician proposes regulations that might benefit us in the short run, we might be wise to remember that such policies will make it much harder for our kids to stick around in the long run after they grow up.
I AM GUILTY TOO…
I should finally add that I am very guilty of “NIMBYism” myself as I donated to and supported many causes that were preserving the land around Mt. Diablo in the East Bay region – giving me a giant playground to play in every weekend and pushing up the value of my home near the open space. But – I also unwittingly hurt the local economy by making in-migration far more expensive.
I only wish someone had told me. 😊 (sorry kids)
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