According to a new report released by the Mortgage Bankers Association's Research Institute for Housing America (RIHA), older college-educated homeowners are two times more likely to leave the workforce after a job loss than home renters.
Why Are Older Workers Moving Less While Working Longer?, RIHA's report study, also found that college educated workers are more likely to move than those without a degree in response to income and housing wealth shocks.
Since the 1990s, older workers' labor force participation has increased while their migration has decreased, confounding conventional economic wisdom. RIHA's study found that the divergence comes from the fact that homeowners and renters, and those with and without a college degree, respond in opposite ways to disruptions to their wage income and housing wealth appreciation.
"Rising inequality has made looking at subgroups more important, because homeownership, employment, and other outcomes increasingly look very different by education and region," said Brian Asquith, author of the report and an economist at the Upjohn Institute for Employment Research.
"Older homeowners and college-educated individuals are more inclined than renters to retire or leave the workforce after losing their job. Older renters appear to be more reluctant than homeowners to leave the labor force in response to any adverse event, possibly because they are worried about paying for their rents in the future when they expect to be living on a fixed income. Unsurprisingly, this means that older homeowners, particularly those without a college degree, really seem to value having their homes as a bulwark against these same adverse events."
Added Asquith, "This research highlights both opportunities and downsides for the mortgage market. The college-educated share of older Americans is rising, and degree holders have higher homeownership rates. Meanwhile, both an aging population and rising regional inequality in home prices will continue to dampen migration, potentially hurting demand for new mortgages in some areas."
According to the report findings, job displacements from trade shocks and the Great Recession caused an 8% decrease in labor force participation among renters and a 16% decline among homeowners. There was also minimal evidence that older workers increase their labor force participation or decrease their retirement likelihood in response to changes in housing wealth.
"RIHA's study underscores the importance that homeownership and higher education have on financial stability and mobility for older Americans," said Edward Seiler, Executive Director, Research Institute for Housing America, and MBA's Associate Vice President, Housing Economics. "Policymakers need to remember that geography and education influence how individuals respond to disruptions to their jobs, income, and housing wealth."
Key MBA Report Findings: