MBA RIHA Study: Older Homeowners, College-Educated Individuals More Likely to Leave Workforce After Job Loss

Older college-educated homeowners are two times more likely to leave the workforce after a job loss than renters, according to a new research report released Tuesday by the Mortgage Bankers Association’s Research Institute for Housing America.

The study, Why Are Older Workers Moving Less While Working Longer?, also found 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. The RIHA study found 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.”

Asquith said the study offers 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.”

The report said 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. Minimal evidence showed 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, RIHA Executive Director and MBA Associate Vice President of Housing Economics. “Policymakers need to remember that geography and education influence how individuals respond to disruptions to their jobs, income, and housing wealth.”

Key Findings of Why Are Older Workers Moving Less While Working Longer?:

• In response to a job displacement, homeowners are substantially more likely than renters to retire or leave the labor force.
• Homeowners are less likely than renters to move after a job displacement.
• There is minimal evidence that older workers increase their labor force participation or decrease their retirement likelihood in response to changes in housing wealth.
• College-educated and non-college educated workers appear to react very differently to income and housing wealth shocks by their homeownership status.
  • College-educated homeowners are two times more likely to leave the workforce after a job loss than renters.  
  • All college-educated workers are more likely to move in response to income and wealth shocks than non-college educated workers.
• Older workers’ labor force participation has increased while their migration has decreased because of composition effects – different subgroups react in opposite ways to the same shock.
  • A particularly strong negative migration response among non-college educated homeowners (about 57% of the sample) and a particularly strong positive labor force participation response by college-educated renters (just 3% of the sample) to the same shock helps create an aggregate impression of migration declining while labor force participation weakly increases.

RIHA is a 501(c)(3) trust fund. Its chief purpose is to encourage and assist – through grants to distinguished scholars and subject matter experts, educational institutions, research facilities and government organizations – establishment of a broader-based knowledge of mortgage banking and real estate finance. Additional studies can be found at the RIHA website: http://www.housingamerica.org.