More houses boosts the economy!

With only a few days to go before the council elections we examine another point that candidates may come up with in defence of more housing. This is that building more houses will boost the economy.

It appears self obvious – you need people to build houses therefore more jobs and the building workers will spend their money in the local economy.

But let’s think about this.

Building houses creates jobs for construction workers – fine but once the houses are built the jobs or in reality the work hours needed to build the houses end. This is a one-off jobs boost. The economy is bigger and the number employed is larger but we have not increased output or incomes per head. [And it assumes that the workers employed are all recruited locally].

But the other issue is that new houses create new jobseekers. On average each new house will contain an extra jobseeker. Therefore new jobs have to be created to meet the needs of the new jobseekers. The end result is ‘more’ jobs but for ‘more’ people so we are no better off.

The ‘extra’ jobs create the illusion that we are developing the economy but all that is happening is that we are playing catch up!


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