It's no secret that inflation has become a major challenge for the global economy in recent years. This is causing increased migration and hitting the job market – people are finding it harder to afford housing as the cost of living continues to rise.

This causes workers to leave the areas where housing is very expensiveleaving entire regions struggling to maintain their workforce. The situation is creating a vicious circle, especially in some parts of the United States, where the unemployment rate has risen because the cost of living is simply too high.

Related: The US is in a Housing Crisis – Here's how to fix it

Inflation and Unemployment: Explosive Dynamics

Some parts of the United States are currently experiencing high inflation, where the cost of necessities, especially housing, is very high. INTER the most affected The states are Florida, Tennessee and South Carolina, with inflation rates between 3.6% and 4% per year. Inflation in these and other states escalates the cost of essential goods and services and reduces the purchasing power of workers, making certain regions financially unsustainable to live in. For example, 2023 research showed that Florida residents have “paid premiums on both the housing price and rental price sides,” ranging from 5% to 6%.

This increase in prices can be explained by factors such as increased demand from population influx, limited housing supply and increased construction costs. Ironically, the result high cost of living it is prompting many residents to move to more affordable areas, leading to an exodus of the workforce. This trend is mirrored nationally, with the number of people moving between states increasing from nearly 7.9 million in 2021 to approximately 8.2 million in 2022. according to the US Census Bureau. The dynamic continues to reshape the national labor market, intensifying labor shortages in high-cost states.

Some of the more common implications include reduced labor availability and an economic slowdown. Due to the withdrawal of skilled workers, the availability of labor has decreased and businesses and companies struggle to fill various vacancies. This leads to critical skills shortages and reduced productivity within industries that require specialized skills or training.

This change also creates a barrier for people seeking to migrate to the affected states for employment purposes and employment opportunities are reduced in these regions. After all, the housing market crisis not only drives away existing residents – it also prevents unemployed individuals from moving to areas with better job prospects.

High housing costs and a lack of affordable accommodation make it financially impossible for job seekers to move to regions where employment opportunities are abundant and even higher wages do not offset the costs associated with finding accommodation in a new country. or the last report clearly shows that the US is facing an acute shortage of affordable housing for people at all income levels. This obstacle worsens unemployment rates.

Meanwhile, local economies in hyperinflationary states suffer from labor shortages and take a hit that creates a ripple effect throughout entire communities. Reduced tax revenue leads to cuts in essential public services such as education, health care and infrastructure maintenance. This decline in public amenities makes the affected regions even less attractive to both residents and potential investors, perpetuating the cycle of economic decline and prompting more people to move to other areas.

Related: Here's how much you need to earn to buy a home in the US: The report

Addressing the Housing Crisis: The Roles of Business and Local Government

To effectively address the challenges posed by inflation and labor attrition, we may need to rely on unorthodox solutions that may seem economically counterintuitive, but are essential to the revitalization of affected regions. A sustainable approach to combat this challenge is to develop affordable housing options.

Some of the strategies that can mitigate the problem include low-rise building programs, which are more often found in suburban and residential areas. This initiative can be strengthened through other incentives. For example, governments can provide tax incentives or subsidies to developers who build affordable housing within these low-rise projects. Or, by advocating for the construction of budget-friendly residential buildings, families can be given the opportunity to relocate in search of work.

Another effective strategy is to provide financial incentives directly to job seekers willing to relocate to areas of high unemployment. For example, if a candidate accepts a position in such a region, offering housing subsidies or covering part of their housing costs for a certain period can make the move more financially feasible.

Of course, local governments play a key role in addressing the housing crisis exacerbated by inflation. They have the power to promote affordable housing development through policies such as community development programs, tax abatements and zoning reviews.

Fostering public-private partnerships can also facilitate the construction of affordable housing options. By pooling resources and expertise, government entities and private developers can collaboratively address housing shortages. For example, a city can partner with a private company to convert unused municipal buildings into affordable housing units. The government secures the property or provides zoning incentives, while the developer handles renovation and management.

regulation zoning regulations can further help address housing affordability challenges. Modifying zoning laws to allow higher-density housing will help cities encourage the development of more affordable housing options. In particular, changing zoning codes to allow multifamily units or apartment complexes in areas previously restricted to single-family homes could significantly increase housing supply.

Finally, state governments can work to increase the attractiveness of their region through community development programs to effectively attract new residents and businesses. Investing in local projects, such as improving public services and recreational facilities, highlights the area's potential. Developing community centers or improving transport networks are simple examples. These efforts enrich the living experience for current residents and stimulate economic growth by attracting new talent and investment, which helps mitigate the challenges of inflation and labor attrition.

Of course, the complex nature of labor force exit inflation requires a multidimensional approach to fix the challenge. By embracing innovative construction projects, providing incentives and implementing supportive policies, regions struggling with inflation and unemployment can turn things around.

Addressing the housing crisis head-on and strategically building affordable housing can keep current residents happy and attract new residents, helping to stabilize inflation and jump-start economic growth. Voronkov sums it up with a simple but profound thought: start building affordable housing today, and you'll build a stronger economy tomorrow.