New Study Finds Pandemic-Spurred Technologies Lowered Barriers to Exit in High-Cost States

Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Read coverage of this report in the Boston Herald, The Boston Globe, and State House News Service.

BOSTON – Both employers and households will find it easier to leave major job centers as technologies made commonplace by the COVID-19 pandemic have led to a rethinking of the geography of work, according to a new study published by Pioneer Institute.

“The pandemic has changed the calculus on whether telecommuting is worth it, for both employers and workers,” said Andrew Mikula, author of “Barriers to Exit Lowered in High-Cost States as Pandemic-Related Technologies Changed Outlook.”

The study draws on survey data projecting that a third of workers could be permanent telecommuters by the end of 2021 and discusses implications of these trends for transportation, municipal finance, and wealth migration. While worst-case scenarios could bring a level of disinvestment in places like New York City not seen since the 1970s, even a mid-range scenario suggests a significant relocation of jobs and potentially wealth.

Before COVID-19, many high earners and large companies were already leaving New York and Silicon Valley. Coupled with the role of prominent vacation spots in providing a haven for those of means, more business- and tax-friendly areas like Florida, Texas, and Arizona are the clear winners of these trends. As demonstrated in a recent Pioneer study, “Do the Wealthy Migrate Away From High-Tax States?”, relocation of jobs and wealth from Massachusetts has been largely to Florida and New Hampshire.

“These trends are not new, but the pandemic has served as an accelerant,” said Pioneer Institute Executive Director Jim Stergios. “Policymakers who care about recovering the pandemic’s lost jobs will need to create a more business-friendly environment. That means a focus on policies related to taxes, regulation, and the additional costs we are imposing on small employers.”

Policymakers face risks on both sides of the employment equation. Both employees and employers see benefits from remote work. Polls show that a quarter of workers would be willing to take a 10-percent pay cut for the opportunity to work remotely, perhaps a small price to pay to be able to escape the exorbitant cost of living in Boston or New York. Research shows that remote work also reduces the direct costs associated with working in an office environment, such as parking, food, and travel for employees, by an average of $4,000 annually.

For employers, savings average $11,000 per worker, largely because of productivity gains and less need for real estate.

Some argue that the attraction of urban amenities and the productivity advantage of large cities will outweigh the added expenses and short-term public health concerns. Still, surveys suggest that a sizable segment of business executives, office workers, and other professionals will choose to operate remotely for the foreseeable future.

The response from policymakers will be telling and likely determine a set of winners and losers in the new post-pandemic economic reality. Some policymakers will double down on the burdensome tax and regulatory environments that started the taxpayer exodus in the first place; others will take action to offset the obvious financial and quality-of-life benefits of remote work. Based on the policy path taken, employers and employees will make their own decisions about job location and investments.

About the Author

Andrew Mikula is a Research Assistant at Pioneer Institute. Mr. Mikula was pre­viously a Lovett & Ruth Peters Economic Opportunity Fellow at Pioneer Institute and studied economics at Bates College.

About Pioneer

Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond.

Pioneer’s vision of success is a state and nation where our people can prosper and our society thrive because we enjoy world-class options in education, healthcare, transportation, and economic opportunity, and where our government is limited, accountable and transparent.

Pioneer values an America where our citizenry is well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to liberty, personal responsibility, and free enterprise.

Get Updates on Our Economic Opportunity Research

Related Research

Supply Chains Understood: Covid’s Global Demand Stress Test

https://www.podtrac.com/pts/redirect.mp3/chtbl.com/track/G45992/feeds.soundcloud.com/stream/1148317750-pioneerinstitute-hubwonk-ep-78-supply-chains-understood-covids-global-demand-stress-test.mp3 This…

John Dearie: Halt Immigration? Fall Behind

This week on JobMakers, host Denzil Mohammed talks with John Dearie, founder and president of the Center for American Entrepreneurship, a Washington, D.C.-based research, policy and advocacy organization. Immigration is core to his mission to build a policy environment that promotes entrepreneurship because he knows all too well that the United States was and continues to be built by entrepreneurial immigrants who had the drive and determination to pick up, leave everything they know behind, and build a new life in a new homeland.

Competition Amongst States: How Tax Policy Drives Residents to Seek Better Value

This week on Hubwonk (our debut video & audio edition), Host Joe Selvaggi talks with research analyst Andrew Mikula about the findings from his recent report, A Timely Tax Cut, in which he explored the relationship between state tax rates and policy and the direction of interstate migration.

Bernat Olle Gets a Visa to Improve the World

This week on JobMakers, Host Denzil Mohammed talks with Dr. Bernat Olle, co-founder and CEO of Vedanta Biosciences, about his journey from Catalonia, Spain, to Cambridge, Massachusetts, where he continued his Chemical Engineering studies at MIT. Navigating the complex immigration system while seeking purpose in his career, he eventually found his calling and was lucky enough to remain in the U.S. to see it through: designing a new class of medicines to modulate the human microbiome. 

Rent Control Re-Explored: What the Past Can Teach the Future

Hubwonk Host Joe Selvaggi talks with economist and MIT Professor Chris Palmer about his research and analysis of the effects of rent control in Cambridge during its 25-year implementation and in the aftermath of its repeal.

Study Warns that New Hampshire Tax Policies Would Exacerbate Impacts of a Graduated Income Tax

Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

Marathon Endurance Test: Leaders Pave the Way for Boston’s Return

Hubwonk host Joe Selvaggi talks with Boston Athletic Association’s CEO Tom Grilk about the leadership challenges of cancelling the world’s oldest continuous marathon, a $200-million benefit to the region involving eight municipalities and 10,000 volunteers, in the face of a pandemic - and how cooperation among stakeholders brought back the epic event to be run this October.

Study Finds SALT Deduction Cap, Graduated Income Tax Will Combine to More Than Double Tax Burden on Some Households

A provision of the federal Tax Cuts and Jobs Act of 2017 strictly limiting deductions for state and local taxes (SALT) will greatly exacerbate the adverse effects of a proposal to create a constitutionally mandated graduated income tax, according to a new study published by Pioneer Institute.

Jim Stergios on Why Immigrants Are Crucial to Our Success

This week on JobMakers, Host Denzil Mohammed talks with Jim Stergios, executive director of Pioneer Institute, about why Pioneer collaborated with The Immigrant Learning Center to produce this podcast. They discuss the overrepresentation of immigrants in terms of job creation in America, contrary to the myth that immigrants “take” jobs.

Economic Long Covid: Mixed Health Messages for Baystate Businesses

Hubwonk host Joe Selvaggi talks with NFIB’s Chris Carlozzi and Retailers Association of Massachusetts' Jon Hurst about the challenges and future prospects for businesses as they adapt to widespread consumer confusion caused by vague and often conflicting public health messaging from our political leadership.

Jeff Goldman on How Immigrants Keep America Competitive

This week on JobMakers, Host Denzil Mohammed talks with Jeff Goldman, immigration attorney and Chair of Massachusetts Governor Charlie Baker’s Advisory Council on Immigrants and Refugees, about how best to ensure that highly skilled and innovative immigrants can remain in the U.S., start companies, and create jobs for Americans.

Trevor Mattos Shows How Massachusetts Runs on Immigrants

This week on JobMakers, Host Denzil Mohammed talks with Trevor Mattos, research manager at Boston Indicators, the research center at The Boston Foundation, which educates state and local leaders on the important contributions immigrants are making. They discuss the urgency of this work, particularly in a time of divisive disinformation about immigrants and the uncertainty of the pandemic, and some of the surprising findings on the disproportionately large impact immigrant workers, entrepreneurs and innovators are having on the local economy