Oct. 23, Meg Tuszynski, managing director and research assistant professor at the Bridwell Institute for Economic Freedom at the SMU Dallas Cox School of Business, for a piece illustrating how — when workers are allowed to work remotely — many abandon homes near the workplace and relocate to places with lower taxes and less regulation. Published in the Orange County Register under the heading Work-at-home crowd prefers to relocate to places with lower taxes, less regulation: https://bit.ly/3kANRzu
When people can work wherever they want, where do they choose to live? And perhaps more importantly, where do they choose to leave?
Traditionally, decisions about where to live have been closely tied to decisions about where to work. If you got a job in Phoenix, you head to Phoenix. COVID-19-related workplace disruptions caused many companies to move all or part of their operations temporarily online. As the pandemic has dragged on, many of these virtual workplace arrangements have become permanent, or at least semi-permanent.
We’re now starting to see what happens when the bonds between a person’s city of residence and city of work are broken. The results are intriguing.
By Meg Tuszynski
When people can work wherever they want, where do they choose to live? And perhaps more importantly, where do they choose to leave?
Traditionally, decisions about where to live have been closely tied to decisions about where to work. If you got a job in Phoenix, you head to Phoenix. COVID-19-related workplace disruptions caused many companies to move all or part of their operations temporarily online. As the pandemic has dragged on, many of these virtual workplace arrangements have become permanent, or at least semi-permanent.
We’re now starting to see what happens when the bonds between a person’s city of residence and city of work are broken. The results are intriguing.
Thanks to detailed data on moving patterns from moving company Hire A Helper, we know exactly which states experienced the largest net gains and losses during the pandemic. Between January and June, New York, California, and Illinois experienced the greatest net losses in state residents, followed closely by Minnesota, New Jersey, and West Virginia. What do these states have in common? What immediately jumps out at me is that these are among the most economically unfree states in the U.S.
Since 2016, I’ve worked on a team at SMU’s Bridwell Institute for Economic Freedom that helps produce the annual Economic Freedom of North America index. We rate and rank states in terms of economic freedom, a measure that captures the tax treatment of residents, burden of government spending, and regulation of the labor market. With my colleague Dean Stansel, I’ve examined the growing literature that examines the broader implications of economic freedom, and found that states with higher levels of economic freedom tend to experience a variety of beneficial outcomes. This includes higher levels of economic growth, higher state employment growth, and a more robust entrepreneurial environment, among many other things.
The flip side, of course, is that states with lower levels of economic freedom miss out on many of the benefits that go along with that freedom. Illinois, for example, has been hemorrhaging residents for years. There are many reasons for this, but the most telling indicators are that Illinois is a high-tax, high-regulation state.
While it is too strong to say that the pandemic has ushered in a workplace revolution, it has certainly changed the nature of work in many industries, and some of these changes will likely be permanent. In the past, states like New York and California could get away with imposing high taxes and engaging in excessive spending on government programs. Jobs in these areas are attractive, and people are generally willing to tolerate government overreach as long as the benefits outweigh the costs.
Now, however, people can retain the benefits of jobs in these areas without also enduring the costs associated with living there. So, they’re quite rationally “getting the heck out of Dodge”.
So, where exactly people are moving during this time? According to Hire A Helper’s data, the top places experiencing net inflows are Idaho, New Mexico, Delaware, South Carolina, and Maine. It’s important to note that these are not all beacons of economic freedom. Idaho ranks 8th on our index, but the rest of the five rank in the lower half of the 50 states.
While people may not necessarily be moving to states because they’re economically free, they seem to be moving away from places that are economically unfree. While some of these pandemic-induced moves may be temporary, policymakers in these areas still should take note. Once people have experienced life in states that are less economically restrictive, some of these temporary moves may become permanent.
Economists like to talk about something called constrained optimization. People make choices, given the set of constraints they face. With the constraint of “living where you work” being increasingly relaxed, people will increasingly be able to choose their homes based on other sorts of criteria. People aren’t likely to flock to the places with high taxes, high levels of government spending, and onerous labor market regulations. They’ll vote with their feet for places that are more attractive. New York, California, and the other net losers should make some clear changes to their economically punitive policies before it’s too late.
Meg Tuszynski is managing director and research assistant professor at the Bridwell Institute for Economic Freedom at Southern Methodist University’s Cox School of Business. She is also the Texas Policy Fellow at the Lone Star Policy Institute.
When people can work wherever they want, where do they choose to live? And perhaps more importantly, where do they choose to leave?
Traditionally, decisions about where to live have been closely tied to decisions about where to work. If you got a job in Phoenix, you head to Phoenix. COVID-19-related workplace disruptions caused many companies to move all or part of their operations temporarily online. As the pandemic has dragged on, many of these virtual workplace arrangements have become permanent, or at least semi-permanent.
We’re now starting to see what happens when the bonds between a person’s city of residence and city of work are broken. The results are intriguing.
Thanks to detailed data on moving patterns from moving company Hire A Helper, we know exactly which states experienced the largest net gains and losses during the pandemic. Between January and June, New York, California, and Illinois experienced the greatest net losses in state residents, followed closely by Minnesota, New Jersey, and West Virginia. What do these states have in common? What immediately jumps out at me is that these are among the most economically unfree states in the U.S.
Since 2016, I’ve worked on a team at SMU’s Bridwell Institute for Economic Freedom that helps produce the annual Economic Freedom of North America index. We rate and rank states in terms of economic freedom, a measure that captures the tax treatment of residents, burden of government spending, and regulation of the labor market. With my colleague Dean Stansel, I’ve examined the growing literature that examines the broader implications of economic freedom, and found that states with higher levels of economic freedom tend to experience a variety of beneficial outcomes. This includes higher levels of economic growth, higher state employment growth, and a more robust entrepreneurial environment, among many other things.
The flip side, of course, is that states with lower levels of economic freedom miss out on many of the benefits that go along with that freedom. Illinois, for example, has been hemorrhaging residents for years. There are many reasons for this, but the most telling indicators are that Illinois is a high-tax, high-regulation state.
While it is too strong to say that the pandemic has ushered in a workplace revolution, it has certainly changed the nature of work in many industries, and some of these changes will likely be permanent. In the past, states like New York and California could get away with imposing high taxes and engaging in excessive spending on government programs. Jobs in these areas are attractive, and people are generally willing to tolerate government overreach as long as the benefits outweigh the costs.
Now, however, people can retain the benefits of jobs in these areas without also enduring the costs associated with living there. So, they’re quite rationally “getting the heck out of Dodge”.
So, where exactly people are moving during this time? According to Hire A Helper’s data, the top places experiencing net inflows are Idaho, New Mexico, Delaware, South Carolina, and Maine. It’s important to note that these are not all beacons of economic freedom. Idaho ranks 8th on our index, but the rest of the five rank in the lower half of the 50 states.
While people may not necessarily be moving to states because they’re economically free, they seem to be moving away from places that are economically unfree. While some of these pandemic-induced moves may be temporary, policymakers in these areas still should take note. Once people have experienced life in states that are less economically restrictive, some of these temporary moves may become permanent.
Economists like to talk about something called constrained optimization. People make choices, given the set of constraints they face. With the constraint of “living where you work” being increasingly relaxed, people will increasingly be able to choose their homes based on other sorts of criteria. People aren’t likely to flock to the places with high taxes, high levels of government spending, and onerous labor market regulations. They’ll vote with their feet for places that are more attractive. New York, California, and the other net losers should make some clear changes to their economically punitive policies before it’s too late.
Meg Tuszynski is managing director and research assistant professor at the Bridwell Institute for Economic Freedom at Southern Methodist University’s Cox School of Business. She is also the Texas Policy Fellow at the Lone Star Policy Institute.
