By Michael J. Hicks, PhD.
Guest Columnist

Michael Hicks

Work from home continues to grow at a reasonably steady pace. In 2019, perhaps 150,000 Hoosiers worked at home at least part time. Today, 633,000 work from home full time, and another 463,000 work from home between one and four days per week. That’s more than 1 million workers, or 31% of our workforce. Indiana has two remote workers for every factory worker, and remote work is growing.

The national landscape shows an even higher share of remote workers. A full 39.5% of households report at least one person working remotely. One in five workers nationwide is fully remote. That is 34 million Americans who are fully remote and 32 million who are partially remote. There are now more remote workers than there were ever baby boomers in the labor force.

Five out of every six remote workers have been to college, and most have graduated. These are traditionally the most mobile workforce, which almost certainly means we are in the early years of what is the largest internal migration the U.S. has ever experienced. This could well be 10 times larger than the Great Migration of African-Americans into northern states, and three times the size of the baby boom shuffling.

The disequilibrium of families moving, jobs and occupations realigning, and wage and work structure changing has just begun. My hunch is that it will last at least three decades. There are labor market and geographic effects of this type of migration. There will be far-reaching consequences.

Jobs that must be done in person will increasingly carry a wage premium, whether this is nursing, production, trades, teaching or retail. Until prices and wages for these goods and services adjust, firms will continue to complain of labor shortages. Remote work is popular, which means that workers who want that environment may have to forego a bit of their salary for the convenience. Of course, work from home is cheaper for workers than office work.

Labor markets will sort these things out well, and workers who want more money for their skill level will do ‘in person’ jobs, while workers who want more flexibility will give up some earnings. These adjustments should result in folks being better off from realizing these choices. But, this has implications for the cost of government.

Much of what government does is mostly in person. Teaching, policing and soldiering are all in-person jobs. We’re in the midst of discovering we will need to pay more for these types of workers, and it’s going to get worse. I suspect the biggest effect will be felt in education.

Teaching is traditionally low pay, with higher flexibility. That flexibility appeals to workers who plan on raising families. So, many teachers trade lower wages for greater labor force flexibility. Remote work entirely upends that model. A young woman today who seeks flexibility and a good salary could become an accountant or economist. The pay is better, and you can work at home.

Remote work will almost surely raise the cost of providing high-quality public services. Voters should keep a keen eye on this issue. I’m afraid far too many elected leaders in the Midwest won’t fully appreciate this, nor will they understand the dynamics of migration. The reason for this is that almost any Midwesterner over the age of 50 has been raised to believe that low taxes, a modest regulatory environment, and tax incentives will usher in a new prosperity. That this has not worked for decades, but that failure is becoming spectacularly obvious.

In the two years since COVID, 60% of the population growth in Indiana was concentrated in four counties with the highest effective state and local tax rates. The combined population among the half of counties with the lowest state and local tax rates was a loss of 204 people. Again, the population of the four counties with the highest effective state and local tax rates grew by more people than the lowest 88 counties combined.

At the same time, the 10 counties with the highest home prices grew by 31,510 people, while the cheapest 82 counties grew by only 12,728. The half of counties with the cheapest housing grew by only 78 people, or 0.0052%.

This might come as a surprise to many folks conditioned to believe that low taxes and low-cost housing are a magnet for new residents. They are not. This is not confined only to Indiana. Cable TV touts the movement of people from California to Texas. That is happening, but the overwhelming movement is people coming from the low-tax, low-cost counties of California to the high-tax, high-cost counties in Texas. Much like Indiana, half the population growth of Texas is occurring in a handful of counties that have average state and local taxes that are higher than California.

Much of the population growth is migration of families who can choose to live wherever they wish. So, why are they choosing higher cost, higher tax places? The answer is simple — those are the places with good schools, low crime, and cultural and recreational opportunities. These are traditional quality of life amenities that some places have in abundance, while others have in limited supply.

There’s another factor as well. Families with someone working at home also need more space. One, perhaps two, home offices are needed, and for some, extra play space for kids who are home while parents work. I think much of the remote work migration is less about cost of living, and more about finding housing that is qualitatively different than those that couldn’t handle one or two people working from home.

I might be wrong about this, but if people were fleeing high-cost places, we’d expect home prices in Carmel and Fishers to drop substantially. We’d also expect a new building boom in rural Indiana and Illinois. Nothing remotely like that is happening.

Indeed, the largest migration in 2022 out of any urban county in Indiana was from Marion County. But almost half the people who left Marion County moved to Hamilton County, with higher effective state and local tax rates and higher cost of housing. In fact, 4 out of 10 new residents of Indiana since COVID moved to the most expensive county in the state.

Make no mistake, American migration is being driven by the quest for nice places to live. Families are willing to pay more to live in places with good schools, parks, safe streets, and expensive housing. Indiana should be able to succeed in this environment. Right now, most of the state isn’t.