thumb-150x150-9277936New York’s loss of residents to other states is a long-established and troubling trend. But the impact of out-migration on the Empire State’s economy, and on personal income in particular, is another, more complicated story.

Unfortunately, the annual release of Internal Revenue Service (IRS) data on interstate taxpayer migration continues to inspire some wrongheaded conclusions on this score.

Gannett News Service and USA Today are the latest to cite the IRS statistics in support of the fallacy that when people move, their incomes move with them. The money graphs are right at the top of this story:

A lot of people dream of picking up and moving across the country.

But those who actually make the move — fewer than 400,000 people moved from 2014 to 2015 — have huge economic consequences, costing some states billions while giving others new revenue.

The first sentence is obviously true, but the next one is deeply misleading. So is the headline: “The $23 billion move: big money changes hands when people switch states.”

Yes, hundreds of thousands of Americans moved from one state to another between 2014 and 2015. But the “big money” changing hands consisted mainly of rental deposits and mortgage down payments, not entire incomes. Interstate migration has real economic consequences, short- and long-term. The complex interplay of impacts on individuals and communities can be measured in a lot of ways, but they almost certainly don’t boil down to a single simple number—and, regardless, that number isn’t $23 billion.

Consider a hypothetical 28-year-old plumber who moved from Elmira to Myrtle Beach in 2015. Did his 2014 adjusted gross income of $35,000 “move” with him?  The answer, of course, is no.  To make a living in South Carolina, he first had to find a new job paying a different amount.  That’s a lot easier to do in Myrtle Beach than in Elmira, which is probably why our plumber chose to move in the first place.  He might even have accepted a lower starting wage in order to get established.  Meanwhile, in a market short of skilled tradespeople, the Elmira plumbing contractor who previously employed the out-migrant to South Carolina had to offer the same wage of $35,000 to hire a replacement from the ranks of recent local high school graduates in the local area.  In a growing area with a bigger labor pool of apprentice plumbers, the contractor could have saved a bit on the hire. But did New York “lose” $35,000 from this move?

Another hypothetical example: a woman employed as a corporate executive assistant, earning $80,000 in New York City, moves from Manhattan to Hoboken, New Jersey—the state that happens to be the second most common destination for migrating New Yorkers.  Her Brooklyn apartment is quickly occupied by two young transplanted midwesterners, who earn a combined $75,000 from their first jobs out of college. Gannett’s analysis would see this as a $5,000 net “loss” to New York.  Two problems with this analysis: (1) New York will continue taxing that executive assistant’s $80,000 salary as if she had never left; (2) the two roommates taking over her Brooklyn flat are about to see their incomes escalate quite sharply.  In a few years, they’ll probably earn a combined $120,000, and one or both of them will move on.

Consider these examples, multiplied by tens of thousands in any given year, and you have an explanation of why the “How Money Walks” narrative is deeply flawed.

In general, people move—but income doesn’t.

Retirees and wealthy households—a relatively small minority of New York movers—are the exceptions to this rule.  Social Security checks, pensions and retirement savings accounts are portable.  So are investments, capital gains, and dividends, (which poses a growing problem for a state’s tax base heavily dependent on the top 1 percent). A very small group of high-income professionals, such as financial advisors, can also effectively take their clients with them. But everyone else will be willing to move only if they have jobs waiting for them in their new home state—and, in the case of homeowners, buyers for their houses back in New York.

As noted here a few years ago, the most commonly cited IRS data measure income the year before individuals have moved. But incomes are almost never the same from one year to the next. This is particularly true in the case of young people, whose incomes rise quite substantially once they establish themselves in trades or occupations. Conversely, the incomes of older, end-of-career movers tend to decline.

There’s no need to hype misleading income “movement” data as a way of drawing attention to negative migration patterns. It’s bad enough that New York is losing so many people, who take with them their skills, talents and future earning potential. That’s the problem.

 

 

 

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

A Look at Covid Learning Loss in NYC

New York City set an example worthy of approbation and emulation by publishing their grade 3-8 test results in math and English language arts. Read More

The state puts a pricey condition on its approval of a heart transplant center

In a provocative flex of executive power, the state Health Department is requiring a hospital system to spend $50 million on health care in Brooklyn and Queens if it wants to open an $8.4 million heart transplant center in Manhattan. Read More

NYISO Predicts Troubled Energy Future

The future is not bright for the Empire State’s electrical power grid, according to the newly released 2021 - 2040 System & Resource Outlook Read More

City union scandal isn’t NY’s first

One of New York City’s largest public-sector unions has been effectively taken over by its national parent after an audit revealed extensive financial mismanagement. It’s the latest example of misconduct made possible under New York’s public-sector collective bargaining rules that force the government to collect hundreds of millions of dollars annually without any safeguards on how the funds are spent.  Read More

NY Pandemic Learning Loss Data Under Wraps 

Nationwide test results revealing major pandemic learning loss have been front page news this month. Read More

The Essential Plan’s accumulated surplus balloons to $8 billion, with no fix in sight

The state's Essential Plan has generated billions in surpluses as the program automatically drew pandemic relief money that it did not need Read More

Firefighter-rights bill torches local control

Two of Albany’s most-vetoed concepts are headed toward Governor Hochul’s desk, this time concealed as a “firefighter bill of rights.”  Read More

Labor Day snapshot: payroll employment in New York still a tale of two states

Over the past three years, the Empire State's recovery has been steady but slow, moving payrolls back to within three percentage points of the 2019 pre-pandemic level Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!