This week I had the opportunity to join a great panel discussion on the Fiscal and Economic Impacts of Remote Work and Incentives. The panel met as part of the National Conference of State Legislatures (NCSL) 2023 Roundtable on Evaluating Economic Development Tax Incentives.
Jim Landers from the John Glenn College of Public Affairs at Ohio State University kicked of the conversation with a review of work from home trends and what they mean for local economies. A key challenge for local government is the resultant decline or shift in property, sales, and income tax payments, which can pose unanticipated burdens. Concerns are especially acute for central business districts but may be felt by many types of jurisdictions experiencing a change in live/work patterns.
I provided an overview of remote worker incentive programs offered by state and local governments. We discussed evaluations of the original remote worker attraction programs in Tulsa and Vermont, which were found to be effective in attracting new people and generating economic gains. However, as remote work has become more commonplace since those initiatives began in 2018, new issues are arising. Future evaluations of ongoing worker attraction programs should also consider differential effects on people, places, and businesses since the benefits do not accrue evenly across states or communities.
It also noteworthy that there has been a recent increase in new incentive program announcements designed to counter the remote work trend. That is, cities are increasingly offering incentives to lure businesses and their workers back to the office, especially in struggling downtown areas.
Yichen Su from the Federal Reserve Bank of Dallas presented recent research on the effect of working from home on the agglomeration economies of cities. Agglomeration economies (knowledge spillovers, linkages, networks) are what account for higher productivity and wages in cities. The findings indicate that work from home has weakened large city agglomeration economies though it has expanded their labor pool. It remains to be seen if hybrid work models will reverse this trend. The full paper can be found at this link.