As reported by The Reminder (Feb. 21, 2019, Dobbs), Senator Eric Lesser’s proposed legislation for a Western Massachusetts ‘remote worker incentive program’ is merited with great economic benefit for the region. In this letter-to-editor, I work through the economics that demonstrate Senator Lesser’s ‘remote worker incentive program’ would cost $1 million and generate between $50 million to $150 million of increased economic activity. Pretty good return. Very smart legislation.
The basic idea is simple, new workers who work from home or remotely would be eligible to relocate to Western Massachusetts. Qualified remote workers would receive a maximum of $5,000 per year, and a total maximum of $10,000 per worker.
According to the Bureau of Labor Statistics remote working options have exploded by more 250 percent since 2001. Fully remote workers, those most targeted in Senator Lesser’s proposed legislation, have increased by more than 150 percent since 2001. If a fully remote worker moved into Western Massachusetts they import or bring their job to the region. Thus, this is literally a job creation program. Although, $10,000 (max) per worker may sound expensive, indeed it is astronomically cheap; this is because these jobs pay between $50,000 and $500,000. Even at the lower end, such new citizens would spend on consumption and pay in taxes approximately $30,000 in local economic activity, thus far exceeding the expense of the program.
Lesser’s proposed bill would allocate $1 million towards a remote workers incentive program. Even if each worker maxed out at $10,000 in incentives, this would bring in 100 new citizens/jobs. If the pay scales of these jobs are on the low end, we would expect a minimum of an additional $9 million in economic activity in a three-year incentive period. This extra economic activity is good for local businesses and municipalities!
One popular industry that is using remote worker is technology. In 2017, Austin Texas had over 60 percent of its tech jobs going to workers outside of Texas, in San Francisco 30 percent of tech jobs went to workers outside of the city. Even more important to Western Massachusetts than remote tech jobs are the remote ‘FIRE’ sector jobs in Finance, Insurance, and Real Estate. The FIRE sector is increasingly turning to remote work to boost productivity and quality-of-life for its workers. Western Massachusetts is smack in the center of FIRE sector hubs in Worcester, Boston, Hartford, and New York. Lesser’s proposed bill would be certain to attract these workers. In addition, their salaries would far exceed $50,000.
Indeed, I would like to end this letter-to-the-editor, with a reasonably conservative estimate for the economic benefit to Western Massachusetts from $1 million remote worker incentive program as proposed by Senator Lesser. First, the program would be structured such that most workers would not receive the maximum, thus we should expect 200 (or more) new citizens and 200 (or more) new imported jobs from this program. Moreover, given the fact that most of these jobs would be from within the high-flying and high-salary FIRE sector, a reasonable conservative estimation of the average salary would be $150,000. These highly paid workers spend a lower percentage of their income on consumption spending and taxes, thus, the extra economic benefit would be approximately $60,000 per year per citizen/worker.
With 200 new citizens increasing economic activity by $60,000 per year would generate $12 million per year, or $36 million in a three-year incentive period. The spending multiplier effect would double these amounts in total economic benefit to the region. Thus, a $1 million three-year incentive program would generate $72 million dollars in increased economic activity as a reasonable conservative estimate, or a range of $50 million to $150 million. This is very economically smart legislation.
Dr. Hans G. Despain
Economic Chair
Nichols College
Longmeadow
