MainStreet Macro: Is there an urban exodus of high-income earners in tech and finance?

As disruptive as the past 18 months have been, one place where workers have sought solitude is at home. The housing market has boomed since the pandemic as remote and hybrid work options led to a big uptick in demand for home offices and outdoor space to walk all the puppies that were adopted early days of the lockdown.

Much has been said about the pandemic-driven migration to the suburbs. But so far, we’ve had only limited data available to understand it. 

This week, ADP dove into its payroll data, where we uncovered three worker migration trends that could have long-run implications for the workplace.

Workers are on the move

All that time spent at home during the pandemic ignited a world-wide reassessment not only of how we work and live, but where.

In an ADPRI study earlier this year, we found that 75% of the global workforce and more than half of U.S. employees either changed to or planned to change their living arrangements.

In the U.S., remote workers have led the charge. Thirty percent already have made a change, and nearly as many on-site workers (29%) are considering one.

The desire to reboot home life was most pronounced among younger workers.  Seventy-four percent of Gen Z employees and 61% of millennials said they were ready to reinvent their home life, compared to 19% of workers 55 and older.

Worker mobility, particularly for those in the early stages of their careers, could have long-term implications for what jobs people do and how and where they work.

Source: ADPRI “People at Work” North America, 2021

Tech and finance hubs are seeing the biggest out-migration of workers

We examined the behavior of more than 2.7 million workers in seven large, urban job centers around the country who stayed with their employers during the pandemic. Cities included New York, San Francisco, Los Angeles, Miami, Nashville, and Austin.

All are seeing an exodus save Austin, which as a tech and music nirvana is pretty hard to beat. However, two cities stood out for the acceleration of workers fleeing for the ‘burbs – New York and San Francisco.

These two cities have a lot in common. Both are extremely expensive places to live. They also were early centers of the health crisis. Both are built on remote-friendly industries in finance and technology. As a consequence, both are dense with high-income earners.

Which brings us to the third trend we unearthed.

Six-figure earners are heading for the exit fastest

Workers making $100,000 or more accounted for most of the migration out of San Francisco and New York.

Prior to the pandemic, less than 3% of San Francisco and New York high earners moved out of the cities during the 12 months that ended in January 2020.

After the pandemic, that number leapt to 14%. Those high-wage employees mainly moved to surrounding suburbs with a manageable commute to job centers.

The hybrid and remote work arrangements that have dominated these industries since the pandemic began increased the appeal of far-flung suburbs. Workers can travel to job centers when necessary but don’t have to endure the daily grind of commuting.

Source: ADP DataCloud

My Take

The story of the past three decades has been the resurgence of cities. Once blighted by crime and abandoned by business, urban centers have attracted young professionals with invigorated job opportunities, jam-packed public amenities, and a commuter-friendly work life.

Downtown home prices accelerated quickly as a result. That made it difficult for people to stay unless they had a big paycheck. As young workers became older workers with greater levels of family responsibility, it got even more challenging.

To a large extent, the move from city to suburb already was underway before the pandemic. Work-remote options, expensive urban home prices, and a building boom in attractive suburbs lured maturing workers away from downtowns. As with so many other parts of the new economy, the pandemic accelerated these existing migration trends.

In the past, the local jobs market and the housing market moved in lockstep. Now they’re  being decoupled by new work options.  The evolution not only affects the communities that high-income professionals are moving to, they also impact the urban businesses they leave behind.