BFI Group Blog

Stay informed about the news at BFI and in a world of rapid change

Global Gold
February 12, 2021

“Escape from New York”: How the Covid Crisis Accelerated the Domestic Migration Wave in the US

The covid crisis has brought with it incredible changes to our daily lives and inflicted massive damage to the economy on a global level. However, most of these changes have been initiated by governments, institutions, and other hubs of centralized authority.

From business closures and travel bans, to stay-at-home orders and remote work mandates, the vast majority of the great shifts we saw over the last year were the result of new laws, rules, and decrees that were summarily enforced in response to an “emergency”, without much political debate and even less consideration of the public’s position. And yet, a formidable number of citizens seem to have found a way to express their views and manifest their will by the most direct of means: by voting with their feet.

The great migration

Some jurisdictions were much harsher than others in their response, and the measures taken varied significantly, with a strong correlation between the political leanings of those in charge and the severity of the lockdown and economic shutdown orders. While this correlation can be found pretty much throughout the West, it is much more pronounced in the US.

With each state being able to chart its own course to a very large extent, and with local authorities having more leeway in the approach they adopt in response to the pandemic, the lines are more neatly drawn, and it is easier to identify this trend of political and ideological consistency in the handling of this crisis.

For example, states like California and New York, among the most “progressive” in the nation, have also had the toughest and longest restrictions in place. That, in sharp contrast to conservative Texas or Florida, both of which opted for a much laxer strategy around lockdowns, mask mandates, freedom of movement, and business shutdowns. This also holds true on a city level too: Large, populous metropolitan hubs, on average leaning further left than rural areas, also generally embraced more aggressive approaches in their efforts to contain the disease.

Very early on in the pandemic, a shift became apparent. Official homes sales data captured an uptick in Americans selling their primary residences in big cities and moving either to suburban areas or different states. Initially, this could have been explained as a result of fear of the virus and the perception that less densely populated areas might be safer. Then, as the “two weeks to flatten the curve” came and went and as lockdowns and business closure orders dragged on, more residents abandoned urban centers, in a move that could be seen as an effort to escape the harsh restrictions. A few months later, this phenomenon intensified, as the “Black Lives Matter” protests and riots spread in major cities around the nation. Weeks of looting, vandalism, threats to life and property, and widespread violence were arguably another argument against the “big city life”.

There were many reasons that could serve as decent explanations for this domestic migration phenomenon. But now, we have accumulated enough data and clear evidence to paint a much bigger picture.

The mass exodus from the cities has been amplified by an even more consequential and much more telling flight away from progressive states that shows there are stronger forces at play. According to recent US Postal Service data, New York has lost at least 300,000 residents, while California was hit even harder. In early January, moving company U-Haul ranked California last on its list of “growth states”, sharing data that showed the state suffered the largest exodus, based on the net gain of one-way trucks entering a state versus those leaving. The Bay Area, and San Francisco in particular, saw the steepest surge in new departures. The same report showed that Tennessee was among the top relocation choices, which contributed to its rise to first place in growth states in 2020, up from the 12th position last year. Second place was taken by Texas, followed by Florida. Real estate data certainly bear this out: Palm Beach single-family property sales saw a record-setting surge with the largest mid-year dollar volume on record, while similar trends emerged in Austin, Columbus, and Denver.

This mass relocation of families and workers is an important development that has the potential to drastically reshape the political and economic landscape. This outlook is further supported by the fact that both small- and medium-sized businesses, as well as huge corporations, have decisively joined the bandwagon out of progressive jurisdictions. Oracle, the second largest software maker in the world, recently announced its plans to move its corporate headquarters from Silicon Valley to Austin. The news came on the heels of a similar move by Hewlett Packard Enterprise and Tesla’s founder Elon Musk.

Killing the goose that lays the golden egg

To understand the whole story behind this exodus wave, one must consider the demographics and socioeconomic profile of the “lost” residents. The crushing majority of those who chose to leave in search of greener pastures are high earners, business owners or they are top executives, highly educated and high-skilled workers. This is evidenced by the disproportionate growth in luxury home sales and the overwhelming real estate demand in upscale and expensive neighborhoods in the states that saw the strongest influx of newcomers.

In other words, they mainly belong to that top percentile that is contributing the most and there is little doubt that the progressive states they are now abandoning in droves have been disproportionately reliant on that much-vilified “1%”. As H.D. Palmer, spokesman for the California Department of Finance, highlighted,” just that 1% is responsible for generating over 45% of all the personal income tax revenue”. However, it’s not just their tax dollars that they’re taking with them, but also their contributions in productive activity, entrepreneurship, job creation, as well as spending power and real, organic demand that props up the economy.

Of course, excessive taxation, over-regulation and red tape are straightforward arguments for leaving that aren’t necessarily new, which is why this migration wave predated the covid crisis. According to figures by the US Census Bureau, the five states that lost the most residents between 2010 and 2019 were all Democrat strongholds, with a long tradition of government interference and aggressively redistributive tax policies: New York, California, Illinois, New Jersey and Michigan (and they lost 4 million people collectively).

Palm Beach hit its lowest housing supply point in 9 years:

Source: Bloomberg

What is different this time, however, and what probably accounts for the impressive acceleration of this trend, is the sudden evaporation of any and all counterarguments that might have convinced people to stay until now. For many, professional opportunities, cultural attractions, entertainment, and a vibrant social life were worth the steep price they had to pay to live and work in these locations. Now, all they get in return is mass unemployment, a surge in poverty and crime statistics, boarded up bars, restaurants and art galleries, as well as concerts and sports events they can only experience through online streaming.

The implications of this shift are immense. It can reshape the electoral map, as there are legitimate fears that the newcomers might bring with them those very same ideas that rendered their own home states uninhabitable. There is, however, a more realistic counter-projection. Since those that left had not just the means, but also the good sense to do so, those that remained were either the most radical “true-believers” in leftist utopianism, or simply could not afford to relocate. This would translate to a historic redistribution of wealth and economic power in the nation, creating new hubs of prosperity, innovation, and eventually political clout. At the same time, it would force progressive states to face the consequences of their own political choices.

With their cash cows gone, those policies that penalized and demonized the productive class, once advertised as “social justice”, are bound to be exposed as economic cannibalism.

Download PDF Blog Post
Download • 288KB