Back Pay for Cost of Living Raises on Grant Money in West Virginia
The Pointlessness of Bribing People to Move to West Virginia for $12,000
Relocation incentives get lots of buzz. Do they work?
West Virginia is the latest place to offer a relocation incentive to remote workers: $10,000, parceled out in monthly grants, for your first year in Morgantown, with a $2,000 bonus to settle in for a second year.
The program is called Ascend, and the commercial is alluring—baritone voice-over, sunset drone panoramas, indie-folk harmonies. It's been endowed by a $25 million grant, which makes it many times larger than similar programs in Vermont, and cities like Tulsa, Oklahoma, and Topeka, Kansas.
It also comes at an interesting time, since many companies are settling on remote work policies that will allow white-collar workers to settle far from the office. That raises the prospect that traditional regional development strategy could be turned on its head, with cities and states chasing workers instead of companies.
Programs like Ascend usually garner a lot of media attention, because their emphasis on no-strings-attached cash grants seems newfangled and zany, like federal stimmy checks or universal basic income. Fair enough—this kind of stuff is new. Since Ascend (which will later include two more West Virginia towns) was announced earlier this week, more than 2,000 people have applied for 50 spots!
But an application does not an interstate relocation make. In reality, these cash grants barely scratch the surface of the savings that their target applicants would unlock by moving to the places in question. And for that reason, it is hard to see them changing the game very much.
A one-bedroom apartment in Morgantown, for example, goes for $675 a month, compared with $2,155 a month in Washington, D.C., according to Zumper. A D.C. resident would already save more than $10,000 a year by moving there—and that's before accounting for other cost-of-living expenses. Buying a house? The median home value in Morgantown is $222,000, according to Zillow, compared with $672,000 in Washington.
The comparisons are similar between Morgantown and other high-cost cities, such as New York, Los Angeles, or Boston. The $10,000 grant, and then some, is priced in without any actual grants.
Another $10,000 never hurts, of course. But the kinds of people Ascend seeks to attract—the application asks for your Instagram and LinkedIn handles, and promises free access to a coworking space—probably already know how many tens of thousands of dollars (hundreds of thousands, over the years) they would save by moving to a place like Morgantown. Will the prestige of an application process convince them?
The same dynamics apply to programs in Tulsa (10 grand), Northwest Arkansas (offering 10 grand and a bike), and Topeka (five grand toward rent, 10 grand toward buying a home; plus $1,000 from Jimmy John's to live within five minutes of a sandwich shop). It is not the high cost of living in these places that has pushed young people toward larger cities, and so a relocation subsidy seems like an unhelpful response—doubling down on the one advantage you already have, the one that so far, has not done much for you. If the point of programs like these is to rebalance the economic geography of the country, I don't see them working—if they succeed in pulling in ambitious young people, it will be from other struggling and depopulated places.
It's hard to blame these places for trying; if it were obvious how to jump-start a new Silicon Valley, everyone would be doing it. (And in any case, it's a lot cheaper to offer some relocation grants than to, say, build a world-class university.*)
But the case of West Virginia is particularly ironic since the guy who endowed the grant—Brad Smith, along with his wife, Alys—was the CEO of Intuit. That's the company that makes TurboTax; you may know them from such hits as lobbying the government for 20 years to make tax filing difficult and expensive.
As the CEO of a tax-prep empire, Brad Smith probably knows that there are already some pretty large state-to-state relocation incentives: income tax rates. Some states, such as Texas and Florida, do not collect income tax. Others, like New York and California, do. Politicians in the former group of states are always bragging about this incentive; politicians in the latter group are always fretting about losing their best and brightest (and may be holding up Joe Biden's infrastructure bill on this very point!). West Virginia Gov. Jim Justice, meanwhile, is excited about the program—but bummed that his state isn't just eliminating its income tax: "My, my, my. I really hope and pray that we do not go down in history as doing the absolute thing that hurt us when we had the moment."
The reality of how those incentives affect behavior is pretty muddy, though. Certain super-high earners probably do relocate in response to changing tax incentives, but most people probably don't. If you make $100,000 in California, for example, you're leaving a big fat $10,000 Florida relocation grant on the table every year. And yet the Golden State retains its appeal.
There may be another problem with relocation incentives, one familiar from the corporate subsidy racket, which economists call the "but-for." But for this grant, would company X have come anyway? Would sports team Y have stayed regardless? If the answer is "Yes," the subsidy was ill-advised. How many people planning to move to Morgantown anyway will now do so with a nice pot of cash?
The relocation grants in Vermont (fully subscribed, for now) offer a case study in how not to run such a program. As the state auditor pointed out, "a serious structural flaw" required applicants to prove Vermont residency before applying for cash. "Therefore, applicants must make financial and major life commitments before knowing if they will receive grant funds. That means they had the will and the means to relocate without the program." Sure enough, the top two reasons for moving were "access to the outdoors" and "safe place to raise a family." Cash grants were third.
Vermont's program spent just $400,000 on 110 workers—less than $4,000 a household, for households with a median income of $107,500. On the one hand, you could ask, are such families really the ideal recipients of half a million dollars in state money? On the other, however, Vermont got earned media coverage for pennies on the dollar, with much attention to its covered bridges, charming towns, and snow-capped peaks. Perhaps primarily, then, the program was an advertisement for the things people really wanted in a new home. Speaking of ads, that one for West Virginia is pretty nice.
Correction, April 15, 2021: This piece initially implied that West Virginia does not have universal preschool. In fact, it is one of eight states (plus the District of Columbia) considered to have "mostly universal" pre-K education.
Back Pay for Cost of Living Raises on Grant Money in West Virginia
Source: https://slate.com/business/2021/04/west-virginia-relocation-grants-morgantown-meh.html