How has the ability to work remotely during the pandemic affected where people live, and what are some upsides and downsides if the changes stick?
As appeared in the Cleveland Fed Digest's Ask the Expert
With so many offices operating remotely during the pandemic, the normal flow of people moving into high-density areas to live near their workplaces for shorter commutes decreased. Some people moved out of these areas during the pandemic, but the bigger driver for population decline was fewer people moving in.
During the pandemic, neighborhoods in high-cost, high-turnover metro areas saw big population declines—places like New York City, Chicago, and San Francisco. At the same time, some relatively slow-growing metro areas—such as Cleveland, Buffalo, Rochester, and Cincinnati—weren’t the net losers of population growth as they had been in past years. For instance, if someone in Pittsburgh got hired by a firm in Washington DC, during the pandemic and that person stayed in Pittsburgh, that’s one less person moving to an urban neighborhood in a high-cost area.
During the first quarter of 2021, the slowdown of people moving into urban neighborhoods started to reverse—more people started moving into these neighborhoods but not yet at the same pace as they did in the prepandemic years.
We don’t yet know how many people will make a permanent shift to remote work. Even a modest percentage, say 5 percent, could allow hundreds of thousands of workers to choose locations that aren’t near their workplaces. If smaller metro or rural areas could attract even a small percentage of this workforce, it could be enough to stimulate local economies.
If Columbus, Ohio, for instance, could attract as new residents three of every 100 new remote workers who want to move in from high-cost metros, that would be about 26,000 new employees in the region—that’s equivalent to about one year of growth in Columbus during the most recent economic expansion (2009–2020). This would be a substantial gain. There’s opportunity here; we don’t know how large, but it has the potential to be quite large and important.
In terms of downsides to attracting and keeping new residents, there are almost none for areas that aren’t already in high demand, which includes all metro areas in the region the Cleveland Fed serves (Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia). There’s available, affordable housing in these areas and the impact on traffic would be minimal, especially if these new residents are working from home. In addition, remote workers don’t directly compete with local employees when they have jobs with companies based in, say, Boston or San Jose. And with remote workers, while their paychecks come from outside the region much of it gets spent locally.
I’m continuing to monitor these trends. If it appears that people start moving into high-density areas at prepandemic levels, then we’ll know what happened during the pandemic was a historic but short-lived phenomenon. If people don’t start moving into high-density areas at prepandemic levels, then it is probably related to remote work becoming a more common option for workers. We’ll want to quantify that relationship.
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