By Michael Hicks | Ball State University
We are now a year past the darkest days of the COVID recession. As the economy slowly begins to recover, we should recognize that Indiana has still lost six years of job creation. Total employment in Indiana is back at April 2015 levels, and there are only 1,500 more people working than we had back in the summer of 2000. This should be pretty sobering news. Still, as we ponder the pace and shape of the recovery, it is encouraging to consider what good might have come from this disaster.
There are many little things we can point to. Household savings have spiked and many tens of millions of families made investment in the physical stock of their homes. As with any recession there is some of what economist Joseph Schumpeter called “creative destruction.” This is the closure of failing firms and a reallocation of their assets to more productive purposes. There are glimmers of hope on firm productivity growth, which languished over the past decade. But one of the biggest changes is a great leap forward on our use of communication technology in business, government and education.
It is hard to overstate this latter effect. A year ago, I didn’t know what Zoom was. Today, I have mastered several types of videoconferencing software and pre-recorded an entire graduate class on Open Broadcaster Software. Even old dogs can learn new tricks.
Today, about one in five workers continues to perform their job remotely, and 75% of office workers do so. A substantial share of these workers — some studies say one in four, but at least one in six nationwide — will continue to work at home after the pandemic. This will have all sorts of effects, from reducing the demand for downtown restaurants to reducing commute congestion. The substantial shift to online work will also change where workers and their families choose to live.
Between 23 million and 35 million households will find themselves newly unencumbered by the need to live within an easy daily commute to work. This won’t result in a complete loss of geographic attachment. Most of these workers will still need to live near the same metropolitan region, so moves within metropolitan areas will be more common than moves between cities. Still, this will alter the choices families can make and accelerate the already quickening trend of residents choosing better quality-of-life communities.
Of course, this means picking winners and losers as families choose to live in different locations. But, this is a clear instance where the winners will be those places that have been investing in neighborhoods and schools. The losers will be those places who’ve stuck to the 1960s models of community development or treated the symptoms of population loss rather than the cause. As painful as this will be for some places, it is better that good policies receive brisk reward and bad policies suffer.
Significantly lessened commuting requirements leave workers free to think more long term about their residential decisions. Of course, they’ll still want to be nearby the thick labor market regions offered by large cities, but now they can look for homes more distant than a daily commute requires. This may return population growth to a number of places outside the formal metropolitan borders.
Here in Indiana, I think there is a list of likely winners. These are places that have made substantial community improvements over the past decades and continue to offer good to great public schools. Let me focus on central Indiana as an example.
A family relocating to the Indianapolis region for office work that can be done remotely for perhaps 80% of the time can cast a wide net. Places like Kokomo, Shelbyville, Rushville or dozens of places in western Hancock County with good schools and great neighborhoods will see growth. Northward toward Daleville and Yorktown, northwest toward Lafayette and south toward Columbus and Bloomington are certain to see busier real estate markets and new families looking around.
Many other places, too numerous to mention, will fare poorly. The newly mobile families aren’t interested in “worker housing,” a fancy new business park or unsupported claims about schools and neighborhoods. The newly liberated office workers are likely the savviest group of Americans ever to undertake large-scale migration. They’ll do their homework.
The formula for success is pretty clear. Communities need good schools, safe, livable communities and some public amenities. I’ve written this often, but need to be more specific. Population growth in Indiana is now happening almost only in places with good schools. This shift will accelerate that dynamic.
In the last year for which we have data, “A”-rated school corporations saw enrollment growth of 1.3%. The “B” corporations saw a 0.06% decline, and “C” corporations lost 0.11%. The “D”s suffered a 0.79% loss, and “F”s lost 9.75% of students. To be clear, this is not the fault of a poor rating system. This history is the result of families voting with their feet in an exodus that started long before anyone thought to rate schools.
It is hard to overstate how big this could be. Indiana’s current share of this newly mobile workforce is somewhere between 450,000 and 700,000 families. It will take a few years for these decisions to shake out. Workers and businesses still need to explore the full scope of remote work. Families will take time to research where they wish to live, and housing markets will have to adjust. This will take more than a year or two, and there is some uncertainty about how many new families might find Indiana of interest.
Still there is a great deal of certainty as well. I am sure that for much of Indiana, this is a once-in-a-century type opportunity. This opportunity will reward those who prepared. For those who did not, this is a lost chance at growth.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.