What to do about our worrying emigration problem?

MIGRATION PATTERNS are a testament to Massachusetts' ability to attract, retain and grow its population. On this front, as the saying goes, there is good news and bad news.

First, the bad news: According to a new study from Boston University, net out-migration from the Bay State, or the number of out-migrants compared to new arrivals, has increased by a staggering 1,100 percent since 2013. In 2023, the net outflow of residents was 39,000, and if this decline continues to increase, if the number does not reverse, it could exceed 96,000 per year by 2030.

Emigration is not just a people problem; it's a money problem. Anyone who moves takes their income and purchasing power with them. The tax revenue that they generated for the state is also disappearing.

Based on most current government data, exodus cost the state $4.3 billion in adjusted gross income (AGI) and $213.7 million in tax revenue in 2021. This year alone, Florida, New Hampshire and Maine took in $1.77 billion, $1.1 billion and $393 million in AGI, respectively, from those leaving Massachusetts. If this trend continues, the Bay State could lose about $19 billion in AGI and nearly $1 billion in annual tax revenue by 2030. In such a scenario, Beacon Hill will either have to make cuts or find new sources of revenue to fill this large budget gap.

The migration of workers is broad and extends across the 24- to 64-year-old age group. More than half of those who moved earned 1.3 to more than 2.6 times the national average, putting them in the top 15 percent or more of wage earners.

The state's largest loss in AGI was in the 55- to 64-year-old age group. Equally worrying, most of the departures were in the 26-34 age group. The younger the group leaving, the greater the cumulative impact on lost tax revenue.

Massachusetts' economic success depends on a knowledge-based economy, and the nation's greatest resource is an educated workforce. This is why the departure of these prime-age workers is so problematic. The rise of remote work options has also reduced financial barriers, allowing employees to “try before you buy” to see if they like a new state before committing to a permanent move.

In the past, the Commonwealth has addressed net out-migration by welcoming large numbers of highly skilled immigrants. More recently, it has also become more difficult for international students attending universities and colleges in Massachusetts after graduation to find jobs. As immigration becomes an increasingly contentious political issue, the likelihood of favorable policy action decreases.

For years it was believed that the bulk of the exodus from the Commonwealth was retirees moving to Florida. But we now know that more than half of those who move stay in New England. From an economic perspective, 30-year-olds moving to Maine is far more worrisome than 70-year-olds moving to Boca Raton.

Now for the relatively good news: If we know why people leave, we can do something about it. The BU churn study provides policymakers with a to-do list to address. The three main drivers of migration are income taxes, housing costs and healthcare costs. The 11 states that accounted for the lion's share of Massachusetts residents all performed better in these categories. Eight of the eleven countries also performed better in terms of housing burden (the proportion of household income that goes toward housing costs). Gov. Maura Healy's commitment to provide funding for housing is a start, but just one piece in a multi-layered puzzle.

The investigation covered a period before the latest additional tax of 4 percent came into force last year. It is highly plausible that future data will show that such tax increases do not help stem the tide of migration.

Massachusetts' strength lies in its world-class health care. Nevertheless, healthcare costs are increasingly proving to be a competitive disadvantage compared to other countries. The study results highlighted the Commonwealth's competitive advantage in economic health and educational quality.

In recent years, a strong economy and large government budget surpluses have made it easier to downplay worrying migration trends. No state has a barrier to population growth; It is something that is not static but needs to be constantly re-evaluated and maintained.

The volume and composition of residents leaving the state is evidence that this problem will have long-term financial implications if not addressed.

Here is an eight-step action plan to combat churn:

  • Beacon Hill must recognize that net migration is not temporary. It is diverse and not just due to the high cost of housing. The Commonwealth's competitive advantage in attracting, growing and retaining a population and workforce is eroding. This is an important first step as it will finally create a sense of urgency.
  • The governor should establish a “resident engagement” task force to help formulate effective policies, establish milestones and measurements, and report progress. The task force should include community and business leaders.
  • Greater emphasis must be placed on building the state's competitive strengths in education and economic health, including the development of programs targeting prime-age workers (26-54) and core industries (e.g., high-tech, biotechnology, FinTech and healthcare). and promoting growth and retention.
  • Financial policy decisions should not be made in a vacuum. It is a short-sighted economic policy for states to simply cut taxes so much, just as it is a flawed policy for states to increase taxes without fully examining the longer-term effects. Income tax policy and its extent of impact on migration, particularly in light of the recent 4 percent additional tax introduced in 2023, need to be examined closely.
  • The state has already enacted policies to reduce housing costs in numerous cities served by the MBTA, but opposition to NIMBY is growing. The Attorney General has rightly sued Milton and must maintain an aggressive stance against other cities that do not comply.
  • Create expedited approval processes, reduce fees charged, and provide tax incentives to builders for building homes that meet defined affordability standards.
  • The BU study shows that high healthcare costs are also a key driver of outbound traffic. The Health Policy Commission has raised similar concerns. The governor must make containing health care costs a higher priority. The state has long enjoyed top rankings in health care quality but has paid less attention than other states to how to better control those costs, which continue to grow faster than inflation.
  • Increase lobbying of the state governors' association to adopt a federal policy that accelerates admission of foreign students and allows them to stay and work after graduation. This would make it easier for Massachusetts to close its migration gap.

While policymakers cannot control the state's (sometimes) less-than-ideal weather conditions, they do have levers to influence the key drivers that cause residents to leave the state. Addressing these factors will help stem the Bay State's growing migration crisis.

Mark T. Williams teaches finance at Boston University's Questrom School of Business, led the recently published BU Migration Study, and is a past president of the Boston Economic Club.

Anna Harden

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