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Scott Burns: Get Ready for the “Great Migration”

By JLP | August 30, 2010

From Scott Burns’ The Great Migration: Lemons Into Lemonade

Get ready for one of the largest corporate migrations in history. It will happen of necessity as managements try to find ways to do things for employees without increasing payroll costs. The move will be from the expensive coasts to less expensive areas.

This is not a new idea. It has been going on for decades. But the driving force is stronger today because corporations have less pricing power. If they could find a way to make it work, they would offer a move with a pay cut that still increased the workers’ standard of living.

I can see one problem with this theory: supply and demand.

Those who live in higher priced areas of the country have higher prices because their property is in demand. If companies start moving people in droves, the housing market will become saturated and prices will have to come down, making the migration less beneficial to both companies and their employees.

It will probably work for the first movers but I don’t see this happening on a very large scale.

Thoughts?

Topics: Economics | 4 Comments »


4 Responses to “Scott Burns: Get Ready for the “Great Migration””

  1. Kirk Kinder Says:
    August 30th, 2010 at 1:56 pm

    JLP,

    Look for companies to begin by moving the jobs with lower levels of required training. This enables the company to shed higher priced workers who don’t want to sell their house at a loss and pick up a new employee in the inner parts of the country, probably a new college grad who is dying for a job and has flexibility.

    Then they start moving the other jobs. In this environment, you will be amazed how many people will decide that Ohio is nice this time of year compared to the coast and move. It is tough to find new jobs so many will just suck it up and go.

    Of course, companies have been doing this for years now. Instead of the midwest, the jobs have been going to mainland China and other emerging markets.

    Also, another point on the housing. Folks on the coasts may not sell for a top price if this trend develops, but they can buy more house for a lower price in central USA. So it may not be as big of a turnoff as expected.

  2. RJ Says:
    August 30th, 2010 at 2:02 pm

    Let’s say that a huge corporation moves 50,000 jobs into a major metropolitan area. And let’s pretend it’d only be 50k houses/households despite being much larger.

    If you increase the population of a land-locked or otherwise constrained place (San Francisco, Boston, NYC) you’ll probably see prices jump a lot. Pick a place like Houston or San Antonio and I don’t think you’re going to see much change. Partly because it’s not a significant spike in population given the pre-existing size, but also because you don’t have many geographic constraints on building (whether natural or political).

    I don’t know what Houston’s permanent or semi-permanent population spike was after Katrina, but it was probably a lot more than 50k and I don’t think it bid up real estate much here.

    I think your basic point is correct if you get to edge conditions like “move all of wall street to Austin” but there are enough destinations that we probably could see significant reallocation of people (which sounds pretty malicious phrased that way) without too many unintended consequences.

  3. The Biz of Life Says:
    August 30th, 2010 at 3:50 pm

    In the IT arena they have offshoring and what is called near shoring (i.e, outsourcing IT to somewhere like Oklahoma City where the cost of living is cheap). Near shoring has only been moderately successful because of the lack of IT talent in those areas. NY and San Fran have been outrageously expensive forever, yet that is where most of the IT talent is and where most of the job opportunities are.

  4. Mark Says:
    August 30th, 2010 at 4:32 pm

    I think this theory is ludicrous.

    The less-specialized JOBS may migrate, but the people won’t. It will be much easier to find people already in those areas to work for reduced salaries than to move people there.

    When highly-specialized people are told their company is moving to the sticks, most of them will quit and go work for someone else.

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