Last week, amid one disastrous report after another about the state of the national economy, the Policy Research Institute for the Region (PRIOR) at Princeton University’s Woodrow Wilson School of Public and International Affairs released the results of a months-long study into New Jersey’s migration patterns.
Written by Cristobal Young and Charles Varner, graduate students at the department of sociology, and Douglas Massey, Woodrow Wilson School professor of sociology and public affairs, the report analyzes recent migration into and out of New Jersey, based on data provided by the U.S. Census Bureau and the state Division of Taxation individual income tax data that provide a comprehensive view of migration patterns.
Entitled “Trends in New Jersey Migration: Housing, Employment and Taxation,” the report revealed that New Jersey’s net loss of residents to other states is not a symptom of weak economic conditions, and that the state is experiencing what PRIOR has dubbed a “brain gain” of highly educated residents to the state. New Jersey is, according to the report, gaining residents who hold college degrees, especially Ph.Ds.
At the same time, PRIOR shows that the state is losing low-income residents, particularly in the bottom 20 percent of wage earners. However, the report states, this loss of residents does not mean the state is losing money. This counters assertions made in a 2007 report released by the Edward J. Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick.
That report, “Where Have All the Dollars Gone?” written by Bloustein dean James Hughes and Rutgers professor Joseph Seneca, argues that the outflow of residents at any level is bad for New Jersey’s economy. “Accelerating out-migration,” states the Hughes report, “has sizable and growing economic and fiscal implications.” It estimates that outmigration cost New Jersey $1.96 billion in income in 2005.
The PRIOR study, however, finds that mostly poorer people are leaving, and largely because of an overly expensive housing market. These same people are not taking jobs with them. Hence, while there is a loss of people, there is not a loss of income in the state — vacated jobs are simply filled by someone else.
Also, despite fears that the state’s “half-millionaires tax” — the 8.97 percent levied on households making $500,001 or more a year that was implemented in 2004 and added roughly 2.6 percent to the taxes these same households had been paying — would drive money away, half-millionaires have, for the most part, stayed.
Not only that, the number of half-millionaires in the state rose by 70 percent (to 44,000 residents) between 2002 and 2006. These residents contribute nearly a billion dollars in tax revenue to the state, greatly offsetting the loss of tax money from relatively few half-millionaires who left.
Among working people, net out-migration is essentially zero (1.8 per 100 out-migrants). Most who leave are either unemployed or out of the labor force, meaning they are not taking jobs with them and, thus, leaving positions open. “These net outflows help to raise the employment-to-population ratio in New Jersey, and suggest that residents are staying in New Jersey in their high earning years,” says Keevey.
Also to be considered is the fact that higher wage earners, of which there are more in the state now than there were five years ago, simply pay more in taxes. A resident earning $1 million a year typically pays $75,000 in state taxes, while a resident making $20,000 a year will pay less than $300. “In short,” the report states, “when one millionaire moves away, the tax impact is equivalent to about 266 poor people moving away.”
Keevey asserts, however, that PRIOR does not assume the loss of low-income residents is entirely beneficial. In fact, he offers a strong suggestion that the state fix its housing woes in order to keep these residents. “”The most important step to reducing out-migration would be to improve the affordability of housing in the state, particular the low-income residents,” he says.
Though Keevey says the report was not intended as a counterpunch to the Bloustein report (it was, in fact, commissioned by the state Department of Commerce), PRIOR’s report goes so far as to call some of Rutgers’ assertions “incorrect and misleading,” and does counter Bloustein’s pronouncements that large numbers of out-migrants is bad for the economy. The PRIOR report states, “adding one million people would greatly strain government services and amenities while also presumably bringing in additional tax revenues. In a very density populated state like New Jersey population growth may be more costly and difficult to manage than out-migration.”
The PRIOR report was hailed by Governor Jon Corzine as the first openly positive economic news in the state in several months.
“The Princeton revealed what we’ve surmised all along,” the governor stated in a release. “People are not fleeing the state at the accelerated rates that some pundits would have us believe.”
The governor went on to point out that New Jersey’s civilian labor force is projected to rise eight percent. “In contrast, our neighbors in New York, Connecticut and Pennsylvania are forecast to experience negative growth by five percent, two percent, and seven percent, respectively, through 2030,” he said. “At a time when the fundamentals of our national economy are faltering, this is positive news.”
Both the PRIOR and Bloustein reports, however, conclude that New Jersey’s economy is strong at its core. James Hughes, executive director of Bloustein, said last week that he would not comment on the PRIOR report, nor be releasing any statements regarding it. He did say he will read it thoroughly and that Bloustein is in the middle of preparing a new report of its own on “the dire state of things” in New Jersey.
According to the PRIOR report, New Jersey has experienced outmigration since at least 1991, a trend common in the Northeast. Those leaving the state primarily are from the high-density areas of northern of New Jersey, though the outflow is partially offset by people moving into the less expensive and less populated parts of the state.
The full PRIOR report is available online at www.princeton.edu/prior/PRIOReconomy-Final-(2).pdf economy-Final-(2).pdf