Cities and states are increasingly offering incentives to attract employers, from giants like Amazon to tech firms like Zynga. The premise is to boost economic activity by promising significant returns based on thorough impact analyses.
However, skeptics argue that many of these initiatives are ineffective.
These models are designed with optimism in mind. They hinge on the assumption that with the right incentive, jobs will materialize, and the financial benefits will surpass the initial investment. Yet, many programs seem to merely reward businesses for actions they would have taken regardless, eroding budgets in local communities rather than building them up.
The incentive landscape is so extensive that companies feel empowered to negotiate tax breaks and funding whenever they consider expanding or renovating. This situation allows businesses to pass costs onto taxpayers while local officials claim they’re fostering job creation and private investment.
When the Upjohn Institute published findings suggesting a fourfold return on Oklahoma City’s remote worker incentive, I found it intriguing. Economist Timothy Baltic uses stricter criteria than what typically dominates discussions. His study implies that Tulsa’s program for remote workers may actually yield positive results.
Since its launch in 2018, Tulsa has offered $10,000 grants to remote workers willing to relocate and stay for a year. While around a hundred other cities have similar initiatives, Tulsa’s stands out with more than 3,000 households participating and a supportive environment that offers community engagement, entrepreneurship resources, and targeted recruitment for skilled applicants.
Evaluating incentive programs involves considering the “but” rate, which indicates how many outcomes wouldn’t have happened without such incentives. Most economic studies rely on self-serving statements from applicants claiming that without grants, their projects would fail. These claims often prove exaggerated. Bartik’s research indicates that new business tax incentives result in actual job creation only 6% of the time.
But Tulsa Remote appears to buck that trend. Using data from both successful and unsuccessful applicants, Bartik estimates that 58% to 70% of relocations wouldn’t have occurred without this program. As he mentions, for similar costs per job, business tax incentives must reach at least $267,000 to achieve comparable outcomes.
In simpler terms, this program is effectively altering behaviors without relying heavily on incentives.
This point is crucial, as attracting new residents—especially high-income remote workers who contribute to the local economy—can fuel job creation and elevate property values while expanding the tax base.
Bartik’s model envisions Tulsa Remote yielding more than four times its investment based on income growth among current residents. This impact is attributed to increased local demand, more entrepreneurial activity, and a more appealing labor market for high-skilled employers.
Moreover, the models account for various trade-offs. Bartik explains, “This model considers multiple costs, including how increased population growth can inflate housing prices,” as well as public expenditures. It sidesteps common multipliers that tend to overstate benefits.
What sets Tulsa Remote apart is its strategy—specifically targeting certain workers, aiding their integration, and aligning the program with broader economic objectives. Bartik suggests that incentive strategies aimed at remote workers can be more effective when they fit into a well-defined economic framework.
Yet, this approach isn’t without its limitations. Bartik admits there’s no randomized trial backing this. “We seldom conduct randomized studies for remote worker incentives,” he says. Still, his research uses robust comparison groups and reliable control measures, producing consistent results across various models.
Could other cities replicate this success? Perhaps. Tulsa might enjoy unique advantages like low housing costs, moderate living expenses, and strong community ties. The program also began just before the pandemic, which granted many individuals new remote work opportunities. This timing could be pivotal; other cities may not fetch the same results, especially if they merely offer cash incentives without a strategic underpinning.
I remain somewhat skeptical about these incentives in general. I believe cities should prioritize essential services—like education, safety, and infrastructure—since these are what truly attract individuals and investors. Often, policymakers mistakenly assume that prosperity will lead to better amenities, then use those amenities to drive economic growth.
That said, Tulsa seems to have innovated in an unusual way, by crafting strategies to utilize incentives for investing in people rather than businesses.
Attracting new residents with cash isn’t as straightforward as it seems. Tulsa Remote isn’t just about handing out money to movers; it’s about integrating economic policy with human capital development. That, I would argue, could be a more intelligent approach.
