Q&A of the Day – The Impact High Net Worth Migration Has in Florida’s Communities
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Today’s Entry: Brian- Q&A question for you. What’s the local impact of wealth migration into a community? I saw the story that in addition to Florida being #1 for net wealth gains since the pandemic – PBC is #1 in the country. How much impact is there in the local economy? How much of a benefit is there if most of the wealth is in non-local investments?
Bottom Line: Today’s note comes on the back of the Palm Beach Post recently highlighting a study conducted last August from the Economic Innovation Group. The study put a fine point on the wealth migration we’ve experienced in recent years. It’s been well known that since the onset of the pandemic Florida’s led the country in net migration. It’s well known that Florida has also led in net wealth migration, meaning that it hasn’t just been the volume of people coming to Florida, relative to those leaving, that’s led the country, but also the amount of wealth the comers have brought relative to what the goers took with them. It’s even been known that South Florida specifically stood to benefit the most from the wealth migration trend on the back of the area having been dubbed Wall Street South - a characterization that’s a result of former Wall Street firms, and often many of their employees, making to the move to SFL. But what wasn’t as clear until somewhat recently is the specific impact of the wealth migration effect by community. That includes the knowledge that Palm Beach County has been #1 for net wealth migration of any county in the country.
According to the Economic Information Group’s study, which used IRS data, Palm Beach County’s AGI (adjusted gross income) gain of $7 billion during the first year of the pandemic was the highest total in the country. And in fact, the top three counties in the country for net wealth migration were in South Florida with Miami-Dade second with a gain of $6.4 billion and Southwest Florida’s Collier County third with a gain of $4 billion. Florida’s 1-year gain in wealth migration totaled over $39 billion. But to the point of today’s question, those are large numbers and it's obviously a sign we’ve been doing things right if the wealthiest people with the ability to live and run their businesses from anywhere are choosing to do so from here...but what does it mean to you exactly?
Numerous studies of the impact of high-net-worth individuals (generally defined as those who have $1 million or more of investable assets) have been done in recent years. Many have resulted from interest in the topic of income inequality. While it’s hard to pinpoint the exact impact of net wealth migration of $39 billion into a state, or $7 billion into one county in a specific year, here’s what we do know. Back in 2019 a study was conducted by the National Bureau of Economic Research studying the effect of rising wealth at the county level using IRS and BLS data. What was found conclusively was this which was said in summary: a rise in a county’s wealth is associated with increases in local employment and payrolls.
So, if that holds true, Palm Beach County should have seen an outsized benefit during and after the pandemic. Let’s go to the scorecard. Palm Beach County’s unemployment rate in January of 2020 – just prior to the onset of the pandemic – was 3.6%. At the same time the US unemployment rate was 3.5% - or slightly below PBC’s rate. At the peak of the pandemic Palm Beach County’s unemployment rate hit 14%, while the US unemployment rate rose to 14.7%. Most recently Palm Beach County sports a 3.1% unemployment rate, one that’s lower than it was prior to the pandemic, compared to the US unemployment rate which stands at 3.7%, a number that’s still higher than it was prior to the pandemic. So, in summation of that exercise, Palm Beach County went from having a slightly higher than average unemployment rate, to an unemployment rate which was lower than the national average during the pandemic, while it remains meaningfully lower than the national average most recently and at a rate that’s a half point below pre-pandemic levels – while the national economy hasn’t yet recovered to employment rate of pre-pandemic levels.
That exercise is proof positive of the National Bureau of Economic Research’s findings that a county’s increase in net wealth results in an increase in local employment and payrolls. But that’s only half of the story. The other half is household incomes. During the same period of the EIG study at the onset of the pandemic, Palm Beach County’s median household income grew by about 6%. During that same period the average household income nationally declined by 2.3%. In other words, it’s not just that Palm Beach County has significantly outperformed in producing jobs and reducing the rate of unemployment since the onset of the pandemic, it’s that there’s been an even more dramatic outperformance in the impact of average household’s income over the same period. It’s a clear win-win and an indication that the jobs that have been created locally often have come with higher and faster growing wages. This is also a natural byproduct of high-net-worth individuals relocating their businesses to South Florida from places like Manhattan.
There are many other studies showing the impact on other aspects of our society. For example, over 60% of charitable giving takes place at the community level. But in answer to today’s question – yes. There’s a significant and measurable impact in Florida and most specifically in Palm Beach County, from the record net wealth migration and most people are benefiting in some form or fashion from it.