First published in the Rochester Business Journal, February 3, 2023:
When I entered the accounting profession in the early nineties, the country was mired in a recession. Central and western New York were hit especially hard as large companies moved out of NY and shed jobs. Downtowns became ghost towns. Friends and family moved out of state for better job opportunities. The South was especially popular, including Atlanta and Raleigh, along with states such as Texas and Colorado. We experienced a brain drain of talent and these regions were the beneficiaries, helping to power their growth and prominence over the northeast for several decades.
Prior to Covid, our fortunes reversed. We benefited from local organizations expanding and new ones were attracted into the state through various economic incentives. Developers began to invest back into our downtowns and people/businesses soon followed. And then the world turned upside down during Covid. As we emerged out of that dark period, an unpleasant reoccurrence has reared its ugly head – the Brain Drain is back.
Locally based professional organizations are getting pillaged by out-of-state outfits hiring our employees at inflated wages and allowing them to work remotely. Accountants, architects, attorneys, etc. are courted by organizations based in major metropolitan areas all over the country. By comparison to their own regions, our educated talent is a bargain even if they pay them 150% of our market rates. Why is this an issue? At least they aren’t leaving the state like in the 90’s, plus they’re getting a huge bump in pay.
Organizations in central and western New York are at an unfair competitive disadvantage. They will continue to find their experienced staff depleted and be forced to compete by raising prices, downsizing or selling out. Keep in mind that it’s these community-based organizations that lend a hand to volunteer days, corporate challenges, food drives, sponsoring non-profit galas and the arts. These new, out of state employers aren’t spreading their profits by sponsoring little league teams or renting office space in our downtowns. Our staff are encouraged to donate thousands of hours of volunteer time on local non-profit boards, yet I doubt non-local companies will encourage that.
As a result, organizations such as ours have been forced to keep raising pay rates to try to hold on to our talent; but this will have a major impact on our local nonprofits and municipalities who are also falling victim to the brain drain. The cost to replace retiring or exiting financial talent is rising substantially and professional fee expenses from organizations such as ours will be soaring even if they can even find a service provider, as many have abandoned these practice areas. The biggest loser will be the communities and taxpayers, who will be directly impacted.
As wages and inflation continue to spiral higher, this issue will continue to get worse as it relates to white-collar employees. Unfortunately blue-collar employees or those not able to work from home won’t be benefiting from this windfall. Thus, the income disparity issue that many believe is already too large, will become even greater between classes of people in areas like western New York.
Jim Marasco is the Managing Partner of EFPR Group, a CPA firm with offices in Buffalo, Corning and Rochester, NY.