New York City losing more than $4,660 annually per worker from remote work, study says

The question of what U.S. workers have for lunch — leftovers, take out or a restaurant meal near work — is taking on more importance as they join the partial migration back to the office.

Economists are pondering the impact of lunch money and other spending by commuters, with a new study estimating New York City’s economy could lose as much as $4,661 a year per worker, assuming their time in offices is down almost 33%. 

That dollar figure is the highest estimate of any of the dozen major cities examined, with Los Angeles coming in second at $4,200, followed by Washington, D.C., at $4,051, according to WFH Research, which publishes the monthly U.S. Survey of Working Arrangements and Attitudes, run by Stanford University and the University of Chicago, among other entities.

Chicago, with a $2,387 estimated loss, Houston, at $2,167, and Philadelphia at $2,161, are the bottom three.

A Bloomberg analysis using "exclusive" data by the same WFH economist who did the study estimates Manhattan workers are spending at least $12.4 billion less a year due to about 30% fewer days in the office.

The authors, including Stanford University economist Nicholas Bloom of WFH Research group, calculated the figure by multiplying the annual inflation-adjusted loss in spending per worker by the U.S. Census Bureau’s estimated nearly 2.7 million commuters and residents who worked in Manhattan in 2019, according to the analysis.

However, buoyant local sales tax collections — which of course include spending by commuters — appear to counter the WFH Research, and possibly, some of its calculations may be a little overstated, said experts who noted the economic transformations wrought by COVID-19 have yet to conclude. 

Based on 200 working days in a year, the WFH Research estimate of what a New York City commuter spends per day is $22, said Mark E. Johnson, a spokesman for state Comptroller Thomas DiNapoli.

“Offices are half full … so assuming 50% of people are office workers are commuting (that equals) $44.”

Bloom, however, defended the estimate. "I think it's a pretty high quality estimate," he said by email. "We surveyed folks back in mid-2020 about how much they spent near work in three buckets: food and drink, shopping and going out," he said, and this data then was broken into ZIP codes.

Sales taxes are assessed on all manner of goods and services. and last week, DiNapoli said local sales tax collections in the state ballooned 12.7% to $22.1 billion last year from 2021. In New York City, the gain was 20.6%.

“This growth has been boosted by increases in commuters returning to the office, and domestic and international tourism, which has helped strengthen service industry sectors, such as accommodation and food services, transportation, and arts, entertainment and recreation," he said in a statement.

Nassau’s increase was 7.2%; Suffolk’s was 5.5%.

Fitch Ratings, in its 2023 outlook published in December, said it anticipated credit quality would be stable for U.S. states and localities this year, though it warned a softer real estate market was a concern. "But the twin dynamics of a rapidly cooling housing market and a commercial real estate market adjusting to the pandemic shift away from office-based work could pressure property taxes more quickly than in the past," it said.

"Strong financial resilience, including high reserves, should allow most state and local governments to absorb a moderate downturn at current rating levels."

New York City Comptroller Brad S. Lander said in a statement: “At the beginning of the pandemic there was a lot of worry that people would not want to live and work in NYC – yet three years on jobs are back to 98%. Workers are spending less time in Manhattan, but new businesses are cropping up a record rates in Brooklyn and other outer boroughs. The shift to hybrid work poses many challenges for local businesses, for fareboxes, and for commercial property values, but also many opportunities as New Yorkers adapt to new rhythms and habits at home and at work.”

Kathryn Wilde, president and CEO of the Partnership for New York City, a business-focused nonprofit, said the economy is still in a transitional stage.

“We’ve got a problem, but I think it’s a short-term problem while the work adjusts to the new reality.” She added: “My read is the digital economy came upon us suddenly and it just takes time for the real estate industry in particular to respond, and for markets to respond, to the impact of the instantaneous nature of remote work, and remote shopping, and remote education, and remote health care and everything else.”

Similarly, Bruce Reinstein, a partner with Kinetic12, Chicago-based food industry consultants, said his industry still was adapting to post-pandemic realities. “Restaurant operators have new prototypes; they are smaller, focused not so much on dining in” but on expanding take out.

“This is a forever change; it’s not going back to the way it was when everybody ate inside and did a little bit of take out — even fine dining restaurants are doing off-premises business," he said.