How ‘Work From Home’ Became ‘Work From Anywhere’
What You Need To Know
The way the pandemic reshapes where and how we work could be one of the most visible legacies from the health crisis. In the U.S., lockdowns sent many wealthy knowledge workers fleeing to suburbs, second-tier cities, and “Zoom towns” in scenic areas near ski slopes or national parks. While most people will eventually return to an office, things might look different than before. It all has the potential to profoundly impact office culture, labor markets, city finances and the American landscape.
1. Who’s moving where?
There are some broad themes, mostly involving knowledge workers who’ve fled high-cost coastal U.S. cities and dense urban areas. Technology workers are abandoning the San Francisco Bay Area for places like Denver, Miami and Austin, Texas. Some professionals in finance have been attracted to South Florida, as well. The apartment markets in both San Francisco and New York are showing the strain, with rents dropping by double-digit percentages from a year earlier. Suburban enclaves and second- and third-tier cities outside major metropolitan areas are seeing some of the fastest home price appreciation in the U.S.
2. Are employers agreeing to this?
Some are. Facebook Inc. Chief Executive Officer Mark Zuckerberg, for instance, has said that as much as half of his company’s staff won’t work from an office in the next decade. Other tech firms, such as Microsoft Corp. and Twitter Inc., have also embraced more flexible work arrangements. Some employers, like Deutsche Bank AG, are envisioning “hybrid” schedules where employees spend part of their work week at home and part at an office. Companies have said remote work might help them recruit and retain a more diverse workforce and boost productivity. (Think of all the time saved on commuting.) The bottom line could also benefit if companies can reduce the amount of office space they need or pay people less because employees decamp for cheaper locales.
3. Will workers agree to a pay cut?
Companies and large organizations, including the U.S. federal government, have long paid people based on where they work, reflecting the wide range in the cost of labor and living in different markets. That means some people who are leaving high-cost areas for a lower-cost one may be taking a pay cut. In many cases, though, these reductions in compensation are offset by cheaper costs or lower taxes, so employees may not see a major reduction in their standard of living. A study by human resources consulting firm Mercer shows that tech companies have generally been paying more than salary surveys suggest when employing people outside Silicon Valley.
4. How does the tax get sorted out?
It’s not clear. While many companies have asked employees to tell them where they’ve been doing their jobs to comply with tax laws, remote work has presented thorny fiscal and legal questions for state and local governments. One of the most contentious issues revolves around state laws that require nonresidents to pay income tax where they have an office. New Hampshire, New Jersey and Connecticut, for instance, are waging a legal battle to prevent neighboring states from taxing residents who, because of the pandemic, are working remotely and have stopped commuting over state lines. Longer-term, migration could erode the tax base of high-cost cities and states like New York and California.
5. How might offices change, once we’re back in them?
A lot will depend on how frequently people come back to the office. But just about everyone agrees that it will be fewer days than before, and that office spaces should be geared toward the types of activities that are harder to do virtually. Some companies have talked about doing away with desks and expanding areas workers can use to collaborate on projects. Overall, the demand for office space is expected to drop by about 10% to 15% in the U.S., according to real estate research firm Green Street.
6. How is this playing out elsewhere in the world?
It’s a mixed picture outside of the U.S. In Australia, workers have pushed out to semi-rural locations, driving regional house prices up 6.9% in 2020, three times more than in the country’s big cities. In Europe, border closures and the introduction of travel bans between countries inhibited movement to more scenic spots. One exception is the flight of many eastern Europeans from pricey cities such as London back home to the Czech Republic, Romania and Poland, reversing years of migration in the other direction.
7. Is this the end of urbanization?
Certainly not. Cities are fun and many people will choose to live in them once the pandemic is over. The economic and career benefits of living close to other people will endure. But justifying the costly housing in cities like New York and San Francisco is going to get harder as more professionals have opportunities to live elsewhere. That could provide a tailwind to less-expensive cities that are able to attract fast-growing companies and the knowledge workers they want to hire.