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The great tech labor market flattening?
One of the many byproducts of the coronavirus pandemic is its impact on work life. More specifically, work-from-home life. In countries around the world, millions of employees that can work from home now do, as part of the social distancing schemes being put in place to stem the spread of COVID-19.
Depending on the country, many of us have now been working from home regularly for two months or more. And at least in the tech world, our corporate overlords have started to realize something: working from home...actually sorta works? Jack Dorsey, the (part-time) CEO of Twitter, sent out a company-wide email last week announcing that employees (except the ones whose job functions can only be done in person) can work from home permanently going forward. (No word on whether they're allowed to work from Africa for six months out of the year.) This followed an earlier Facebook announcement that its employees could work from home for the rest of 2020.
Days later, Bloomberg's Sarah Frier wrote a piece in which tech employees mused openly about leaving excruciatingly expensive Silicon Valley for greener pastures, in places like Hawaii or *checks notes* Sacramento. (Hey, we all have different dreams.) One such employee, Dylan Hecklau, evaluating his pricey rent and envisioning a future comprised of either remote work or a return to an office devoid of traditional perks and stripped of its most social elements, asked: "Once the reality takes hold, why would we live in SF?"
Why indeed. I have long (semi-tongue in cheek) mocked San Francisco as "New York stripped of culture and every industry but tech," but Hecklau's question actually applies just as much to New York as it does anywhere else. The New York Times reported last week that a number of prominent Manhattan-based businesses are thinking the unthinkable: "But now, as the pandemic eases its grip, companies are considering not just how to safely bring back employees, but whether all of them need to come back at all. They were forced by the crisis to figure out how to function productively with workers operating from home — and realized unexpectedly that it was not all bad."
The potential scale of these decisions is enormous. As the Times article notes, three banks -- Barclays, JP Morgan Chase, and Morgan Stanley -- lease as much square footage in New York as exists in all of downtown Nashville. The Verge's Casey Newton, reviewing draft plans to reopen offices with strict social distancing rules and the removal of coffee bars and beer taps, asks: "Who wants to go into an office like [that]?" Moreover, as the Times piece asks: "If social distancing remains a key to public health, how can companies safely ask every worker to come back?"
But perhaps most crucially -- for all companies, but especially for tech firms whose leases represent a large chunk of their overhead costs -- now that they've seen how (relatively) smoothly remote work has gone, the prospect of cutting one of their most expensive outlays may be a temptation too sweet to resist.
Which brings me to a thought experiment. Imagine a world in the near future in which many, if not most, tech employees are allowed to work remotely on a permanent basis. In the short term, there would likely be a one-time migration of workers from cities with high salaries and an exorbitant cost of living to regions with considerably lower housing costs and income and property taxes. Marrying a San Francisco or New York salary to a Cleveland cost of living -- that's the dream, right?
But that's not where the changes would end. Employee recruitment would be fundamentally transformed. For positions requiring in-person work, companies have always been forced to pay going market rates -- which by necessity are bounded to the geographical area defined as a reasonable (defined quite generously, in some cases) commute time to the office.
In a remote-first world, the tech labor market will become truly nationalized (and for larger companies with mature HR and legal teams, internationalized). As Hecklau wryly notes, "The talent pool gets massive...Why would my employer pay me SF wages?"
Why indeed. Sans a crystal ball, I don't know how companies would navigate the compensation of current employees whose San Francisco-level earnings would soon be wildly out of sync with a new, much lower national equilibrium. Perhaps they would simply be grandfathered in (lucky bastards), or future increases would be frozen, or something else entirely. But almost certainly, new applicants for remote jobs that were previously based in the bicoastal tech hubs would confront a vastly deflated offer package.
This would also mean seismic shifts in the metropolitan real estate markets. San Francisco rent could actually become affordable again. Mid-tier cities like Denver, Austin, and Portland could see the opposite. Tech capital may start to mint affluence in areas throughout the country, rather than siloing it in increasingly cloistered superstar cities. (Hell, if VC Twitter feels like it's everywhere, no reason VC $$ can't be either.)
Of course, it's also possible we'll have a vaccine by this time next year, everyone forgets their pledges to abandon the office, a backlash mounts against the social isolation occasioned by remote work, startup founders continue to traipse out to the South Bay in search of funding and pearls of 280-character wisdom, and so nothing really changes. A fully remote tech workforce is hard to imagine. But then, so was a global pandemic.