More employees are working remotely and are re-evaluating what matters. Ultimately moving to places that better meet their needs.
In 2020, remote work is a hot topic. Companies are downsizing corporate offices and allowing employees to work remotely on a permanent basis. In fact, the global commercial real estate firm Cushman & Wakefield recently estimated that after COVID-19 subsides, at least 10% of the workforce could be permanently working from home.
Prior to the pandemic, the push towards remote work was already underway and helping to create a new social class divide. Digital and location-independent workers of the information age versus the location-dependent workers more characteristic of the industrial age. It’s no longer a blue collar vs white collar divide. Now, the needs of these emergent social classes are changing and leading to societal shifts.
Some of these shifts created by permanent remote work include an alteration to the corporate real estate landscape, an ability for organizations to rethink how they source and manage employees, and a reprioritization of location preferences for both employees and companies.
Remote Work Reprioritizes Personal Preferences
As an employee, you’re not tied down to any specific location because of work. Therefore, you can expect your priorities in living preference to change. How might the transition to permanent remote work impact your decision on where you ultimately live?
During the pandemic, remote work means working from home because of lockdown procedures. You’re influenced by the outbreak and the government reaction to it. You may decide to move out of a densely populated city to avoid exposure to people. Or you might move to an area in which the school district has decided to stay open. Perhaps you’d select a state with better laws for hiring personal teachers for micro-schooling.
But the pandemic won’t stay around forever and current preferences may prove temporary.
Preferences During Normal Times
In normal times, remote work is conducted anywhere. Jobs that include programming, content creation, sales and many functions traditionally tethered to a specific location don’t require recurring onsite visits.
With remote work, what you may lose in team building you make up for in quality of life. But there are some differences in prioritization of needs based on whether employees have families with young children, just a spouse or they are single.
Rising crime and quality of schooling are important factors for families but may be less important to an employee with no dependents. Many school systems are experiencing the Red Queen Effect and are struggling to keep pace with digital workforce needs. Families that are able to work remotely will relocate to better school districts or locations that permit innovative approaches to education.
As an example, not all states are as open to homeschooling formats and many have varying types of restrictions. The decisions school systems make will have lasting consequences on whether families relocate or not.
Remote workers also evaluate cost of living and relocation arbitrage opportunities available to them. If you can collect a high salary and relocate to a cheaper location, you gain an ability to save more or live a higher quality of life.
Other location-based preferences include rural vs urban living, living closer or farther from family, living abroad vs domestic, tax jurisdictions and criminal codes. If you’re not required to live near your work, you can reevaluate what’s important to you.
Questions about Remote Work Preferences That May Impact Regional Government Policies
- Which governmental policies will ultimately come into focus on these decisions?
- Will locations that opt for a defund the police strategy see an inflow or outflow of location-independent workers?
- What about taxes? Will California’s tax code alterations lead to an inflow or outflow of people compared to Bermuda or Puerto Rico tax policies? As Paul Graham recently wrote, a wealth tax such as what California proposes has significant consequences and will cause people to move.
- What about healthcare? Can we expect some individuals to relocate to locations with better healthcare systems? Or countries that provide universal healthcare not tethered to your employment.
So What Can We Expect to See from Remote Work?
In simple terms, people will start to move. That manifests as more homes listed for sale. In the event that it happens quickly on a broad scale, an adjustment to both rental and home sale pricing might take place. Widespread remote work will lead to an outflow of people looking to live abroad and corporate real estate leases not being renewed.
A recent Zillow Study shows that we are seeing some preliminary changes in the housing landscape. In most major cities, there is a tightening of the housing inventory available. This could be for many reasons including low mortgage rates. It could also result from a fear of relocation during the pandemic. Or it could in fact be that there is no significant change in relocation from remote work at this time. It’s too soon to make any judgement based on these types of lagging indicators.
However, there are above average changes are taking place in San Francisco.
This is not surprising given it’s the prime tech hub in the US with a major location-independent workforce. Ie: they are effectively becoming a permanent remote workforce. San Francisco has also been a leader in the move to permanent remote work by companies residing in this location.
There has also been increasing rental vacancies starting with areas traditionally inhabited by higher net worth individuals. As more companies offer permanent remote work, this may expand to lower income brackets.
Early Consequences of Remote Work Preference Changes
Expect large company announcements of permanent remote work will function as early warnings of location based preferences changing. In the shorter term, not much will change. It will take time for the remote worker to decide whether that’s a desirable lifestyle. Some may look for more traditional jobs while others make sense of the new change and what it means for their lifestyle choices.
In the longer term, relocating workers will have their wages impacted. Preliminary indications point to a renegotiation of compensation with a reduction in salary for workers that opt to relocate.
The push to remote work and subsequent renegotiation of compensation will lead to a global equalization of opportunity. As companies realize they can effectively pay less for the same quality of labor by expanding their employee search parameters, opportunities will move abroad. In short, many digital jobs will be outsourced to locations with lower costs of living where the demand for higher wages is less.
“In fact, tech companies could start upping their recruiting efforts not just all over the country but all over the world. That raises the potential for the tech labor market to be upended by globalization the same way other sectors of the U.S. labor market have been.”A recent WSJ article
Remote workers may then ask themselves if it make sense to move to a lower cost of living location to become more competitive in a globally diverse job market.
What It All Means
As remote work becomes a normalized option for location-independent workers, expect to see a significant reordering of location preferences. This will have lasting consequences to how local and national governments adjust their policies. It’s too soon to have a complete understanding of how this change will play out. But we can certainly monitor early indications of the changes that take place. If you’re allowed to work remotely on a permanent basis, ask yourself, are you going to stay where you’re located now or move? Why? You may be surprised by your answers.
Caveats – Pandemic Risk
Right now, it’s become a meme to say people are fleeing cities for rural areas. The evidence does not yet validate this type of claim. In fact, it really wouldn’t make too much sense to see an immediate change in behavior solely based on the ability to work remotely. There are many factors and personal preferences that impact a decision to relocate.
The pandemic is accelerating the push to remote work but the undefined nature of the outbreak makes relocation decisions difficult for most people. Making living arrangements is challenging under normal circumstances. Adding a pandemic and the uncertainty about whether remote work will truly be permanent further complicates these decisions.
We cannot assume most people will relocate to the wilderness when there is a possibility of being asked to come back to the office in a short timeframe. Viral outbreaks and the corresponding government solutions have been unpredictable at best. Leaving one location for another during this unpredictability is a risk factor that will impact decision making. Many will simply opt to wait before deciding to move.
Speaking of risk, most digital workers cannot afford to pay 2 rents or mortgages at a time. If wide-scale permanent remote work takes place, the market may be flooded with a supply of housing inventory in markets with limited demand. Like in San Francisco. If this happens, it may be the case that many digital workers are stuck with the majority of their capital tied up in their home. In other words, they are at the mercy of their mortgage. Just because inventory is listed doesn’t mean people are actually able to move.
The ability to work remotely on a permanent basis will lead to a reshuffling of factors impacting how workers decide where to live. Priorities will shift but until the conclusion of the pandemic, its hard to know how changing preferences will impact society.