Everybody loves remote work. No commuting, no hot conference rooms, and sometimes no pants.
Even beyond the comforts of home, remote work holds other promises. For more than a decade now, almost all job growth has concentrated in superstar cities where no one but the college educated can afford to live. This trend has exacerbated (and been blamed for) gentrification, the “death spiral” of rural America, homelessness, and even Trump’s election.
Now that many companies can hire anywhere - including podunk towns across the country - shouldn’t that cure all our ills?
Source: JPM Private Bank.
Indeed, Noah Smith of Bloomberg even thinks remote work could lead to a productivity boom, through more free time, cheaper housing, and a better talent pool.
But is removing friction always a good thing?
I’ve been working remotely for almost five years - thanks to the pandemic and Joe Lubin’s foresighted policies at ConsenSys - and absolutely love it. Dozens of my coworkers have taken advantage and moved out of the NYC area to places like Raleigh, Austin, and Savannah. But I’ve also noticed an odd pattern: all of them were white.
Why might that be?
Buying what I’m Schelling
John Nash (of “The Beautiful Mind”) is undoubtedly the most famous game theorist, but Thomas Schelling was arguably as accomplished, writing analyses on nuclear war and even helping to inspire Dr. Strangelove.
Schelling wrote in a famous paper that game theory suggested racial segregation could have both intentional and unintentional causes. As you can test in your own simulation, if any group has an even slight preference for living closer to people of the same background, neighborhoods often end up segregated.
Polling data bear this out. In polling (and of course, sensitive topics don’t always poll perfectly), all racial groups in America expressed very similar sentiment: they were fine with diverse neighborhoods, but they did not want to be a small minority (i.e., on average, respondents liked a community where 3 out of 8 neighbors looked like them).
Unfortunately this creates a problem. Since no one wants to be a small minority, America’s racial mix (~60/20/15/5) makes fully integrated neighborhoods satisfactory to no one except white people.
The data and the theory show that mild, socially imperceptible preferences can end up in high levels of segregation without the influence of policy or culture.
This may have been surprising when Schelling wrote his ideas in the 1970s, but in 2021, New York City is still one of the most segregated cities in America, and many are in the northern states. Throw in racism, redlining, and all of our other history, it’s no surprise more than 50 years after Brown v. Board America is not very integrated.
What does this have to do with remote work?
In the last six months, COVID has turned a gradual migration from the superstar cities to the Sun Belt into a relentless torrent as millennials look for affordable places to live. Even within cities, movement from cities to the suburbs has accelerated.
If we apply Schelling’s logic and survey data, who do we think is most likely to move? Minorities who live in urban enclaves or on the more diverse coasts will likely want to stay, while white Americans will find themselves in places like North Carolina, Texas, and Florida.
Recent racial demographic data on migration is not easy to find, but in general trends show strong differences in migration destinations and a large North-South movement among white Americans:
That means, apart from the effects on segregation, minorities would stay in higher cost areas while white Americans end up in small metros and suburbs where homeownership is easier and cost of living cheaper. Given homeownership is the biggest piece of household wealth, that may indicate these stronger migration patterns might feed directly into inequality. That wealth tied up in the household gets transferred from generation to generation, creating long lasting effects. That doesn’t even consider the potential effects of migration on the origin cities, which will lose tax base and more educated residents.
Crowding the Pool
Aside from migration, remote work may create other complications even as it “flattens the playing field.” Politicians have bemoaned the concentration of jobs in coastal cities, and remote work promises to open up the talent pool to anyone, anywhere.
The workplace should naturally become more diverse, right?
But that seems contradictory. Tech is concentrated in large metros that are the most diverse places in the country. Opening the talent pool up to include small metros or rural America would reduce the share of diverse candidates as a percentage, even as it may benefit small towns in need of more employment opportunities.
Corporations in big cities are likely to be the biggest beneficiaries, taking the best talent from smaller cities to displace locals who may have needed more training. That would generate a “crowding out” effect. Meanwhile, lower level jobs like assistants filled by minorities might simply move abroad as we all adjust to a more remote-friendly world.
We’re Not in Kansas Anymore...Or Are We?
Given the census only occurs every ten years, it seems we will likely have to wait some time to see whether this thesis plays out. And it’s possible the societal gains from the “Zoom boom” will be so widely distributed - say making childcare easier or cheaper online tutoring - that the inequality effects will wash out.
On other hand, even if we take out the racial considerations, the fact that remote workers - already better paid than non remote - will be able to save on commuting and housing costs has its own implications for inequality.
But I figured this simple thought experiment was an interesting example of how technology can remove frictions and make our lives easier - but how that generates second and third order effects that we barely anticipate.
Even as America gets more equal and more diverse every year, the path to remove those remaining stubborn stains of our history gets more difficult - and requires more careful introspection on the effects of policy, both intentional and unintentional.
>> On other hand, even if we take out the racial considerations, the fact that remote workers - already better paid than non remote - will be able to save on commuting and housing costs has its own implications for inequality.
Employers already adjust pay by city/locality, though. Not all of them do; regional and small businesses generally don't, but many major/multinational ones do. And how long do you think Google is going to keep paying Bay Area wages to every Bay Area Googler who figures they can cheap it out living in Tempe, Vegas, or Salt Lake?
I'm tempted to say that regional and small business may be vulnerable to workers going remote, but those businesses' salaries are also much more strongly determined by revenue fluctuations, and the first place any small business owner will look for savings is at that employee living high off the hog in a low-cost locale. If anything, it leads to a structural disadvantage for any firms who are pre-hoc structurally more likely to not already be locality-adjusting pay - overpay your remote employees, or skeet them and end up with the same or worse pay-to-satisfaction that you were getting before. It's kind of a wash from the theoretical side: no clear advantage with either choice.
But between those businesses and the big players, the savings workers realize from the Zoom Boom will be nonzero, but they won't be uniformly distributed, and importantly, there won't be any structural racial component to the nonuniformity on top of the global structural components which you've already identified.
I do agree that corps are likely to be the biggest beneficiaries overall. I'm always reluctant to declare winners in the "horse race" aspects of any trend; they tend to defy prediction. It's impossible to say that St. Louis will benefit more than KC or Des Moines, and impossible to say that any level of workers will disproportionately come out on top. Overall, none of the fundamentals really point to a clear conclusion in the same way as, say, the current rising wages for workers at the bottom due to labor scarcity.