What urban flight means for the future of work
There was more than a 50% increase in people looking to leave New York City in October compared to the previous year. What’s more, the amount of vacant office space in Manhattan is at its highest rate since 2009, with commercial property sales in the city dropping by nearly 50% this fall, and occupancy rates in metro area apartments are expected to continue to decline in 2021.
Layer that with remote work entering the mainstream, and it’s no surprise that many business leaders are facing the conundrum of managing distributed workforces for the first time. Before the pandemic, only 1 in 5 workers who could do their jobs from home actually did. Now, over 70% of those employees are teleworking either all or most of the time, and nearly 40% say it’s now easier to balance work with family responsibilities. And while the seemingly overnight transition to remote work was overwhelming at first, the majority of workers have settled in, with 80% saying they’re able to meet deadlines on time, 77% saying they have an adequate workspace, and 68% able to complete their work without interruptions.
If anything is certain from the past year, it’s that we won’t regress to life before COVID-19, even after a vaccine becomes widely available. Business leaders will need to craft forward-looking policies today that address the needs and concerns of workers no longer bound by geographical location, especially as nearly 40% of organizations still don’t have formal policies around flexible work.
Here are three major workforce trends that every business executive will need to account for in the decade ahead.
Don’t expect employees to come running back to cities (just yet)
Jerry Seinfeld and more than a handful of New Yorkers will be quick to tell you that “No, New York isn’t dead.” They’re right; it’s hard to believe that one of the most vibrant and densely populated cities could vanish, even with a deadly virus that has rocked the city since early spring. In fact, tech players such as Amazon, Apple, Facebook, and Google have recently snatched up office space in Manhattan to expand their workforce significantly in the Big Apple.
However, it’s undeniable that many have fled for the suburbs, leaving a lasting mark on business as we know it. Just one example is Santa Barbara, a suburb of Los Angeles, that saw a 124% net inflow increase during late summer. And we’re starting to see signs that tech is willing to venture out of its familiar haunts—just ask Elon Musk and Oracle, who are ditching Silicon Valley for Texas. This comes as metropolitan centers on the West Coast that have consistently suffered from the virus experience a degree of urban flight; 15% of working professionals in the San Francisco Bay Area have left the region since the pandemic began. With 44% of six-figure earners (the salary range of many tech workers) in New York saying that they’ve considered relocating amid the pandemic, East Coast cities aren’t in the clear either.
The most likely scenario is that while big cities won’t lose their long-standing luster and appeal, many employees that ditched their tiny, overpriced apartments are done with city living for good. Workers enjoying greater flexibility, cheaper housing, and no commutes won’t be keen to give those perks up—and they shouldn’t have to. Nothing will bother your employees more than a mandate to head back to the office once the pandemic is under control.
Instead, leaders should take action on a case-by-case basis and give employees a chance to share their preferences. This doesn’t mean you’ll have to move to a fully remote workforce, and it doesn’t mean you’ll need to cancel your lease on your downtown headquarters—but it’s time for leaders to prioritize employee well-being, autonomy, and productivity over traditional work models. After all, happy, healthy employees make for better business.
The world is less connected than we think
Demographic shifts have traditionally taken years, but as modern technology has whittled away at physical boundaries, we aren’t tied to traditional job hubs like we used to be. Suburban and rural areas are now in play, but with one crucial caveat. Remote-work advocates have celebrated the dawn of a “work from anywhere” era, but for now, we’re living in a “work from almost anywhere” world.
It’s easy to forget this when Wi-Fi is as readily available as oxygen in urban areas, but parts of rural America still lack widespread and reliable internet access. The need is so great that the FCC recently awarded billions of dollars to broadband providers to expand internet access for millions of Americans who still lack it.
Remote work is only as successful as the underlying infrastructure that supports it. If employees don’t have the bandwidth they need to deliver without delay consistently, the business will suffer. 5G offers a hope of global connectivity, but we aren’t there yet, and most of the early rollout is limited to big cities. For now, we’re still living in a “digital divide” where more than 26% of rural areas don’t have access to high-speed broadband.
This doesn’t need to dampen our excitement for teleworking possibilities, and it shouldn’t deter employees from pursuing remote-work programs offered by suburban locales eager to convert city slickers into permanent residents. But it does need to ground business leaders when they consider granting remote work requests, opening new offices, or even moving headquarters. Connectivity is everything, and leaders that fail to recognize this may handicap their employees before they even get started.
The compensation debate still has fire
As employees move away from urban headquarters to work in more cost-friendly suburban or rural locations, businesses face tough questions around relocation compensation. There are generally two stances—either reduce pay to better match the local cost of living or keep salaries the same, knowing that the nature of the job isn’t dependent on the location.
It’s safe to assume that employees aren’t about to jump in line for a pay cut, but many employers are already deciding to slash salaries. For example, Facebook was quick to announce its acceptance of remote work, even saying that as many as half of their employees would be remote in the next 10 years. But the company also made it clear that pay would be tied to location, meaning that workers moving from their Silicon Valley offices to, say, Boise, Idaho, could expect to shed some dollars. By contrast, Reddit has announced that their employees won’t take a pay cut even if they leave the Bay Area, and 61% of organizations say they’ll pay fully remote workers the same as in-office employees in 2021, regardless of their location.
There are merits to both sides. Companies that tie compensation to location may be able to afford a more diverse and experienced workforce, getting rid of unnecessary geographical boundaries. And those spending almost half their salary for rent in a studio apartment in the middle of the city may resent employees living in a mansion in the middle of the country. On the other hand, employees who are doing the same job shouldn’t have to be penalized just because they want a higher quality of life. The company is also likely to save money in commercial office space and other fees when more employees work from home.
Regardless of where your business lands, the most important policy will always be honesty and transparency. Leaders will need to create specific remote-work policies related to compensation and clearly communicate these plans to current and future employees (because the alternative is employee alienation, decreased retention, and industry tension).
As the demographics of the nation have shifted, so has the nature of work. Business leaders should view this not as a threat to the old guard but as an opportunity to foster a more diverse, more fulfilled, and more productive workforce—no matter where employees are based.
Peter Jackson is the CEO of software company Bluescape, who has founded and led several startup tech companies to acquisition and IPO exits.