Bloomberg Businessweek December 21, 2020 pp32-37 “go burbward, young knowledge worker”. “the pandemic has meant that white-collar workers can suddenly live anywhere. That will have implications for pay-how does a 20% salary cut sound?-and could reshape the U.S. by noah buhayar
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Summary of the Article
An excerpt of data presented in a chart accompanying the article.
If you plot Pay Index (PI) Versus Cost-Of-Living Index (COLI) you find municipalities that are balanced in that PI balances with COLI such as Oklahoma City, Milwaukee, Chicago, Trenton, and Washington D.C. and then there are some close to this equivalence line that offer some worker arbitrage (pay is better than cost of living [left of the equivalence line]) including Tulsa (94 Vs 90) and Houston (108 Vs 92) and some are inequitable (pay index is worse than the cost-of-living index [right of the equivalence line]) including Portland Oregon (102 Vs 115) and Los Angeles (113 Vs 147). See the article for many more municipalities. Some of this trend of working from home (WFH) and fleeing the city could reflect in regional population growth rates. These data illustrate municipalities with a growth rate over 20% are Boise (Left of the equivalence line [L]), Provo [L], Bend [L], Raleigh [R] and Austin, Texas [R]. Some areas have negative growth rates including Chicago [on the equivalence line] Rochester NY [L], Toledo [L], Cleveland [L], Syracuse NY [R], Modesto [R], Hartford [R], Walla Walla, Wash [R], Pittsburgh PA [R]. See article for growth rate in many other areas.
At this point more than ten months into the pandemic companies are assessing to what extent certain roles can continue WFH. In some employment situations, where the current pay was based on a higher cost-of-living area, a firm may ask the employee to accept pay cut up to as much as 20%. Unbeknownst to many companies have always had such a policy but it’s hidden in rates offered for identical roles but performed on-site in different locales. ONe then would surmise that on average job A in Los Angeles would pay more than the same role in Syracuse NY. In that past, movement of staff and retaining the same role at the same rate has been more of a "one-off" and evaluated on a case-by-case basis. Sometimes retaining a key employee would override concerns about regional pay equity.
With the COVID and the sudden ability to WFH many tech workers have fled cities. As an example, Rachel Musiker, was on maternity leave and her husband works in the insurance industry, “had loved her Brooklyn neighborhood. The rent was ridiculous, but there was a bistro a few steps” away and childcare nearby. So, they moved to Rochester NY, living with her parents temporarily but then bought a home. “In August, [after she returned to work as Director of Communications for Redfin] the couple bought a four-bedroom, 3,400 square-foot house for $355,000” versus paying rent for a “two-bedroom basement apartment [in Brooklyn]” where “It was just starting to feel unsafe to even go for walks.” Despite her past reluctance she is quoted as saying “Rochester wasn’t that bad” mom helped with child care, shopping was easier with a car, and there was a straight-out-Brooklyn craft brewery nearby.” Subsequently, given her new locale “Redfin asked, would she be willing to accept a pay cut?”
Reportedly only 8% of the U.S. workforce fully WFH after spiking at 35% in May. Although the rate has fallen there’s likely to be an impact on commercial office space “if the exodus to second cities and exurbs become permanent, it has the potential to improve corporate balance sheets, remake labor markets and profoundly reshape the American landscape.” Some secondary cities and exurbs may see prices rise with the influx. According to Nick Bloom (Stanford) “There’s going to be a reverse of the urban boom.” Some executives including Jamie Dimon disagree “suggesting, in various ways, that remote employees aren’t as productive, that corporate cultures will be eroded, and that worker’s mental health will suffer.”
Musiker notes “We were making a lot of sacrifices in Brooklyn, in Rochester we get so much more for our money.”