Future of Work : Why Geographic Inequalities Are Not About to Disappear
…and there’s nothing digital nomads can do about it
Donald Trump was the great winner of the growing geographic inequalities that affect his country. Without them he may not have won the presidential election. The more digital the US economy, the more unequal its geography of work and the more resentful the voters in deserted areas. Can these inequalities be expected to go down? Can remote work be the solution to combat rural depopulation and the declines of secondary cities?
I don’t think so. Last year, I wrote this piece titled “The Geography of Remote Work” in which I shared my thoughts on the subject of remote work and the geographic distribution of work. More than ever it is critical to be located where the party is on. There’s an obvious paradox when it comes to the geographic distribution of work in the digital age: although distance is dead (think Slack, Skype, GitHub and Google Doc), location has never mattered so much and the concentration of work has never been so extreme. Some cities become digital winners while others have lost the battle and are losing ever more population and wealth.
In spite of massive public investments, North/South or East/West geographic divides have not been reduced: Germany’s eastern Länder have continued to lose people and Italy’s Mezzogiorno has continued to become poorer. There’s just no economic activity in the deserted areas (apart from tourism maybe). If you’re a young graduate from a university in Saxony, Germany (one of the 16 Eastern Länder), chances are you will have to move West for a good job. Massive subsidies and public investment have made little difference.
As remote and freelance work are taking off, some believe there could lie the solution. This article claims companies should focus on hiring remote workers located in deserted areas, while this one (in French) claims there is a massive urban exodus due to the rise of digital nomads. But both ideas have more to do with the impoverishment of more and more workers and the rise of real-estate prices in big cities than with the empowerment of workers supposedly free to choose to live away from the city.
The reality is still that an overwhelming part of those who do choose to live away from the big city do so because they can’t afford to live in the big city, rarely because it offers them new opportunities. In a lot of cases they suffer extremely long and painful commutes as a result. Very few of them (let’s call them the “happy few”) get to actually enjoy the luxury of an idyllic rural lifestyle.
Dynamic centres are likely to continue to attract more people in the future
Initially factories were located in city centres, causing awful smog in the process (as in London), because they had to be near the ports or rivers. But with the invention of the container and as there was less and less space in cities, factories left the city centres. For most of the industrial age, whenever factories and machines represented huge costs, companies were free to locate their production in areas where space could be cheaper, often far from city centres, where workers could also find cheap housing.
So factories could be found anywhere: in the outer suburbs of large cities or in rural areas. In a way, the industrial age contributed to a better geographic distribution of jobs, activity and people. Geography didn’t matter so much. Then companies relocated their factories in third-world countries with a cheaper workforce. Transportation costs were so low that again geography didn’t matter so much.
In the digital age, conversely, the concentration of companies in high-density areas is increasingly high. Because more value can be created in less space (there is no need for big factories anymore), it is easier for companies to be where everybody is — where real-estate is expensive. Synergies, intersections, emulation, cross-fertilization are what makes the “ecosystem” a reality for a company. You just have to be where the others are if you want to be in a position to recruit them.
The Geography of Remote Work
Tech seems to have abolished distance: people are increasingly connected and communication is cheaper than it’s ever…
A host of more “traditional” companies (i.e. not from the tech world) have recently chosen to relocate their headquarters to big cities. McDonald’s has recently announced it will move its corporate offices to Chicago as have food conglomerate Kraft Heinz, commodities giant ADM and telecommunications firm Motorola Solutions. Their objective is to be in a better position to recruit the young professionals most likely to help them complete their digital transition. And hiring the best talent in software analytics, digital engineering or digital marketing is just very difficult if you are located in Oak Brook, Illinois, a town with 8,000 inhabitants (that’s where McDonald’s headquarters were located). This article lists some of the many companies that have made this kind of move: Aetna will relocate from Hartford, Connecticut to Manhattan; General Electric will build a global headquarters in Boston, etc.
Consequently more and more economic opportunities will converge in a few top cities in a kind of snowball effect, while jobs will be increasingly hard to find in some suburbs and smaller cities. More service jobs will multiply where the better paid workers flock, as new restaurants, shops, barbershops, medical centres will be created to cater to the newly arrived. The challenge for these top cities will be to continue to welcome more people and make it possible for less paid workers to contribute too. (A simple solution is often to just pay them more.)
Enrico Moretti’s book, The New Geography of Jobs, shows that you don’t have to be a scientist or an engineer to thrive in what he calls the “brain hubs” as, he writes, “carpenters, taxi-drivers, teachers, nurses, and other local service jobs are created at a ratio of five-to-one in the brain hubs, raising salaries and standard of living for all”. For Moretti, dealing with this split — reinforcing growth in the hubs while stopping the decline elsewhere — is going to be “the challenge of the century”.
Those who live away from top cities will depend more and more on them
As real estate prices in these attractive economic centres continue to skyrocket, more and more people have to seek housing elsewhere. It doesn’t mean their livelihood doesn’t continue to depend on these centres. Most of them have to endure longer commutes, as documented in the book Rush Hour: How 500 Million Commuters Survive the Daily Journey to Work by Iain Gately.
In San Francisco, for example, where real estate prices are particularly extreme, many workers suffer extremely long commutes. Other poor workers choose to sleep in their cars or couch surf away from their families just to work in the city for a few days (then they return home). Many of them live the life of poor migrants… in their own country. They may officially be counted as Nevada or Utah residents but are in reality highly dependent on San Francisco or some other centre for their livelihood. Their living in a low-density area can hardly be seen as a choice. (I highly recommend this article on the subject of San Francisco).
As small towns and rural areas have continuously lost people over the past few decades, they have had to reduce their infrastructures. There are fewer schools, fewer public transportation options and fewer hospitals and medical centres. The more deserted the area is, the faster it wastes away. What’s the opposite of a snowball effect called?
What about digital nomads?
Digital nomadism may no longer be a completely marginal phenomenon as an increasing number of highly-qualified mobile remote workers do relish the luxury of a nomadic lifestyle. But in the larger scheme of things, they do remain the exception. Because they are mobile and fickle, they rarely spend a lot of time in one place so don’t contribute to developing it. They don’t set up roots because they are more often alone. As long as they have an internet connection, they can afford to disregard the state of the local infrastructures because they are most often childless, young and healthy.
As Remote: Office Not Required authors insist, there is a lot to be gained by promoting remote work and offering long term stable remote work opportunities. If more secure workers enjoy the possibility of working remote, they could indeed contribute to making other areas more dynamic. But I doubt many will move to Wyoming as a result.
Unfortunately the promotion of “nearshore IT services” by platforms that capitalise on the impoverishment of off-centred workers won’t contribute to lowering geographic inequalities. If their aim is to offer companies cheaper options, they won’t offer workers better opportunities. Low paid gigs cannot be the solution. Quite the reverse, the higher-paid services of empowered workers (notably freelancers) may give them the leverage to actually opt for a more nomadic lifestyle… As long as they remain a fungible commodity they’ll be like slaves to those dynamic centres.