The Future of Work
Like many of you reading this, my company and clients have all been pushed out of the office and into the confines of home. When COVID-19 first hit the United States, I predicted that it would have a lingering disruptive (in a good way) effect on both where and how we work. Traditions such as driving to an office, wearing a suit, and looking busy in between code reviews will increasingly be replaced by remote work where the focus becomes value that is delivered versus physical presence. Since February of this year, many companies have moved to allow employees to work remotely on a permanent or semi-permanent basis and that has led managers to reevaluate their workforce strategy.
One of the areas I am particularly interested in is how remote-first or remote-friendly companies will impact the Appalachian region. For the last 15 years companies have been springing up everywhere except Appalachia with Pittsburgh being the notable exception due to Carnegie Mellon University. Even the Great Lakes region has seen an influx of established companies and new startups, albeit quite small compared to areas such as San Francisco, New York, Boston, etc. The concentration of talent and wealth on the coasts has largely been a benefit for those areas (with some negative externalities, like homelessness in San Francisco and rocketing home prices), and the network effects generated here are responsible for significant technical innovation - at some level you really do need the best and brightest mixed in together in order to achieve great things.
The concentration of tech talent in a few high-profile cities has left most of the country, and Appalachia in particular, behind in economic progress. Boston does not compete for talent with Charleston or Lexington, but instead competes with London, Singapore, and Munich. This means that talent concentrates around a few global and highly competitive cities, versus geographic regions or even countries. What is especially concerning is that even basic corporate jobs at large tech companies (Microsoft, Google, Twitter, Netflix, Amazon, Uber, etc.) require people to attend Ivy League universities and relocate to high cost of living cities, like San Francisco, Seattle, Boston, and New York City. This has two negative effects: people who want to stay near their family and maintain social cohesion are forced to leave (i.e. internal brain drain) and companies are significantly overpaying workers in order to keep up with the costs of living on the coasts.
The COVID-19 phenomenon has caused companies to question the need to relocate workers to high cost of living areas, and also the need to maintain significant and extremely expensive footprints in those areas. Top executives will stay in the cities for now. Living in a high-profile city is a status symbol and aside from the occasional homelessness and crime, cities offer greater quality of life and world-class amenities that make them highly desirable. Not only can you hop on a plane and be in Europe in 6 hours on a direct flight, you get some of the world's best cuisine and dining experiences, desirable walkability, and immense concentration of globally relevant institutions.
When many of these companies were forced to move to remote workforces, management began looking at the costs and capabilities of a remote workforce, and for many companies hiring more remote workers makes mutual financial sense. You can hire a software developer in Parkersburg, West Virginia who can stay at home and help take care of their grandparents and still command a substantial salary, while also saving a company a large amount of money. If someone is willing to work for $80,000 per year in Parkersburg, why pay someone $140,000 per year and move them to San Francisco while also paying for an office? The economics of this scenario just won’t make financial sense for many companies, particularly as global competition increases. There remains a persistent idea in the psyche of the world that a few top cities have “all the talent”. While I think that it is true to an extent that talent has moved to a select few cities, what remains unaccounted for is that although the Googles of the world do hire the absolute best computer scientists, they also hire marketing professionals, sales team members, office assistants, and financial analysts. These jobs can mostly be done by anyone in the country, it just comes down to getting the job and relocating. With increased remote work friendliness, the orthodoxy of hiring and relocating to top cities comes into question.
In the long-term, more companies will allow remote workers or even have remote-first policies. So far this year companies such as Facebook, Twitter, and Box have announced remote work arrangements that no longer require employees to return to the office. In a recent survey posted on Entreprenuer.com, more than 60% of startup founders have said that after lockdown restrictions are lifted they’ll continue to allow some or all of their employees to work remotely . I've spoken to some managers that have instituted "within a day's driving distance" policies because they do want people to come into the office occasionally, and for good reason. Face-to-face will always be the best form of communication and team-building, but as companies continue to compete globally, it will make less and less sense to spend money for the sake of spending money by maintaining a significant office footprint.
For many positions, companies are going to be open to remote employees, and that means Appalachians are going to be able to compete for some of the world's best jobs. The greatest challenge is education. The Appalachian region needs to substantially increase investments in education to a point that’s never been seen in the history of the region. The remote job opportunities will be squandered if a child in the suburbs of Washington D.C. is still receiving much more educational investment than a child in Tennessee. A fantastic book that discusses aspects of this topic at length is The Meritocracy Trap by Daniel Markovits. Similar to other investments, the compounding effect of educational investment in children leads to a widening gap between wealthy households and everyone else. Markovits demonstrates that the gap between the wealthy and the middle class is greater than any other gap, including the gap between the middle class and poor, or the gap between whites and African Americans. If the region does not invest in education then the move to remote work won’t matter much.
If you’re interested in learning more about how Develop Appalachia is trying to address economic inequality in the region, please reach out to us.