Telework spreads the wealth and boosts innovation
The pandemic fast-forwarded the transition to a digital economy, and office jobs in particular will never be the same. Telework, as it is sometimes called, remote work, or working from home, is here to stay, with a substantial market share in the business of running the large organizations of advanced capitalism and democratic governance. That creates new opportunities for small towns and rural areas — or at least those with decent broadband infrastructure.
As the telework transition matures, it will spread the wealth in several ways.
First, all sorts of professional work that’s done on computers and does not inherently require physical presence — in a phrase, office jobs — will spread out from the metro areas where they were formerly concentrated to wherever office-capable workers live or want to move to.
Second, physical production will spread out, too, since — as telework becomes normal — factories won’t need to recruit their office staff locally and can afford to select sites with less of a labor shed.
Third, expect telework to stimulate the emergence of new businesses and industries by allowing new combinations of available land with skilled labor. The surge in entrepreneurship since the pandemic is expected to contribute to faster productivity growth and technological progress.
Big cities will have to innovate to overcome hollowing-out pressures. Urban office workers will face new competition from remote workers with lower costs of living, and factories will get more footloose as C-suites get more comfortable managing them remotely.
Against this, telework will enable cutting-edge teams to be assembled from all over the world to do things that have never been done before. While self-driving cars and other new quality-of-life amenities will help cities hold onto some office workers whom telework could enable to leave, expect the big beneficiaries of telework to be small towns, rural areas, and left-behind places, provided they have access to modern connectivity. That underscores the urgency of finishing the broadband buildout that Congress set in motion with the Infrastructure Investment and Jobs Act (IIJA) of 2021.
Telework will spread the wealth, but only as far as the broadband networks reach.
A more centrifugal economy
A “centrifugal” force moves things away from a center. That’s what happened to the U.S. economy during the pandemic. Big cities were hit hardest, as people, jobs, and spending shifted outward, away from city centers and into suburbs, small towns and rural areas, altering and often reversing the trend of a generation.
Some of the factors were transient. With lockdowns over and fears of contagious disease reduced, metro downtowns again are a draw. But telework continues to be a centrifugal force.
A recent study by the Economic Innovation Group entitled, “Economic Renaissance or Fleeting Recovery? Left-Behind Counties See Boom in Jobs and Businesses Amid Widening Divides,” confirms an intriguing and promising trend that many of us who are living in rural areas have been observing first-hand.
It used to be that most rural counties were losing population, as family farming and small-town factories declined, and ambitious young people moved to cities in pursuit of opportunity. Starting in spring 2020 amidst the pandemic, things began to turn around. Rural home prices surged, “help wanted” signs appeared everywhere, and now, this study confirms job growth and reports that new businesses have surged as well.
At the other end of the spectrum, most big cities have seen population growth slowdowns or outright population loss since the pandemic, as other Economic Innovation Group research shows. Downtown foot traffic fell by 36% between 2019 and 2022. Commercial real estate has been in a slow-motion crisis ever since the pandemic began, with rising office vacancy rates. Residential real estate did better, rising in big cities as elsewhere, a trend partly driven by demand for home offices as telework took hold. But there was a “donut hole effect,” with demand shifting from city centers to suburbs.
More recently, house prices have been falling in some “creative class” cities like San Francisco and Seattle. The pandemic shrank the restaurant industry, a classic urban lifestyle perk. We’re not talking about catastrophic deurbanization, but cities face more headwinds, even as foot traffic has recovered in most places (less so in New York City).
For even as cities have been freed from lockdowns, the rise of mass telework has liberated a lot of people from having to live in cities.
The eclipse of the office
Major metros have long been organized around mass office work. The skyscraper was invented to concentrate huge numbers of office workers in one place, and even when buildings don’t rise quite so high, urban density emerges to concentrate brainpower.
Every weekday morning for decades, highways and public transit have been crowded with cars and passengers going in, and the same traffic appears every weekday evening going out. Much of this traffic deposited people in offices, where they worked first on typewriters, later on computers, and always in a lot of meetings, doing the thinking and calculating and planning and decision-making that ran the organizations that oversaw the division of labor, specialization, and trade by which capitalism achieves such dazzling productivity.
All the commuting was a high price to pay, however. Studies find commuting at or near the bottom of the list of things people like to do, and long commutes are devastating for happiness.
When mass office work as a way of life dropped like a rock in 2020, the transition was shockingly easy. The sudden demise of the office, which had been such a central ritual of capitalism for so long, was weirdly innocuous.
Telework took up the slack and carried “white-collar” America through the pandemic, with its organizational functionality remarkably unscathed. This easy transition was possible, of course, because computers and the internet had thoroughly colonized the workplace and quietly taken over the business of writing, planning, communicating, and running organizations, leaving the physical office as a relic, maintained from habit and for show, until the pandemic suddenly exposed its obsolescence.
The open secret that everything important that can be done in an office can be done at home with an internet connection suddenly became public knowledge.
The return-to-office battle rages on, with some bosses issuing mandates that sometimes work and sometimes don’t, while many employees have voted with their feet, usually but not always in favor of telework. It seems clear, anyway, that telework, whatever its market share in the new normal may turn out to be, is here to stay.
Some young people just starting their corporate careers may never see the inside of an office. And that’s the best reason to think that the left-behind counties are experiencing a real economic renaissance, not just a fleeting recovery.
How telework will decentralize the economy
Telework provided an immediate economic windfall by saving people the time and costs of commuting. Looking ahead, it will do more — it will change how labor markets work. Then, it will change industrial geography, too. Telework will decentralize both occupations and industries. At the same time, it can help renew urban innovation.
We should expect telework to cause a sustained outsourcing of urban office jobs. Telework-based and telework-friendly organizations have outgrown the need to hire project managers, accountants, data analysts, proofreaders, and many others locally, so they’ll increasingly open up their hiring to nationwide searches.
For office workers living in creative-class metro areas, that means more competition, and sometimes downward pressure on wages. At the same time, remote office jobs will be, or already are, a big step up in pay and working conditions for people in economically backward areas who have the right skills. Remote office workers earn elsewhere but spend locally, boosting local economies where they live.
We should expect a decentralization of existing physical production industries, too. Physical production can’t be done remotely, but in organizations that have learned to telework, much of the management of physical production operations can be remote. That means you don’t have to locate your physical plants near where the cognitive professionals live. It frees industry to follow low-land prices and light regulations into smaller towns.
Every industry will face these centrifugal pressures, stronger or weaker depending on the ratio of office work to physical production work. A recent boom in factory investment will reshape industrial geography, and while towns that have suffered from factory closures in recent decades shouldn’t count on those losses being reversed, many can benefit from the opportunities of a manufacturing renaissance.
Finally, telework will empower — or is already empowering — new entrepreneurs to assemble new teams, do new things, and start new industries. The Economic Innovation Group finds a surge of “establishment growth” — new businesses — in the left-behind rural counties. After decades of stagnation, these counties now have 9% more business establishments than in 2019.
This post-pandemic entrepreneurship surge is observable almost everywhere. Telework helps to free all this business creativity from some of the limitations of a local workforce, so it can be more scalable and impactful.
Closing the Digital Divide
The rise of mass telework is a promising trend for rural and small-town America. Unfortunately, that trend is not much use if there’s no decent internet service available.
While cities and metro area suburbs have long enjoyed access to broadband at bandwidths of well above 100 Mbps, fast enough to support multi-device video streaming and other demanding applications, millions of U.S. residences and businesses are still unable to access reliable broadband service at download speeds of even 25 Mbps, and upload speeds are slower still.
Even before the pandemic, such inadequate internet service caused people to move away, and the increased dependence of the economy and society on the internet will presumably make the problem worse with time.
Fortunately, help is on the way.
The IIJA of 2021 instituted the Broadband Equity, Access and Development (BEAD) Program, with a $42.45 billion budget, which seeks to establish universal broadband coverage at fairly modern speeds of 100 Mbps download, 20 Mbps upload.
Implementing BEAD is a major challenge, and the program is unlikely to be completely successful, but a large majority of unserved and underserved locations should get internet service at modern speeds by the end of the decade.
As they do, they can plug into the centrifugal economy of the telework age and experience an economic renaissance as jobs spill over from the big cities and land in places that used to get left behind.
Rural America has a brighter future as telework spreads the wealth.
About the author: Dr. Nathan Smith is a Broadband Policy Specialist for Connected Nation. In that role, Dr. Smith monitors federal broadband policy, writes public comments for federal agencies that request advice on broadband policy implementation, and helps with business development and proposals