The Rise of Remote Work: How Smaller Cities are Attracting Top Talent Away from Big Tech Hubs/

Over the past year, remote work has surged due to the pandemic, and major urban centers like San Francisco and New York have seen the sharpest declines in rents as crime rates surged and residents fled. With shutdowns imposed to limit the virus’s spread, employers found that most computer-based office duties could be done productively from home. This shift in how people work is having a profound impact on where people choose to live and work, and as a result, smaller, more affordable cities are emerging as new hubs.

A New Paradigm for Urban Economies

According to the McKinsey Global Institute, smaller hubs like Madison, Wisconsin, Jacksonville, Florida, Salt Lake City, and Sacramento have seen an increase in workers relative to outflows from April through October 2020. In contrast, the ratio of workers moving to New York City versus people departing was -27%, while San Francisco saw a decline of -24%. Erik Stettler, a business consultant, believes this shift is a new paradigm for urban economies. Cities will now compete for the best talent, rather than the world’s best talent competing for access to certain key financial and tech hubs.

The Impact on People’s Lives

For many people, remote work has given them the opportunity to move to areas with a lower cost of living and a higher quality of life. People like Kate Valdes, a product designer who once worked for Netflix in Silicon Valley but now works remotely for Charlotte, North Carolina-based Discovery Education, have been able to move to Sacramento and find their ideal single-family home. Takuma Kakehi and his family also left Manhattan’s Upper East Side for Baltimore, where they could find more space and feel safer.

Incentivizing Remote Work

Some communities are trying to take advantage of the shift by offering incentives for remote workers willing to relocate there. Tulsa, Oklahoma, for instance, has gone so far as to offer cash incentives for remote workers willing to relocate there. Other so-called Zoom towns are just trying to manage an unexpected influx, and locales like Sandpoint, Idaho, that are near sprawling public parks or ski areas have seen population growth strain local resources.

Adapting to the New Reality

The rise of remote work is forcing companies to develop the technological infrastructure and organizational culture to facilitate remote and hybrid work. Companies that adjust to the new geography of work will not only improve their cost structure by reducing the need for real estate, but also they will put themselves at a competitive advantage in attracting and retaining the more mobile highly skilled workers.

Winners and Losers

As the shift to remote work continues, there will be winners and losers. Cities that adapt and offer a high quality of life with lower living costs will emerge as new hubs, while others that fail to adjust may see a decline in their economies. Companies that adjust to the new reality of remote work will also thrive, while those that resist change may struggle to attract and retain top talent.

Conclusion

In conclusion, the COVID-19 pandemic has accelerated the shift towards remote work and triggered a structural change in where work gets done. Major urban centers like San Francisco and New York City, which once dominated the US economy, are no longer the draws they once were due to the surge in virtual work options. As a result, smaller, more affordable cities are emerging as new hubs for innovation and job growth. With the lower cost of living and often improved quality of life in these cities, much of the talent that has moved from large urban centers is not likely to return. This shift in the geography of work is forcing companies to develop the technological infrastructure and organizational culture to facilitate remote and hybrid work. Companies that adjust to this new reality will not only improve their cost structure by reducing the need for real estate but also put themselves at a competitive advantage in attracting and retaining the more mobile highly skilled workers. While this is a powerful change, there will be both winners and losers in this new paradigm for urban economies.