Planet Money - Two Indicators: Will Remote Work Kill The Office?

Episode Date: August 20, 2021

It's Stacey vs Greg in a face off on the future of the office. Each takes a side, armed with studies, historical examples, theories on efficiency and happiness and from their closet studios, they bring their indicators for the future of the office. | Subscribe to our weekly newsletter here. And our daily podcast The Indicator hosted by Stacey here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Support for NPR and the following message come from the Kauffman Foundation, providing access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity, regardless of race, gender, or geography. Kauffman.org This is Planet Money from NPR. Stacey Vanek-Smith, it's so nice to see you on a Zoom call again. Greg Rosalski, it's always nice to see you too. And a few weeks ago on a call, not unlike this one, you and I started debating the future of work.

Namely, if workers would be going back to the office in the future or if the way that we work has permanently changed. And we had pretty different opinions. way that we work has permanently changed. And we had pretty different opinions. Yeah. As much as I love remote work and I want to stay a remote worker, I kind of believe that for most industries, the office is here to stay. And then we started talking about this and thought maybe this is kind of like an interesting debate for the show. It's true. And it wasn't just our strong, differing opinions either. There is a lot of data and such strong opinions on both sides. So, Greg, you took the side that is in line with what you think is going to happen, which is that the office is here to stay, that we're all going to

go back to the office. And I took the side that I happen to believe, which is that things have permanently changed, that we're probably not ever going to go back to work the way we used to. But apparently, Greg, this is not a new debate. Right. So I actually found this amazing old article. It was in The Economist magazine, and it was published all the way back in 1975. That is amazing. We're talking the disco era here. It was the disco era. This is like pre-staying alive. It was written by the deputy editor of The Economist. His name was Norman McRae.

And McRae said that basically this newfangled device called the personal computer was soon going to kill the office. And when the office died, he said that would lead to what he called the end of the urban age. The title of it was Tomorrow We're Hicks. Of course, the exact opposite happened. Companies like in the tech industry, for example, Google and Apple, they built these ginormous offices and put them all right next to each other in Silicon Valley. And the office really kind of expanded what it was in people's lives. In a lot of cases, these became like a second home. I mean, they would have fancy food and like concerts and dry cleaning and free meals. And this became like a cultural shift, you know, like the office is a fun place and why would you ever want to leave?

And the question is, why did that happen? And kind of explaining it, I think, strengthens the case why the office is still alive. TBD. Hello and welcome to Planet Money. I'm Greg Rosalski and I write the Planet Money newsletter. I'm Stacey Fandek-Smith. I'm the host of our daily podcast, The Indicator. Today on the show, The Office, alive or dead. We bring you two episodes of The Indicator, which make the case for and against us going back to The Office as we knew it. us going back to the office as we knew it.

About a decade ago, the economist Enrico Moretti wrote this really popular book called The New Geography of Jobs. It sort of explained why a small number of superstar cities had this sort of gravitational pull. Think like New York or Seattle or San Francisco. Their gravity brought in more and more office workers who helped them get richer and richer. And meanwhile, a lot of smaller cities and towns started to lose people. They started to shrink and fall behind economically. The book was super influential. Even President Barack Obama recommended the book at the time. It was a blockbuster, yes? You're still living large off of the book sales, I bet. I don't think it was a blockbuster in terms of sales,

but I think it became part of the conversation, and that's what I care about. Enrico wrote that superstar cities all had one thing in common. They were filled with brainiacs, you know, fancy degrees, idea generators. They were attracted to live in these places because of good paying jobs in innovative industries like tech or finance or publishing, you know, office jobs. Right. And as people migrated to these superstar cities, they, you know, made a lot of money at their jobs and they wanted to spend it. And that had this ripple effect across these economies.

It created all these other jobs like chefs and bartenders and lawyers and accountants and yoga instructors. You know, people who could provide services and businesses for people who had money to spend. All this cool stuff to do made the gravitational pull of these superstar cities even stronger, pulling in more well-paid people with cash to spend. Yeah, the gap between these winning cities, these star cities, and the average city in the U.S. has grown for the past 20 years. So why did that happen? I mean, office space and housing is so much more expensive there. Economists have done a lot of thinking about this, and housing is so much more expensive there. Economists have done a lot of thinking about this, and they use this term to explain it. They call it agglomeration. And it refers to the fact that by concentrating, the innovation sector tends to be more productive

and more innovative. And there's a growing body of evidence that points to the fact that when scientists, engineers, and innovators move from small clusters to larger clusters, the same person tends to become more creative and more productive. In other words, if you take like a computer programmer in, I don't know, like Pine Village, Indiana, and plop her down in like Palo Alto, California, within a bit of time, she seems to get better at her job. But why does she get better at her job? Economists have identified two important factors here. The first is something they call matching opportunities. For example, when lots of tech firms, workers, and investors clustered in Silicon Valley,

it created a lot of opportunities for productive matches between them. Like our computer programmer could quit her job at Apple and go work at Google, for example, without having to move. And she's probably more likely to run into someone who's looking for a computer programmer in the middle of Silicon Valley. There's an even more important factor in this theory for why innovative companies and workers tend to physically gravitate next to each other.

The basic idea is that smart people get smarter when they're around other smart people. There's a growing body of evidence that points to the fact that our best ideas come from serendipitous interactions with others, often within our firms, but sometimes also outside our firm. The key thing behind this theory is that these interactions between people tend to be not planned. They're spontaneous and serendipitous. Like, you know, you randomly meet your coworker at the water cooler and you go out to a bar together and then all of a sudden you stumble on this great idea, this great innovation for an app or a new kind of website or a podcasting business or something. Enrico believes that factors like these, which caused us all to cluster together, haven't gone away. For so much of our jobs, he says, the Zoom room just doesn't measure up to the benefits of physically living and working near each other,

which is why he says the office is alive and kicking. I've been looking at data on job openings and I counted how many job openings are under percent work from home. And he found that the number of fully remote office jobs was only about 7%. That is triple what it was before the pandemic. So that's a big deal. But that still leaves the vast majority of all new office jobs looking a lot like the old normal, or at least they will look like the old normal when the economy opens back up more fully. I don't mean that everything will be like before. Let's be clear. I think that the share of work from home will increase and has already increased. I believe that for some firms and for some type of occupation, probably it will

be very large. But if we're looking at the overall labor market in the U.S. or if you're looking at the tech labor market in the U.S., in my mind, the new normal will look like a lot like the old normal with maybe one or two days a week of work from home. And so, bottom line, Enrico says employees will probably still have to live near the office. But I gotta say, there was this ironic subtext to my conversation with Enrico. Yeah, I'm in the, I'm in Italy. I'm in the Alps. Oh, I love it up there. What? That's right. Enrico was working remotely in the Italian Alps. Oh my God. I, what? I mean, you know, as smart as Enrico is, he could be wrong. And, you know, maybe remote work is actually completely revolutionizing how we work. And Stacey, I think you might have a few thoughts on this. I do have some thoughts, Greg.

And first of all, you know, in the spirit of sportsmanship, hats off for a very compelling case for the cubicle farm. However, now it is my turn. And after the break, Greg, I'm going to give you not one, not two, but three indicators that will prove to you beyond a shadow of a doubt that the office as we know it is dead. as we know it, is dead. There are a lot of jobs that cannot be done remotely. If you are a dentist or a barista or a chef or a carpenter or a surgeon, you basically have to show up in real life to do your job. That's true.

It's estimated that about half of jobs in the United States can be done remotely. So that's kind of what we're debating here, the fate of that one half of working Americans. Yes. And to help us figure out this fate, I called up an economist who has a foot in several different parts of the job market. Hello, my name is Adam Ozmek and I'm the chief economist at Upwork. You are also a business owner. Yes, I have a couple couple businesses. I am one of the owners of the Bowling Alley Restaurant Arcade. I am one of the partners in Joy Cat Events, which runs beer fests. And I am one of the owners of Kepner Scott Shoes, which is the country's oldest children's shoe company. Oh my God, Adam. Do you have free time?

You know, my secret is I don't like sports. There you go. Secret to life. Don't like sports. So I asked Adam, are we going back to the office? I mean, things have changed radically over the past year and a half, but the office, you know, it evolved over decades. It is powerfully entrenched in our culture and in our psyches. Not only that, Adam points out that traditionally there has been a kind of stigma around remote work and remote workers. There's a great paper by Emma Harrington at Harvard about how remote workers were sort of viewed at firms before the pandemic and how often there was sort of a stigma associated with it. I mean, you can certainly see it in media portrayals. Like there was the episode of The Simpsons in the 90s where Homer was trying to become a remote worker.

Working at home. You've got a guy who's like at home, taking breaks whenever he wants, like drinking beer in the middle of the day. What happened to my bird? No, Homer. Explosion imminent. TLDR, that nuclear plant almost has a total meltdown.

See, Greg, you have people working from home and it almost destroys the world. Yeah, well, Homer's really making a case against remote work there. But Adam says a lot of those negative assumptions around remote work and remote workers have changed. We did a survey last year where we asked managers whether they thought productivity had gone up or gone down. And more thought it went up than went down. And that's important. Really? Yeah.

Like 32% to 23% thought it had gone up. That is my indicator for our IP office, Greg. 32%. 32% of managers thought people were more productive when they worked from home. And notably, only 23% said they thought that productivity went down. So, you know, most managers did not think productivity dropped when people were not physically in the office. And I think, Greg, that that will make them far less likely to push workers to come back to the office or, you know, especially to like lay down ultimatums. Because remember, Greg, the labor market's really tight right now.

Workers have a lot of options. A lot of companies are kind of desperate for workers. Workers want to work from home. So much so that they are willing to pay for it. to work from home, so much so that they are willing to pay for it. And I mean this literally. Adam and his team at Upwork did a survey that found that around a quarter of workers said they would consider taking a pay cut to stay remote. Not only that, a big chunk of the people they talked to who were already working remotely said that they would be willing to go to economic extremes to leave the cubicle farm behind for good. And we have some research that we just put out

looking at the percent of people who are looking to quit because they want to stay remote. And we found that 17% of people are considering quitting their job to stay remote. Whoa. Like the job that they have right now, they're considering quitting. Yeah.

So that's a lot of people who place a serious economic value on working remotely. So indicator number two, Greg, people are willing to make sacrifices to work from home. And, you know, not to put too fine a point on it, but like, where are you working from right now? San Francisco. You and I worked in the same office for years in Manhattan. That's right. That's right. And if and when our offices open back up in New York, are you going to come back to the office? I hope not because my family and friends are all out here. This is where I grew up. So I hope they don't force me back. Would you like take a pay cut or anything?

Would you consider it? If our manager is listening, absolutely not. I'm going to drive a hard bargain. Fair enough. Well, I just wanted to put that out there before I got to indicator number three, Isaac Newton. So the Delta variant has indefinitely postponed office reopenings for everyone from like Amazon to Wells Fargo to Apple. Like it was just all over the news last weekend. It's been a huge bummer.

I know. I know. The Delta variant part is really hard. But I also do feel like the longer we stay away from the office and from like crazy rushed mornings and like eating your breakfast on the way to the subway, you know, and putting your face into some stranger's armpit for 35 minutes, like on a packed subway car, like only to get to work and find that you can't get anything done because your cubicle maid is being too loud. And then there's a fire drill. And then like someone steals your yogurt out of the communal office fridge and all of the other like annoyances that come with working in the office. Here is where Isaac Newton comes in. You know, he was the guy who identified inertia, right? Objects in motion tend to stay in motion.

The more inertia that we get in working from home, the longer we stay away from the indignities of the office, the harder it's going to be to go back. And so, Greg, that is my argument number three, Isaac Newton. This is why I think we're not going back to the office. And there is like an economic upside also to the idea that we might not go back. Economist Adam Ozemeck told me that he really thinks the shift away from the office could have a really positive impact on the U.S. economy. He says the rise of the so-called superstar cities, which is just the handful of cities where just so much of the country and really the planet's economic activity is concentrated. Adams says that that has been really hard on a lot of the country, a lot of small towns

and rural areas. You have a falling tax base, you have falling house prices, you have rising vacancies. You know, when the tax base declines, the government cuts back services. That just is one more thing that pushes people away. So you get into this pretty negative downward spiral. Adam says if workers have a choice of where to live, that a lot of them will pick small cities and rural areas and bring a lot of economic activity into those areas, places where giant companies are not concentrated. Economically speaking, I do think that there is potential for that to help a lot of places that have been losing population and to sort of rebalance the economy away from superstar cities and towards the rest of the country. In Brooklyn, I'm Stacey Vanek-Smith.

And this is Greg Rosalski in San Francisco. This episode was produced by Darius Raffion in Pasadena, California. And these episodes of The Indicator were originally produced by Darian Woods in Queens, New York, Julia Ritchie in Asheville, North Carolina,

with help from Jamila Huxtable in New Jersey, and Gilly Moon in Los Angeles. They were fact-checked by Michael Ha, also in Los Angeles, edited by Kate Concanon in Seattle, Washington.

The Indicator, along with Planet Money, is a production of NPR, which is based in Washington, D.C. along with Planet Money is a production of NPR, which is based in Washington, D.C. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.