Corporate cost cutters salivate over working from anywhere. Oh my, the free gourmet cafeteria is gone. Companies already said they’d cut salaries if folks move to cheaper locations.
By Wolf Richter for WOLF STREET.
Dropbox, which offers file hosting in the cloud and is headquartered in San Francisco, and which had announced on October 13 that it was switching to permanent work-from-anywhere, today announced cost cutting moves associated with this shift: laying off 11% of its workforce.
In a new twist that will likely become more common, it specifically cited work-from-anywhere as one of the reasons for these layoffs because suddenly, with people working remotely, there are “teams” that used to deal with those people in the office, and that used to deal with the office itself, that aren’t needed anymore.
In an email to employees, then published as a blog post, cofounder and CEO Drew Houston, who has already bailed out of San Francisco as part of the California Techsodus and purchased a home in Austin for his full-time residence, said that the company made “the difficult decision” to cut its “global workforce by 315 people, or approximately 11% of the company.”
Early on in the Pandemic, as millions of people lost their jobs in a matter of days, Dropbox was one of the tech companies that said that it wouldn’t lay off people in 2020. OK, 2020 is over, it’s now January 13 of 2021, and here come the layoffs.
This cut is “necessary to implement the new strategies we’ve shared over the last few months.” Namely its “remote work policy,” which Drew Houston himself exemplifies. And then he cites this shift to work from anywhere for these cost cuts:
“For example, our Virtual First policy means we require fewer resources to support our in-office environment, so we’re scaling back that investment,” Drew Houston said.
Shifting the workforce to be remote all the time, from the CEO on down, is a radical change for a company, sending all kinds of previously sacred assumptions flying out the window. And it entails some radical shifts in spending, shifts from the company to the employees.
Unneeded office space is going to get dumped, with all the cost cuts associated with it, and the people that take care of it.
But employees have to create an office at home. They need space, furniture, equipment, appropriate broadband service, and they have to drink their coffee at home and go to the bathroom at home, and clean the kitchen and the bathroom, and buy their own toilet paper and supplies and lunches, and pay for the added utility costs of powering a home office all day long.
On the other hand, Dropbox employees could move from San Francisco to anywhere, save an enormous amount of money on housing, and save time and money by not having to commute in the Bay Area. And if you skip out to ski for a couple of hours mid-day, in the brilliant winter sun, you can make up for it by working late. For employees working from anywhere, this arrangement could be a big net benefit.
For companies, eager to cut costs, it’s a huge net benefit. A company can shed much of its office space, and the people that are taking care of that space, and people that are taking care of employees in some way. This could include all kinds of expenses such as the company’s cafeteria. Makes total sense.
There are videos online about the famous Dropbox cafeteria, called Tuck Shop, a gorgeous place at Dropbox’s headquarters. In June 2018, CNBC gushed, “Dropbox’s food makes most nice restaurants pale in comparison,” and it “serves up gourmet food for its employees, making it one of the best cafeterias in Silicon Valley.” It was free for employees, a big perk, and very costly for the company. Well, it closed, staff is gone, and the costs were cut.
Dropbox, like so many of its ilk, has lost money every year as publicly traded company through 2019. But in 2020, over the first three quarters, given the wonders of the Pandemic and working from anywhere, it started making money for the first time.
The job cuts related to working from home come on top of the moves already announced by other companies that have switched to work from anywhere: They would adjust salaries based on where people were working.
Geographic pay scales have long been the rule for big companies with a global workforce, and for the government: pay depends on where you work. If you’re in an office in Tulsa, you’d get paid less than your colleague in the San Francisco office. If you get transferred to the San Francisco office, your pay would be raised based on the company’s geo pay scale.
What’s new is that you’re no longer required to work in a particular office, you can work from anywhere, and eventually geo pay will follow, presumably as long as it’s downhill.
The potential of the shift to working from anywhere is making corporate cost cutters salivate. Cost cuts flow directly to the bottom line. And they’re a big motivation behind the shift, now that companies have become confident that they can actually pull off this shift to working from anywhere for their office employees.
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This is what I’ve been saying all along. The structural changes brought about by COVID are not going to go away, and high unemployment is here to stay for many years. Couple that with the loss of small businesses, unless the government is planning and able to replace all of that lost income in perpetuity, the earnings estimates for the S&P 500 are absurdly optimistic.
It is definitely bad news for NY and CA, basically the highest cost locales in the US (for the relevant mega metros)…and subject to the highest taxing regimes.
Those same states have also benefited from having the largest number of SP 500 company headquarters (almost always holding the highest paid personnel).
But 20 years of US economic decline (tipped further over the edge by C19), may be the beginning of the end for those long obsolete relationships.
The companies (especially their costly HQs) can, will, and have relocated…economically it makes sense for this trend to accelerate.
The outcome for the other 48 states is less certain…although it is hard to imagine them not benefitting to some degree from “redistribution” away from CA and NY’s “excessive concentration”.
The “Richard Floridan” pitch concerning the hipster, multi-culti, center-of-the-universe appeal of NYC/SF/LA has always been badly over hyped…usually by those cities’ development offices, looking for a shiny object to distract from decades-embedded higher costs and lower quality of actual daily life (ie, you’ll go to Broadway three times a year…but make a 45 minute subway commute 500 times).
And a handful of art gallery visits don’t pay the 3k (after tax) apt rent nut every month.
Amen!
“The outcome for the other 48 states is less certain…although it is hard to imagine them not benefitting to some degree from “redistribution” away from CA and NY’s “excessive concentration”.
And a handful of art gallery visits don’t pay the 3k (after tax) apt rent nut every month.”
Not sure about the “benefit” to the other states, and what’s going to pay the “nut” there after CA equity locusts drove up prices in places like Reno, NV, where the median house price is now $500,000 – nearly 10x the median HOUSEHOLD income. This entire situation is untenable.
The housing bubble will continue until the last sucker who doesn’t understand the relationship between home prices, median incomes, and interest rates is scalped…just like 2008.
I had the genius idea to look at moving to Reno to be closer to family in CA without actually being in it and was shocked to see that it’s nearly as expensive. Glad we got to Texas before everyone else a decade ago. May go back to CA after housing hits the fan, unless they make more stupid tax laws.
Devaluation of currency plays a quiet but big role in this.
When you have lost the yahoos at Yahoo…
The very first sentence,
“The California dream has been fading for a long time, and people have been voting with their feet.”
The only question is if surrounding states can build apts fast enough for the stampede…soaring rents suggest they are running behind.
You mean New York City, NY is not NYC. Upstate and central New York is awash in $80k-$150k split levels in peaceful towns with little traffic. And you are always 1,2,3 hours from the GW if you want the culture.
It’s just an extension of an economy that doesn’t actually make anything.
Yes, I pretty much meant NYC rather than NY (although the NYC metro is huge, extending across 3 states and is generally a *long*, costly nightmare for millions and millions of commuters).
Upstate NY is physically big but long depopulating due to decaying economics and bad politics.
And from an economic and political perspective, Albany politics is almost wholly centered on NYC where 90% of the money is.
I made that move 10 years ago and haven’t looked back. 3 hrs to NYC or Beantown, 5 to Montreal. And I can breathe and enjoy the stars!
Cas127,
I expect much more massive office job layoffs (and corresponding jobs and unrelated jobs) in the next couple years and beyond. These layoffs could be potentially massive enough that a change in the entire US economy becomes inevitable. At this point, it’s anyone’s guess, what will happen. But, whether in those 2 states or anywhere else, the average person should hedge their bets and brace for impact. There will be a lot of layoffs everywhere in many things.
Alot of the people laid off at the big tech companies, might end up working for companies that automate away office jobs. It’s not clear if they will continue to live in California though. It doesn’t take a large percentage of an areas population to move away to crash housing prices there.
TR,
I agree that it doesn’t take much of a population loss to tank housing prices. The opposite is true too.
I’ve often wondered at how high occupancy levels can get (95%+) before lenders loosen and new housing gets built.
Particularly in ZIRP world when soaring rents would seem to promise one of the few areas of decent return (compared to the Fed’s giveaway of 25 bps for the mountain of bank idle funds, ahem).
But I suppose that new homes are such a large investment, and zero yielding if unoccupied, that home lenders want slam dunk economics if they are going to front home building loans.
The same dynamics work in the opposite direction…an empty house has huge debt against it and yields zero…so it isn’t too long before repossessing lenders want to dump them, at any reasonable price (absent Gvt interference).
In either case, you have a recipe for huge latent volatility, especially in ZIRP world of last 20 yrs.
Thanks, Fed brain trust.
Keep dooming Tommy, maybe one day your dreams of despair will come to fruition. Meanwhile, white collar work in the US is only expanding during the pandemic.
You must live a decidedly miserable existence.
sc7,
I am not a doomer, I am a long term optimist, in the near future though, alot of average people will be hit hard. I’m not worried about myself personally, but, I do want to figure out how all the economics and finance of the world fit together. All of the current problems could be fixed almost immediately, if enough people knew how it overall worked. I can tell by your attacck on me, that you are not the kind of person who knows things, so it all must be very confusing for you.
As for white collar work expanding right now, maybe in some places, but, that’s definitely not the norm. As I’ve stated before, the large white collar layoffs will probably start after the pandemic is over or late stage pandemic.
Large enough layoffs that cause structural changes to the economy could be very positive for everybody long term, but, it’s almost impossible to predict exactly what will happen, when. For most people, it will probably be painful for some indeterminate amount of time.
Thomas, I know plenty “about things”, I don’t take most comments on this site very seriously because it is basically ZeroHedge 2.0 anymore. A shame because Wolf is spot on.
A significant component of my work is automating jobs, and the strategy behind doing so. To say “most” will suffer insinuates >50% of the workforce, that’s not happening in any near-term timeframe. Any organization that benefitted from automating jobs was already doing so. Automation will be a slow burning drag on white collar work, producing some, but not enough replacement jobs in its wake. It’s becoming clear at this point the pandemic is just not going to cost nearly as many white collar jobs as it did blue collar, especially with vaccines rolling out. I guess we’ll see in a year.
sc7,
If even 10 to 20% percent of the workforce lost their jobs permanently, both white and blue collar jobs, because of the pandemic and automation that occurred afterwards. That would have ripple effects that would cause pain to most people in America.
As for automation, certain things have to align for it to truly take off, which is beginning to happen. If
“A significant component of my work is automating jobs, and the strategy behind doing so.” is true and your job involves automating away jobs and you don’t know how to accomplish that, by your own admission, then you are further cementing your status as someone who doesn’t know things. Attaccking me and the majority of all commenters on this site, doesn’t make you smart.
This is purely anecdotal, but as a mother and a corporate professional, working from home is too great a distraction.
I’m currently just stay at home mom, so I don’t have to balance the two. But when I was working, getting into the office, and freeing myself from the “mommy strings” was when I could focus and do my best work.
I just cannot imagine trying to juggle complex projects at home, while my children are constantly pulling at me?
I wonder how other “work from home,” corporate professionals are fairing? Especially women with children?
Question…why are people talking about the work from home/child problem as though the conflict is permanent, as opposed to C19 related (w4H *and* schools/daycares closed).
Post C19, people can put their kids in daycare/school just like they did pre C19.
If there is a “child problem” it really doesn’t have to do with working from home.
Just last week I asked a colleague if he was still working in the office. His reply? I work from home when I have my kids three days a week.
A number of people I work with are “working from home” while providing child care to their kids and their managers know it. Covid has created this untenable situation.
And when Covid fades, work from homers will do what they did when they worked from office…put the kids in daycare.
This is being treated like a work from home issue when it is really a Covid issue.
Why should it always be the women to care for the children?
My wife is working at the office for the moment, because she just started in a new job at a new company and working from home isn’t possible yet. And i cared for the children for the past 15 years. Now they can pretty much take care of themselves and i’m only needed for preparing the meals during the day, while they school at home.
I imagine it must me much harder when both parents work and there are little children about. But the very little ones sleep much of the day and you can do some hours of work. I did. I had a woodshop (still have) where i used to build cabinets when the kids were sleeping. Few hours during the day. Some hours at evening. And work the weekends. You can’t stick to the old ways when society changes around you. Adapt and make the best of it.
And what Cas127 says is also very true.
Bose QuietComfort 35 II noise canceling headphones. The noise cancelation + music + closed door means you hear virtually nothing of the wee little ones, unless they’re banging on your door.
This of course assumes somebody else is with the kids. Of course there’s no hope for one working and caring for kids simultaneously. Utterly impossible (and not fair to the kids or the employer/clients).
fred epop women = 74% pre-Covid; 65% at the trough and 67% now.
What a wonderful opportunity to teach your children at an early age what the word discipline means.
I kind of wonder at this point if the US stock market is some kind of money laundering and transfer vehicle for people from China, Hong Kong, Russia, Nigeria etc. just as US real estate is.
Structural Changes-
Sure, why not add yet another layer to this already crazy incredible “division of labor” we have. Nobody knows or can figure out all the specialized jobs we all have had for 60 years, and it is getting worse.
“What do you do for a living?”
“Well, I……..”
Like Bucky Fuller said, “All the real talent is siphoned off into the Arts and Sciences, and that leaves the dregs to put it all together”
And the dregs are all doing a bang up job, eh?
Green New Industry with all the effort and intensity of a WW2!!!!!
Will put most everyone unemployed or wastefully employed (or the diabolically employed) at present on the same page in a war against fossil fuel, climate change, and general physical inefficiencies, for the benefit of All. …..and start NOW!
And unlike WW2, you can even tell people your part in it. Don’t have to say, “Can’t say, G job” (Government secret, loose lips sink ships, etc).
First time I ran across “G job” term (70s) was from people were working on their own stuff on company time, very useful slang among factory worker bees.
A Rockefeller friend to Bucky, “Why make business simple when you can make it complicated?”…per Bucky, I trust him.
Might even require Constitutional level stuff. So what? The flexibility rules are in there. But just like our enlightenment era founding fathers did, leave your damned dietys out of it!
Sure, you are always free to ask them for help, but they DO NOT get to participate in the decision making.
This sounds like a sneaky way for Silicon Valley companies to cut back on all of those expensive perks.
Our only “perks” were free coffee and subsidized vending machines (everything is a quarter). So not much loss there for us.
I did visit some other silicon valley campuses (Google and Facebook) with perks out the wazoo and it just becomes very clear how much money these companies are rolling in, and how much they believe that their only path to success is retention of “the best” (debatable) technical talent.
It’s easy to make a lot of money when you have a government supported quasi-monopoly and access to a rigged capital markets regime.
I mean they also provide services in use by billions of people daily and that have fundamentally changed the way most people work and live, so there’s that too.
Z,
Scaling technology aside (and even that ain’t advanced physics) the “technology” behind something like Twitter isn’t exactly the Manhattan Project.
Network effects, user inertia/laziness, and now conspiratorial censorship are the true barriers to entry.
And, truth to tell, they likely won’t be enough…the Bigs’ recent coordinated actions throw their trustworthiness into question for *everyone* (a flippable switch is a flippable switch).
In the end, the only real barrier to competition is user inertia…and with every widespread controversial act, the Bigs’ motivate more and more people to explore backups/alternatives (Parler and Gab have gotten more coverage in a week than in three yrs).
Google is a near monopoly for search because it’s the best.
Google far outdistances Bing and DuckDuckGo because,
1) Google hasn’t pissed people off enough yet,
2) So people lack knowledge/motivation about alternatives, and
3) People are pretty damn lazy unless given sufficient motivation.
But, in the last analysis, almost every Big is one alienating screw up away from having millions “exert” themselves by typing a different fifty characters.
Network effects provide some impediments but not really if you think you are being ripped off, betrayed, or sold out.
Just look at how fast initial uptake was for the Bigs…the same mechanics can work for their demise.
Ask MySpace.
Happy1,
Real men use DuckDuckGo.
The real reason Google is the biggest, is because at one point they were the best and built a brand name. More recently, this is less and less true, while, their censsorship of search results is skyrocketing. They pay companies like Mozilla (makes Firefox) and Apple, huge amounts of money to be the default search engine, they pay Apple, something like 10 billion a year to do so. They read your emails to serve you ads and their employees are “”adjusting”” the search results to try to control the way you think. They do countless other bad things as well.
One of the first things I do, when installing a new web browser or setting up a new device is to ensure Google is not handling the search results.
Wolf’s post said they offered free gourmet food at Dropbox.
That can’t be cheap.
I’ll bet they were blowing seven figures on Naked Juice alone.
My company provides free lunch and dinner ( after 630 PM ). If Engineers are not driving out to get their lunch and staying bit late to avail free lunch, they tend to do some more work.
Engineering headcount is ~$100/hour. If Company spend say $25/day for meals on employees, then it’s a win for company, ie spend $25 and get $100.
A lot of companies would give you free lunch only if it is ordered to your desk :-)
Yup. Free food will be small potatoes compared to the wage arbitrage due to geographic location.
10-15 years ago I was in a job search for Director level pseudo-tech position. The going rate on either coast was $150k. In some place like Chicago, it would have been $100-125k. I was talking to Pfizer about a job of theirs in India, all the time assuming a US pay scale. After the first round of interviews, salary came up and they were going to pay $40k/yr and said that was generous.
@jon – 2009 I was offered a job change with my company to work in Russia. Promotion, more responsibilities. My salary was around 125k, sans bonus. The offer was 40k, same pay scale as my future manager. It was the most he could offer. I didn’t take it. Nice people tho, perfect spoken and written English, warm and friendly.
Yes, the miracles of using people as products, it does wonders for a company… I can attest having been to both Google and Facebook campuses, it’s pretty impressive. As are their massive perks.
What’s also funny is how much talent and effort is wasted there. For example, depending on your line of work, getting a call from Google was either the golden ticket, or you knew you were going to be killing time.
The worst of the bunch is when you get a request from Google’s X team, their moonshoot factory, it’s almost always a waste of time when they come in wanting one or two special pieces of hardware, because it never goes anywhere. In my opinion, the majority of the technical talent that resides in Google X is wasted.
I’ve heard from many people that if you’re on the X team, it’s because Google doesn’t want you working elsewhere, but they can’t figure out how to use your talent. So, they park you in X, so you can basically phone it in and collect your paycheck.
… google and facebook, and … hire lots of tech folks, not necessarily to get work done, but to make sure they are not working for someone else as a competitor.
“The best” = 28-year olds with no family, commitments, who can live out of their cars and prefer to be “at work” at all times because of the free food and also on the weekends to chill in the cushy work spaces fully equipped with xbox/ps and unlimited snacks in the kitchen. I’m glad I don’t work for one of these Gen-Z magnets where your corporate work defines who you are and people live to work and not the other way around.
“it just becomes very clear how much money these companies are rolling in”
The next bubble to burst will be Internet advertising
I personally am much more productive in an office and I know for a fact that most of my company is the same way. I know this because pre-COVID, there were emails flying around at all hours of the day and night (obviously concentrated from 8 am to around 7 pm weekdays) as work got done.
Now after around 2 pm email is a ghost town as most people have already “made their appearance” via zoom meetings and proven that they’re still “working”, and then start slacking for the rest of the day.
There are many Fridays where I don’t receive a single email for hours in the afternoon.
My company cannot be unique here.
I agreed. Especially if you have kids at home, it’s extremely distracting.
I can remember being barked at by both Mom and Dad while they were working at home. Their message was clear: Don’t bother us and go find something to do on your own.
I think statisticians call this a “scientific sample of 1”.
Based on the actions of hundreds of individuals.
Is your contention that my company is made up of people who behave considerably differently than any other similar group of people?
If so, the burden of proof is on you here.
How can no one at your company have figured out how to send scheduled emails via Microsoft Outlook??
I’ve been working from home about 15 years now, and I’m the opposite – definitely way more productive at home for me, without the distractions of coworkers always dropping by to chit chat, without the 2-way commute, etc. When I go to an office I get literally 25-50% less done than when I work from home.
Also being at home I can get quick things done around the house, meet with contractors for a few minutes, etc. Whereas if I’m at work all day, I come home and still have to do all that stuff. To each his own I guess.
“chit chat”
I really agree that in the overwhelming majority of cases, work from home is more productive.
Numerous workplace studies have indicated that interruptions (chit chat, unnecessary meetings, etc) just slaughter productive flow by continuously interrupting thought processes.
(Email and phone calls do the same…but they are easier to politely ignore/delay/redirect) for preset blocks of time.
It is harder to trap door Chatty Cathy from Accounting or skip out on the 2 PM ego stroke of the VP in Charge of VPs.
And, my god, the friggin commutes…which are essentially 100% lost time (although a few view them as a wholly “alone time” refuge…).
Costly, time consuming, aggravating…few are going to champion work commutes…except radio stations.
I also agree that work from home is more productive. Before Covid I could spend an hour or more commuting each day. Now that I’m not doing that I am working during that time. I also would take an hour every day for lunch. Now I just grab a sandwich and then continue working because I’m already home and I don’t have to drive to go somewhere and wait in line to get my lunch. I’ve also not called in sick all year long for 2020. I usually would call in sick at least five or six days Per year. Same for my hundreds of fellow employees. The net gain of productivity is quite large because no one’s calling in sick.I’m also much more happy being able to work from home. There’s no more TGIF. I’m not waiting for the weekend to enjoy my life. I am enjoying every day while working through the day on my own terms. Not to mention we’ve got a few hundred employees not running a 1500 W heater all day long to stay warm all throughout the year lol The benefits of saving all of the fuel and less effect on the environment without all the cars commuting to and from work etc. etc. etc.
You know, I’m not sure I agree. Having both worked in office, and out. There is a lot of value in being able to directly access your colleagues face to face. The chit chat is useful in its own ways.
I always value the time I spend in office although I worked from the home for the last decade. I think even the commute has a purpose, it’s not an entire waste of time, yep, it can be frustrating, but it does make a nice transition between work and life. And let you recharge from the hassles of the day. No such transition working at home.
It would depend on the commute though. Some commutes can be stressful and take away a significant amount of remaining time of the day (counting both ways).
Same here. I literally save 3 hours (not having to get ready for work and the time to commute to the office) a day and can get a lot more done without cubicle noise that is constant and unending interruptions. I now have a quiet, private office with my pets keeping me company. I save a ton of money every day since I make coffee at home as well as eat at home. I also do not have to deal with transportation and work clothing costs. Those individuals who currently have kids at home have not experienced the ease of working after the kids are back at school. I wonder what their feedback would be when kids do go back to school fulltime?
Many years ago z, when, as a guv mint employee, I left a message on a phone at a department of state hdqrtrs at approx. 1315 Friday, I received a very clear order the following Monday never to do such a thing again, on jeopardy of my employment…
Similarly couple years later, trying to get sub contractor bids on a very rich private project, I could only get the ”office boy”, or equal anytime on Friday in the good times, though the boss would call back in minutes when work was scarce.
Have known entire crews, supposed to be at work on Friday, to be working only at bending elbows at the local watering hole by and after noon,,, especially if they were paid on Friday morning as was done by some cos…
You must be an oldtimer. I’ve heard stories like that but only from the oldtimers. Some of them even had fond memories of the boss handing out paychecks and thanking them for their work. There was a general bitterness over the attitude of eff u for costing me money that seemed rampant among a number of contractors these days. I think the good times for them were the 90s, after that it went to shit ever since.
Is this thought process similar to “it’s 10 minutes before close you HAVE to serve me” restaurant workers have to deal with?
In private industry important news delivered on Friday is intended to be missed. Why not get the important stuff done on Thursday and straighten your nails on Friday? Other people have to straighten their nails before Monday, why should they straighten yours too? Why should they even bother reading your email you sent at the last second. If you leave me a voicemail on Friday you are clearly trying to buy yourself time so why should I ruin your plan and sit by the phone until 5pm?
Office work for self motivated people is pointless. I was an accountant when I retired at 30. My work day consisted of 2 hours of work and 6 hours of babysitting a phone that didn’t ring. I trained 5 people to replace me. 5 accountants to share 10 hours of work a week. Productivity is about producing not peacocking. The office is about peacocking.
Also, my butt left my chair at 4:59 so my hands could hit the door at 5:00. Lunch at 12:00 no matter what. Lunch goes until someone needed me which was never so I’d finish lunch around 2:00.
Wage theft? Maybe. But if you do the math when I stopped taking 2 hour lunch breaks the company started paying 2.5 hours for the 5 replacement drones lunches.
Ha ha, when you work virtually the boss never knows for sure if you are working in high productivity mode or just killing time (watching YouTube or sports sites outside company VPN). At the end of the day your results can be mediocre, but hey, you worked your butt off to be mediocre.
Sure, boss can count keystrokes log, but a lot of knowledge-type workers do research and other tasks that don’t translate well to keyboard strokes.
As I have said before, WFA is the camel’s nose under the tent that will lead to more culling of the corporate work force.
Thanks Wolf for this reveal about DropBox (your uncommon insights are the reason I visit WolfStreet). It is a harbinger of more to come.
I truly feel sorry for all those perks-dependent employees (massage therapists, fitness gurus, juice bar attendants, yoga coaches, etc) that will lose their jobs because almost no one still goes to physical company headquarters.
Heinz
I was thinking of all the commuting jobs that will go…cars, car repair (especially with electric cars), car parks, meter maids, traffic cops, gas, office suits, shiny shoes, cans of drinks and snacks plus probably hundreds more lol
Seems like all these spoiled tech babies need their health benefits taken away, to help save the corps money. Ya’ll wanna a good paying job, fine, we’ll give you a salary but no benefits, farm those out yourself and join the real world of efficient cost cutting and disinflation austerity. Don’t want your cool job, fine, millions are unemployed …
Is that too harsh?
Mostly it sounds like it comes from the perspective of a hater who doesn’t like anyone working in an industry other than their own. I can’t imagine why you’d use the term “spoiled tech babies” otherwise. It’s the kind of tribalism that is ruining modern society. It doesn’t surprise me anymore.
“But employees have to create an office at home. They need space, furniture, equipment, appropriate broadband service, ….”
The SC has talked bout this in numerous posts.
This is a huge cost that is unloaded onto the employee. A room in your house and all the telecommunications costs, utilities, alone are fairly large. Add in the disruption to the household which I experienced when this was implemented at my government agency. I’m well aware of these expenses now in a business that is 75% home based and 25% in the field. But these are a personal choice. If a company or government agency did that (been there) I call it employee abuse. And, what does taking employee’s health ins away have to do with anything discussed in the topic except creating more employee abuse.
Disagree here. Most people who have salary jobs already have broadband that can support a half dozen iPads streaming Netflix at once while junior plays video games on his Alienware. Not many need to upgrade their internet for WFH.
Most people already have working space. Dining room table, sofas. I’m pretty sure offices have spent the last ten years trying to make offices more like living rooms! At home you have this vibe for free.
As others have pointed out, when kids go back to school, you have the entire house as an office. Who wants to lock themselves in a cubicle at their own home?
I do have a grudge against technocrats that are helping shift human jobs to the silicon world — I’m part of a tribe that looks to robotic AI as a dark age — versus those who see opportunities to cash-in on reducing human output. Nonetheless, it’s entirely logical to be supportive of entities that create future value, no matter what the cost is. I was simply expressing a perspective that mocks people that think they’re irreplaceable prima donnas. They live in a cannibalistic tribal world where they devour each others jobs — apparently creating future value (for shareholders) through Darwinism. I don’t support that, but it’s the way it is.
Who thinks they are an irreplaceable prima donna?
Perks are offered to attract employees, they are part of the balance of compensation.
Half the people on this forum will argue out of one side of their mouth that employers are terrible and only exist to screw the common man over while arguing out of the other side of their mouth that employees that expect good compensation (some of it in the form of perks) are spoiled crybabies.
Capitalism is always “devouring jobs”. The tech industry is merely a particularly intense and visible example.
Because most of the commenters on here are bitter, not very educated educated, and hate that knowledge workers are successful. Most are afraid that the world has changed since the 1970s. They have very little knowledge or understanding of what tech workers, and members of management actually do. Any competent manager hasn’t seen their job change that much, they don’t go around looking at people in seats, they manage work output, both in terms of productivity as well as quality. But the WolfStreet comment section is full of people hoping that the well-paid smart people somehow “get what is coming to them”, as it makes them feel better.
“But a plumber actually does something with his hands” is their only real retort.
You sound like one of the most bitter people I’ve ever read here.
@sc7 – I do read your stuff. But perhaps you should go back to ZH as it’s more your style and zeitgeist.
Please, dear beloved commenters, a little tolerance. We don’t want to send anyone anywhere. Some people live here ;-]
Mea culpa Wolf. Sorry, I was a bit more edgy than usual at the time.
And an apology to sc7 too.
“disinflation austerity”
Disinflation is only “austerity” for the corporations trying to sell you overpriced goods…for normal humanity “disinflation” is more accurately known as “price savings”.
I know the Fed has worked for 20 years trying to convince everyone that white is black and black, white…but there is little reason to perpetuate the double talk.
If disinflation is the horrific monster that the Fed has tried to make it out to be, the last computer would have been sold in 1958 and there would be 17 in the world now…
The Fed gets away by using technical jargon that is incomprehensible for the average person and the media goes along with it.
Imagine if Powell said: “we are committed to making sure the prices you pay every day will increase by at least 2% which means that in 25 years you will be paying double for everything compared to what you pay today.” which is what he has been saying in technical terms.
Or nonsense like “The low interest rates are a result of a glut of cash available for lending,” while neglecting to mention that that glut is a direct result of his printing.
The definition of “chutzpah.”
Powell is a moron
Most people don’t see past Friday so 25 year talk is still non sensical technical jargon!
Zan asked: Who thinks they are an irreplaceable prima donna?
Paul answers: The plumber when your toilet doesn’t work, the roofer when your roof leaks, the electrician when……
Project development types, not so much, especially when the next applicant phones from Mumbai. :-)
As I was reading the above comments someone mentioned how much more productive they were because they did not have to drive and buy food at lunch, or others expected their employers to provide food. I’ve packed a lunch my entire life, from school days until retirement at 57. I wonder if there is a correlation? hmmm $200 a month for a wrap or gut burger….crazy. Waste of time and waste of money.
My son works two weeks on and 2 off earning 200K per year with all the bennies and inducements imaginable, including an extra $7 per hour for retirement investment which the company then matches at the end of the year. Every two weeks he makes and freezes breakfast wraps for his entire shift. Lunch he can cook at work in a microwave. He just bought his 2nd house, age 36. Nice ocean view on the east coast of Vancouver Island.
I have a nephew who is a senior VP US operations for an automotive manufacturing company…..big job and big bucks to match his responsibilities; says he’ll never go back to the office, ever again. Same for my son in law whose immediate supervisor is 3 time zones east. He just starts work early when needed for meetings and is more productive than ever. At 45 he plans to stay WFH until retirement. His supervisor concurs and recently promoted him with an increase in salary.
You’re either a self-starter or you are not. Staying hours upon hours at a desk or work site is not the same as being productive, with measurable work output for confirmation. They used to call being seen at the office, facetime; being noticed by the boss or manager.
Thank God those days are dying out. WFH isn’t for everyone, but thankfully it can be an option for some careers.
I’ve been working from home the last 3 1/2 years. My wife has also for the last year. We love it. With the pandemic we also kept our two boys on remote learning for school- we don’t love that, but after a vaccine is available back they go.
There’s no doubt businesses have started recognizing the cost savings and I hope it continues to expand. On the employee side it’s wonderful not to have to waste incredible amounts of time commuting and paying for gas, business attire, lunches, etc. My wife and I also moved from an expensive city to a rural community in the middle of nowhere. Our cost of living has been cut dramatically, so we’re able to save aggressively and will likely be able to retire years ahead.
Wolf,
Could you follow up with info on taxes?
My kid got first UX design job with EBay last year working from home. Would like to give her a heads up on tax situation.
Thx!
Alberta, it’s somewhat complicated, but this site explains the various nuances fairly well.
https://www.jpmorgan.com/wealth-management/wealth-partners/insights/working-remotely-watch-out-for-state-taxes#:~:text=In%20general%2C%20income%20earned%20for,where%20you%20are%20a%20resident.&text=If%20the%20taxpayer%20works%20remotely,subject%20to%20that%20state's%20tax.
Thx! RightNYer
Alberta,
That tax situation is likely to be fraught…CA has always been aggressive about the extra-territorial pursuit of what it claims is “its” tax revenue, and it is only going to get more aggressive as the huge public pension bills come due.
My guess is that if out-of-CA’s have *any* point of contact with Ebay’s CA operations…CA is going to try and get a cut.
This dynamic is going to be interesting too…because CA’s tax collection aggressiveness is not only going to drive personnel additions out of state, but the tax collectors’ situs interpretations may very strongly encourage *wholesale* departure (ie, *zero* CA employment contacts).
I guess we can report remotely to corporate headquarters in Delaware. No CA needed.
You need to spell out more details….is she an independent contractor (1099) or full time employee (W2). That would help as both situations have different tax code paths.
Alberta,
I don’t get into tax advice. This is complicated and depends on her specific situation. Deductibility of home office expenses will be a key issue for her. There are specific rules for that. State income taxes may also be a sticking point, as a state other than where she lives may try to tax her income. Good tax preparation software can walk her through it (but the good stuff is not free). Or a good tax advisor can do that.
Ok, many thx to all for input!!
At age 27, I’m just glad she Finally Launched ;-)
…or we could get rid of taxes on jobs.
Msybe this is the push for the consumption tax that we need! Good forbid wOr king hard and saving money be considered a good thing.
One piece of advice. Don’t take the home office deduction. It triggers an audit by the IRS. I use a lot of my home for business purposes. The home office deduction is a waste of time and energy. Also, you depreciate the basis on your home and have to pay it back if and when you sell it.
I think Wolf meant Dropbox instead of Lockbox.
Working at home fells like a lockbox.
I always suspected that most companies could fire 40% of their office workers and still operate normally. Especially manufacturing companies. Most office workers spend their time gossiping in the office and they will do even less work when working from home. They will be jobless within one year as companies realize how little they are needed.
Remains to be seen how city centers will be revitalized , I suspected restaurants will come back strongly together with cultural activities as people will need to get out of their houses again.
I hope they start making city centers for pedestrians only, similar to what they do in Europe, that could work maybe.
40% is a little low. Try 75%
Having worked guv mint for 7 years and private before and after sc, I suspect the 75% is about correct for many of the former, and 40% might even be unrealistically high for some private companies.
I will never forget asking the boss for more work at guv mint, and he laughing in my face, and then asking if I was trying to get him fired.
Basically, in that job, I could have done the work of all 5 of the folks in the same job, easily, and was almost always bored out of my gourd, and quit because of that.
Some private jobs just exactly the opposite, working hard from can to can’t and still never ”caught up” to where I thought I should be, and, to be sure, was paid very well accordingly.
Vintage
Aren’t you special !
Able to outwork everybody !
And you embody Taylorism !
Right ?
Having worked in gubbermint nearly my entire career I concur with much of what is said about gub employee productivity and usefulness, or actually lack thereof.
But I give an honorable mention to some gub employees that really work hard and try to make a difference in civil service.
Pareto distribution: I’m convinced that 20% of the people do 80% of the work in most settings.
This problem is determining which 40%. If you layoff the wrong people, then the company is completely screwed, especially if you wind up promoting some of the problem employees.
– “most companies could fire 40% of their office workers and still operate normally.”
Hmmm..
Not every fat is bad. Some of it is a natural protection which increases the chances of survival in hard times.
Firing 40% of workers makes shareholder happy in the short term and creates a risk of a business disaster in the mid term.
“…….can work from anywhere, and eventually geo pay will follow…..”
Wolf, is that a new term you created (“geo pay”)? It fits well.
Unfortunately, I’m not that creative. The long form is geographic pay. Geo pay is quite common as an expression once you’re dealing with that issue.
Got it…that term is not in my background as all of my prior working world was “on location” either in a manufacturing plant or in the oi/gas/energy field where products were produced. Never pushed much paper except for occasional field/technical reports. I’m an engineer but from days when computers were “new”. I did take four courses in FORTRAN though. LOL
I can see that the world of online work (coding new software, filling out web forms, etc), can easily become work from anywhere. This is really not something guys and gals who worked with their “boots on the ground” can readily visualize from a large number of employees taking part prospective. But I guess that’s the high tech world these days!
I suspect one needs to have very special skills at whatever they do for work from home or anywhere to be considered “necessary” or “irreplaceable”.
Here is my main concern. By dispersing your employees, you may be decreasing their ability to address wrongs in a company and the underpayment of wages. I believe that even in this website he has noted that wages have not kept up with productivity in the last 40 years. I feel really sorry for the children of our society. I hope I am wrong. Also, we are losing our feeling of compassion for each other.
Colleges are about as geographically concentrated as it gets (pre C19), and they had zero problem treating grad students/adjuncts – teaching 30%+ of the course load – like serfs…for decades…their empty moral preening notwithstanding.
Giving *employees* more flexibility in where they work is going to help them a lot more (housing cost savings) than it is going to hurt them (labor complaints…which are submitted electronically to HR, gvt, press anyway?)
The only kind of businesses likely to be influenced by picket lines are the same businesses less able to electronically disperse anyway.
Cas
Wages are going to be SLASHED !
And you think this is a benefit ???
You have to compare the net pay in NYC/SF/etc (after highest taxes and costs of living) with what people are going to be paid in a wide variety of other places (a number of companies have said they aren’t changing pay based on geo…perhaps a sizeable majority…there are no stats yet).
A lot of workers endure the real life miseries of NYC/SF/LA (in contrast to BS TV gloss) because corp HQs are disproportionately in those cities (so the CEOs can live the gloss).
Those tens/hundreds of thousands of mid level workers are basically buying a lottery ticket…long years of high cost struggle in high stress geo locales in exchange for a *chance* of promotion in a narrowing pyramid.
And they are losing their faith in the lottery…that is why they are eagerly willing to relo.
Working in the office didn’t stop companies cutting jobs here and sending them to China, India, low cost locations.
“We are losing our feeling of compassion”? LOL, we either never had them or we lost them a long time ago.
The last of the compassion began dying off around 2000 along with defined benefit pensions.
It would seem that a company comprised of remote, atomized individuals, would be much easier for management to ‘manage’. Easy to play employees off each other or create an ultra competitive work environment in which workers have no loyalty to each other.
Once work from home becomes ‘standardized’, I see no reason to even hire Americans as our corporate over-lords will shift ‘work from home’ to the cheapest locations on the globe. Why pay someone in Texas 40K to do a remote job that can be handed off to someone in Delhi for 4K.
Americans are being transformed into virtual workers that can be deleted at the push of a button.
Overseas outsourcing has been available for many years, it’s not some new discovery. Some things are just easier to accomplish with US based personnel, not every job ends up in India.
Agreed, although that’s why I think we will see a hybrid model post-pandemic, meaning that people come in to an office once or twice a week. That way, there is still face time and some personal interaction (such that the benefits of not outsourcing are obvious). But it’ll also mean that living totally in the middle of nowhere won’t be feasible. The exurbs, however, will be.
As an example, it’s doable to live in northeastern Pennsylvania if you only have to go to Manhattan once a week.
“Overseas outsourcing has been available for many years, it’s not some new discovery.”
I think covid pushed the volume on outsourcing up to ’11’. Everything in America is going to extremes. Extreme inequality, extreme profits. Now extreme out-sourcing, and we’ve got a new president who did not run on a platform of ‘bring the jobs back home’.
We’ll be back in the TPP treaty in no time, or something worse.
I’m sure with widespread, permanent adoption of WFA the Indians will be glad to step up to the challenge and make more inroads in US work force.
In email no one knows if you have an Indian (or Thai, Chinese) accent. So colleague ‘Chris’ might actually be Krishnamurti from Bangalore.
Theo,
Unless you are a unionised employee with a firm contract to address concerns, salary, work expectations and wages, an employee never has an ability to be heard.
Some of the best jobs I have ever had were non union, but that was only because they really really needed me not to quit. But in a tough market? God save the employees from it all, especially from business owners who made landing pads for their children. It is brutal out there. I do agree with you it won’t be getting any better in this divided climate.
One group that will be coming back to the brick and mortar office is local government employees. My wife manages a county-wide waste water agency and her masters ( elected county commissioners) have told her in no uncertain terms that they expect all employees to be back at their desks when the pandemic dies down. They know the taxpayers/ratepayers don’t don’t want their public servants working at home in their pajamas. Plus most city and county governments own their own special purpose buildings. In my wife’s case all the district office space is on the grounds of Sewage Treatment plants or on an island in the middle of a county owned wetland, so there are few cost savings from leaving those buildings empty. Many of the office type employees ( IT, engineering, customer service) are convinced that they will be working at home forever, but they will face a different reality.
The thing is, ultimately the market sets these things, not the employers. I do think your county’s policy is going to be true for most government employees. But based on my experience, most government employees don’t have better options in the private sector. Sure, they might be able to find something with a similar salary, but without the pension, no risk of layoff, union benefits, and so forth. So if they’re told they have to come back to an office, their choices are either comply or quit and find something better in the private sector. Most won’t be able to.
However, take someone like a government lawyer. He likely has many other options in the private sector. He will make less in the government, but has the pension, easier work life balance, and so forth. If he’s told he has to work in an office whereas all of his private sector friends are not only making more, but have much more flexibility, watch him jump ship quickly.
It’s all going to come down to how in-demand each individual employee is.
A lot of these companies will find out, eventually, that they don’t even need employees because their business plan was not even viable. Many of them have just been selling advertising or marketing user info to one another. Once that dries up, it’s curtains.
Who works anymore when people can hit the “Fed Easy Button” and conjure up 10x more income buying TSLA call options and bitcoin. Productive labor is so 2020….(sarcasm).
P.S. Anyone notice the Reuters article today titled —>ECB’s Lagarde calls for regulating Bitcoin’s “funny business”. I am shocked they allowed a competing currency get this far along, as they smashed the only real-world useful cryptocurrency concept “Libra” instantly back in 2019 as soon as Facebook got major corporate backing. There can be only one golden calf, else our future behavioral economics incentitive system would have an opt-out escape hatch for the bottom 99%, and we can’t have that, can we?
Facebook and twitter are in a world of hurt, as they are getting cutoff, in/by entire countries. Seems they don’t like censorship, who knew.
“There can be only one golden calf”
Considering exactly how the G *has* kept the old broken down US GDP cow hobbling along for two decades, it *is* rather shocking that the alt currency concept was not assassinated and incinerated in its crib (against a backdrop of 3 hour CNN specials/”town halls” on how Bitcoin gives you cancer).
My guess is that the lure of 100% electronic personal savings (immediately “adjustable” by individuals under “legal authority” was simply too tempting).
If interest rate manipulation is meant to “stimulate”, how much more “stimulative” if the G could directly and immediately “adjust” post tax savings principal that refuses to be spent/stimulate.
The concept of “self-liquidating” savings was discussed during the Great Depression:
In this way, alt coin (whose appeal hinges upon the fact that the G can’t dilute it at will) is converted into a stalking horse for a “currency”, more easily, thoroughly, and quickly able to be diluted/erased by “legal authorities”
Lagarde is finally waking up to the fact that there is something out there that could replace the Euro and the power that would leave fiat currency if that happens?
Although she could at least be a little smarter about her target, and go after cryptos as a whole rather than bitcoin which actually makes criminal activity harder because there is an indelible record of what happened, linked to a particular address which would than be linked to a particular individual.
But her purpose is to sow fear and doubt and drive down the value of cryptos, if Bitcoin became a European project today, it would be instantly praised.
Most of the banks and financial services firms in NYC offered subsidized lunches to their employees, to keep them close by. It was not fancy but it was good enough and some were very cheap. I saved money by eating my main meal at lunch in the company cafeteria for $1.25. The 25 cents was extra for a soft drink, but I could have had free tea or coffee. Going out for pizza or Chinese food was about $5. This was in the 1980’s. Some of the WFH crowd is definitely missing the free food.
Speaking as an individual I am already hearing that merit increases will be deferred another year. AKA no raises across the enterprise again for the 2020 cycle. As the article states it I have to now pay the added expense (space/utilities) of having to maintain a home office. The offset is that I don’t have to commute to the office or wear / launder clothes
My company, Bank, is making record profits as reported to the market
I can confirm Dropbox had a very nice cafetaria, having visited the place 2 years ago. Lunch options were plentiful and you could get all kinds of food. Think of Vegas buffets, but better.
At the same time the office was pretty pretentious, with “art” strewn all over the place.
dropbox is a has-been in the story of new tech. not the best example or something to worry about. this remote possible world will have all kinds of knock on effects that people don’t yet understand. betting against cities has never been a good bet unless a giant flood
is your antagonist.
“betting against cities”
Well…it depends on what you mean by “city”.
You’ll notice that NYC was the last NYC type city (nothing comes close to the population density of Manhattan…not even Brooklyn, Queens, etc.)
The arrival of the auto put an end to the economics that justified that level of population concentration…thus…the suburbs.
Internet/work from home will simply enable even more diffuse populations, in ultimately less costly (because less concentrated) housing arrangements.
Less dense “cities” will continue to exist…work from home doesn’t mean we all become farmers/forest rangers too.
“You’ll notice that NYC was the last NYC type city (nothing comes close to the population density of Manhattan…not even Brooklyn, Queens, etc.)”
From a US centric point of view that’s truth, I don’t think NYC can even crack the top ten if you look at cities with highest density population around the world.
The US population tends to take for granted its huge natural gifts that it has in terms of geography.
MCH,
With a handful of extremely land constrained countries, I would be willing to bet that almost all of the megaopolises around the world…were also enormous in 1920.
And that their growth rate has tremendously shrunk relative to other locations in the same nation since 1920.
Once people have access to autos (even buses)…they spread the hell out if there is any way to do so.
@ Cas127
If you look at Tokyo, Shanghai, Beijing, they have all of those that you mentioned, in most cases, far better than what you’d find in NYC. Yet, the population density is still very high. It’s really due to geography more than anything else.
In terms of space, the US is size wise not significantly different from China or India, but the population is 3x or more smaller in comparison
Is this the company, Monkey, that was losing money year after year?
There have been numerous reports about public school students enrolled in distance learning not completing their assignments. A few do better with distance learning due to the absence of bullying and other factors. Lab courses need physical locations. It is too easy for remote learning pupils to opt out of working.
“numerous reports about public school students enrolled in distance learning not completing their assignments
My god!
This *never* happened before that internet b*tch got involved!
There are a *lot* of HS students whose entire career consists of not doing/half assing assignments.
How long *have* you been out of HS?
LOL c10,,,
as one who was expelled for missing too many days of senior year of HS in 1962-63, mostly spent hunting and fishing,,, your comment is right on the money!!
David:
Your observation about online learning is correct. Some students do better, other students do worse. Actually attending school still doesn’t change the results!
My son learns best by doing. Last summer, due to the pandemic, his week of company training was done online, instead of travelling to corporate headquarters.
My son chose to set up his office at our island cottage, laying in a hammock, in the shade under a weeping willow tree, ice tea in hand, cooled by a light breeze off the water, with his laptop placed on top of a blue plastic 55 gallon drum!
I seriously doubt his company would have approved of his choice of office decor or it’s location! Certainly his choices during breaks of swimming or going kayaking or seadooing would have appalled his company!
Needless to say he failed his online test. But he would have failed it anyways because that is not how he learns best!
Now my daughter is in her second year of business and she has set up a proper desk in her bedroom and she is doing just fine. My wife and I have to be mouse quiet during her lectures. But she also did just fine at school too!
Each to their own, I guess!
It’s very true: at Cambridge (UK) many years ago I never went to a lecture, but speed-read the mandatory books,and lingered over many more.
Fortunately, lectures were not compulsory, although some seminars (dread word!) were, but ,thankfully, brief enough; and there were some pretty girls around.
If forced to attend lectures for most of the day I might well have turned to drugs or something!
My experience of corporate life led me to conclude that it is some kind of ante chamber to Hell.
But for others, it is meat and drink.
Nope, sorry, not buying it.
For those who have an interest in sociology, humankind is tribal and tribe members feel better if their ambitions can be advanced face to face.
A sweeping generalisation, but the principle is sound.
For those of a technological bent; are you sure that your systems are secure to maintain compliance with your local laws.
Maybe today…..
TimTim,
Dropbox didn’t ask its employees what they would like to do. It TOLD them what Dropbox decided, namely permanent work from home, forget the free gourmet cafeteria, and here are the layoffs. Employees don’t have a say in this. The cost cutters are at work, and they’re cutting. It doesn’t matter to them what you would prefer.
That said, you can switch employers. You can take a job that requires you to commute to an office every day. That’s a choice you have. And I think, that’s how it will split up. But don’t expect corporate cost cutters to ask you what you would prefer and what kind of social life you would like. They don’t give a hoot about that.
What’s next? Employees voting for an increase in compensation?
Most people also realized too late that HR’s role is not to help employees.
I swear, some people are so clueless.
That’s the beauty of the cloud, high speed broadband, and a computer. Now you can be a slave (monitored even) everywhere.
We don’t need jails called offices any more, with the internet, we can turn your place of residence into a jail. Better yet even, that is a jail which you pay for yourself.
That, comrade, is what we call, progress.
“humankind is tribal and tribe members feel better if their ambitions can be advanced face to face.”
I don’t know…the Twitter political tribes have managed to sort and organize themselves pretty thoroughly and quickly while typing from every point in the country/world.
When humankind is tribal it is because it affords opportunities to stick something sharp in the other face.
Interesting to think what the endgame of this will be, especially when salaries are determined for jobs that don’t have an employee currently in them..
Of course the company wants to pay the least possible, so I suppose they will offer a salary that one can only live in Mississippi or Detroit, and force people to move to those cheaper locals to get hired.
Or why not even think internationally.. I’m sure quite a few Americans (particularly singles) might be OK working / living in Cancun, Cabos or Rio, so perhaps the hiring salaries will start at even lower numbers still.
Very interesting, but if your work can be done remotely (and must be done by an American or western educated / western speaking skill person), it is unlikely you will be recruited to live in a big expensive city anymore.. (for better or for worse)
there is no end game.. it just evolves and modulates. the only rule here is those with real in demand skills can write there tickets and the rest can write blog posts.
Once a company figures out work can be done from home, the next logical step will be to send the job overseas to achieve the next level of savings.
They’ve tried this, the quality drop in tech is huge, it’s why Google/FB/AMZN/MSFT et al still pay huge American salaries. Not because they’ve never heard of outsourcing, but because they tried it and quickly reversed course.
Also, once a company figures out work can be done remotely, a logical step will be to see if machine intelligence can do the work.
Working from home requires different skill sets from working in an office. At meetings prior to c 19 the same people always arrived early. Some people always were the last to leave. I asked my daughter in law who manages a team of employees working from home about productivity. Her comment was overall somewhat better but individually some are doing better others need the office environment to succeed. I think the underlying technology is here so the big corporate offices are going to fade away with some people winners others losers. I
When the crazy building boom began in Seattle (like $4,500 per month for a one bedroom) it was directed toward highly paid techies pouring into the city. As I recall something like 80% of this new construction was aimed at those high earners who can now work from Bisbee, AZ. or Fort Kent, Maine.. My neighbourhood has a number of techies that no longer have to commute to Bellevue or Redmond and to a person are working from home and have been for most of 2020. New high-rise construction is still booming in the face of falling rents. But, malls were still being built when the trend was clearly pointing to online sales. Now malls are being torn down or reconfigured into something other than retail. So, at some point can we expect these expensive rents to reflect reality and fall to something that’s actually affordable? Finally, what will be the point of a city if all of those, so far, highly paid techies can work from anyplace with electricity and an internet connection?
“So, at some point can we expect these expensive rents to reflect reality and fall to something that’s actually affordable?”
This has *always* been the dynamic, it is simply supply and demand…every new addition to supply (even the most expensive ones) making existing apartments comparatively less expensive – because they are older.
The gross inflation of *all* apartment rent
is because total demand is outrunning total supply…the really important question is why that second condition holds.
But all in all, it is better – for everyone – to have expensive new apt supply…rather than to have no new supply at all.
The reality, at least in Seattle, was the opposite. Rents across the board went up right along with every new supply and that radiated out to the furthest suburb.. Older affordable buildings were torn down to make room for the new expensive ones. But even those older places that have survived raised their rents because they could.. All of the thttps://wolfstreet.comowns ringing Seattle saw major rent increases..
“making existing apartments *comparatively* less expensive”
“The gross inflation of *all* apartment rent
is because total demand is outrunning total supply…the really important question is why that second condition holds.”
If demand is outstripping supply all prices are going to go up…but older apts increase slower than new builds.
Without increased supply, there is no magic distortionless fix that will lower rents. Rent control will disincentivize new builds…making apt shortage worse.
Yikes, so much for the social contract.
I keep imagining one of those time travel movies. A an engineer from 1958 time travels to 2021. He steps out of his portal in his neat tweed suit with bow tie and polished shoes. Only moments before he had been doing hands-on work at his job at Bell Labs developing transistors . At first he finds himself in the abandoned core of the once vibrant town. Looking for people he heads toward the burbs, Soon he finds himself in a neighborhood of closely packed chipboard and vinyl houses, with cartoonish bloated cars out front. Inside the houses he finds various slovenly coders slumped over their terminals in pajamas. What are you doing he asks? One replies ” working on a script to automatically place adds on a blog page.” The next says,” I am refining a video package that lets people post pictures of cats on a computer easier.” The engineer turns around, heads back to 1958 and puts an end to the transistor project forever.
Best thing I’ve read all day!
Haha…. ” working on a script to automatically place adds on a blog page.” The next says,” I am refining a video package that lets people post pictures of cats on a computer easier.”
Is this what these coders actually do? (kidding, of course – old real engineer here)
Anthony, that is exactly what many computer science graduates do today.
If only William Shockley wasn’t such a jerk…
Quite brilliant, Seneca’s Cliff!
Whereas, if a time traveller from, say, 16th century Iran or 18th century France were to magically appear in my workshop, he would see just what I am about and be at home.
Everyone talks about being a ‘maker’ these days, and so few do it…..
I really like working from home. Without the commute time and the pointless meetings and waiting around for something to start, I save hours every day and am more productive. I can work till midnight and not have to explain to security what’s happening or walk to the carpark in the dark – or I can have a lazy morning if nothing much is going on. Businesses staff up so that they can cope with the ebb and flow of business – i.e. sometimes a lot is going on and sometimes not so much but everyone needs to be there – until now.
Cities will be for artists and bohemians once again.
Cities are working on becoming dangerous, filthy slums too.
They never left, just changed cities.
It would be nice to see the revival of ghost towns in Mid-America, particularly OK, KS, and Ark that I know. Just getting back to the small town basics too small for corporate would be nice. I traveled the back roads of eastern Oklahoma as a salesman throughout the 70s and 80s, it wasn’t that long ago that so many little stores and businesses died out. Every face had a name on the quiet forgotten backroads of the Indian territory.
I think a lot of metro dwellers don’t really grasp how unimaginably big/empty the US really is.
You would think that a single coast to coast flight would have them contemplate the unexamined metaphysical necessity of city life but…not so much.
Overwhelmingly, people go where the jobs are.
Good point c10,,, but driving across USA is an even better way, especially if you stay off the interstates and just drive the old US Highways, not to mention the state roads.
Drove US 50 in northern NV a couple years back, just because it is labeled as The ”loneliest road in America” or something like that. And it is very very lonely to be sure.
USA is really very lightly populated over most of it’s actual land mass,,, and we can only hope it stays more or less that way, as, eventually, farms of all sorts: trees, solar, wind, grazing pastures, and crops of all kinds are and always will be the basis of support for all living creatures, but especially our species as we continue to wipe out ”nature.”
There was a commenter here “Alex from San Hose, aka digital detroit”. May be he is still here. I thought how SF can be a Detroit? The Detroit has only the old headquarters of the big three automakers and you get the picture. He is right. Technsodus. Compared to Detroit, SF has a huge population and tourism and housing industry. Lets wait and see…
Cobalt:
Yes, auto headquarters is in Detroit, but I know a few who are working from Florida!
San Francisco is becoming ‘Baltimore by the Bay.’
The jobs will migrate to Bangalore. Tens of millions of lean, hungry, childless, tech educated youth willing to work for peanut skins.
“India is a lower-middle income country, and the average worker makes about 720 American dollars per year, or about 2 dollars per DAY.”
Tech? How much does a Information Technology make in Bangalore, India?
The average salary for a Information Technology is ₹556,013 in Bangalore, India. Salaries estimates are based on 9 salaries submitted anonymously to Glassdoor by Information Technology employees in Bangalore, India.
One ₹ is worth, drumroll please! One U.S. Cent.
Jobs started migrating to Bangalore 25 years ago. This is nothing new.
For good East Indian software engineers I paid ~8k/yr without bennies.
Wolf, can you write about the absurdity of California’s budget surplus?
Well, it’s not really a “surplus.” If I recall correctly, without looking up the actual numbers, they cut the budget by some $50 billion or so early into the Pandemic. And now it turns out that a cut of $25 billion would have been enough. And the other $25 billion that they cut is now called a “surplus.”
Also, they didn’t rally cut actual spending by $50 billion. There was a lot of shuffling around going on to get there.
That’s about as much as I want to say about it.
Texas has a similar situation, I was just told from David in Texas. Other states do too.
What happened is that the high earners that pay most of the income taxes kept their jobs and switched to working from home. And capital gains taxes kept flowing in due to the Fed’s asset bubble. California is very depended on capital gains taxes.
Thanks for the response, Wolf!
Aren’t cuts a bit absurd though in a pendamic when millions are losing their job, income, ability to pay rent, health care etc. It would se that that is the time to expand the budget!
So apparently they were anticipating a shortfall of revenues from eg. capital gains taxes that never happened courtesy not the Fed. Still more money ought to have been spent helping those hard hit. By absurd I meant unconscionable the reaction to save the economy, save the budget rather than save people.
No.
If you spend money you don’t have, then expenses are greater than income, and you go bust.
As anyone in business will tell you, you spend more money when you make more money and spend less money when you make less money.
While your idea is great from a do good perspective, it lacks practicality from a cash flow and business perspective.
And it is basically 100% what Wolf is against.
If we can save money when times are good, then we use those savings to support ourselves when times are bad. That is the long term sustainable answer.
With your thinking, as it goes currently, times are always bad and we are always taking on debt. It can only last for so long.
I work for a mid size manufacturing plant in the midwest. We have not missed a day during this time. All office staff have continued to work onsite alongside the manufacturing production staff. I consider all of us blessed.
I read a book a decade or so back called “The world is Flat” by Thomas Friedman. Be careful what you wish for on your decentralized – work from CO or TX. Soon it will no longer be in the US.
If you physically do not to be there. You are truly a global commodity.
ArmchairQB, I am in the same boat with manufacturing. It is a tough sell to get an employee to telecommute with a forty ton machine tool in the back of the pickup.
Chinese companies have purchased entire manufacturing plants and shipped them back to China.
But, with the new NAFTA, Mexico is much much closer. Ford is building the new Mustang Mach-E in Mexico.
My wife has her vaccination series complete, I’ll start mine sometime in the next two weeks. She seems a bit more invulnerable these days. When everyone is no longer afraid, and the media is ready to make Biden a hero with his great COVID leap forward, people will be ready to live life as it was 12 months ago. With the election over, no promises have to be kept. The poor do not contribute to political parties. Only the rich. Forbearance will end, the real estate market will be saturated, and people will be ready to party- in the city not in the sticks.
Re: “When everyone is no longer afraid”
As summer phases in, we’ll see how people are adapting. It seems likely that the slow-paced vaccine program mixed with people rejecting vaccines and efforts to slow down virus spread will result in a larger pandemic. I think there is a hopefulness that this will all be over in a few weeks, but more than likely, this entire year will be very difficult around the globe.
People are adapting to working from home, if they have skills, and a huge amount of people want to live in the sticks — and I doubt if that trend will suddenly just stop. If anything, people will embrace the sticks and realize that cities were highly overrated. This pandemic is a generational game changer, not unlike the post WWll housing boom (and rush to live in cities).
Random behavior stuff from web:
On average, it takes more than 2 months before a new behavior becomes automatic — 66 days to be exact. And how long it takes a new habit to form can vary widely depending on the behavior, the person, and the circumstances. In Lally’s study, it took anywhere from 18 days to 254 days for people to form a new habit.
They move back for day to day social cultural reasons. Many people move back to cities once they find out internet bandwidth and electrical power delivery are crappy, medical care and schools are subpar, there aren’t many or even any excellent restaurants, galleries or playhouses and crime is about the same- just more spread out and planned out. They will also need to do their own research at times on everything from medical to construction permitting/codes to vehicle registration regulations as many rural county doctors and gov employees etc weren’t at the top of their class.. Plus fires..
In migrations from cities it generally happens that many city people will move back. It’s just that it takes the majority of them 1 to 2 years to finally decide to do so.
But, of course, “this time is different”.
What was Drew’s paycut when he left SF for Texas? Clearly the cost of living is way lower. As a leader the clearly led by example, right? ?
He moved for tax reasons. Easy to hide in TX. Drew took a pay rise. Dropbox got govt clients. So they’re on a drip. Drew doesn’t like govt. Like the rest of us. State got what it wanted tho. Lockdown and in check. We are the people. We pay tax to usurpers to moan in a tuxedo. Govt was canceled made a comeback.
Great comments….2021 will hopefully see some financial reality applied to the public sector as the truth sets in that we are not returning to normal as normal was previously defined. Hopefully might just be a dream considering the Fed financial floodgates soon opening.
It’s funny because when a freelancer works in a cheap locale, they charge the higher ‘going’ rate and pocket the difference.
It’s a perk for doing what many won’t want to do.
It’s not as if every freelancer can do this and it’s easy.
I know people who do what I do, charge say 80%, but live in countries many times cheaper to live.
They make a killing but they need to give up their old life and make a new one… and often it’s not all rosy.
But still, many customers want face to face ability if needed. I get work. I’d probably lose a lot if I went to live in Russia or Poland.
This dynamic has been going on for 20+ years at least.
Covid19 policy is changing things while it’s active.
But the ‘natural’ human behavioural outlook won’t change much afterwards.
Being near family.
Not needing to move to a different country.
Community, friends.
And now businesses want to give you less money to pack up and move to a cheaper area… making it only the businesses financial benefit for the change?
You can see where this is going.
You have to live in ‘cheapville’ for your job, we pay you less.
Win win for just the business.
WFH for the masses won’t be what they think it is.
I expect always on zoom type cameras, microphones, and AI watching you to check you’re working.
It is bad news on the jobs but seriously, some of these tech CEOs must have their brains in their ass if it took a pandemic for them to realise the work could be done remotely. Hey look, we are now in profit! Who would have thought it?
It was always about control.
For 75 years, organizational psychologists have produced a body of science stating that close, non-formal interactions led to higher productivity, greater creativity, better problem-solving, and more focused efforts towards organizational goals. This led to open-office concepts, office buildings with informal meeting areas, etc. Now, with no formal analysis and relying only on anecdotal accounts, everyone assumes WFH is better. As far as self-reported claims of higher productivity, just remember: 90% of drivers report having superior driving skills.
R Bacon,
“…everyone assumes WFH is better.”
You moved the goal post. No one said it was “better” in general. But it’s “cheaper.”
There are also some functions that work better at WFH – even Apple has said that. Companies have studied this for months. They know exactly what’s working for THEM and what is not working. They don’t need to ask you for your opinion or read studies about it. They have 9 months of hard data on their own workforce at WFH. And they’re going to get at least 6 more months of data. That’s what they base their decisions on.
R. Bacon,
Dunning & Kruger – “90% of drivers report having superior driving skills”.
Inverse of Imposture Syndrome.
Par for the course on people’s typically inflated sense of superiority.
According to a YouGuv survey, 55 percent of Americans believe they’re more intelligent than the average American. Think about that.
That is technically possible depending on the skew of the distribution of IQ.
Now 55% being above median intelligence on the ither hand…
Many tech companies have at least 10 years of data on folks working from home. They know how well or not well it works. The impact is on direct control, management ego, and HR justifications. What’s the fun in having slaves if you can’t beat them from time to time.
WFH and C19 is obscuring a business related issue with Dropbox. There is consolidation occurring in the cloud segment. Even old tech companies are entering the cloud space, like IBM, with their acquisition of Redhat. If the consolidation continues you will see some cloud companies entirely disappear while others grow.
This isn’t your grandpa’s X.25 cloud.
With the work-from-home trend, national boundaries become less meaningful and the company you work for becomes more meaningful. This will accelerate the globalization of the workforce and the corporate takeover of societies across the globe.
The US, in particular, currently has a lot of profitable multinational corporations. What happens to the US society when those corporations accelerate their offshoring of labor. They already offshored manufacturing. Now, the offshoring of white collar labor appears to be beginning in a big way. The pandemic will provide the excuse for further offshoring.
These dummies in congress don’t see that they too are being off shored by these transnational companies. We are heading for a future where loyalty is owed to the employer, not the nation. Thanks globalists.
Apparently when you work from home, you don’t need a COO.
Olivia Nottebohm, who joined just a year ago from Alphabet (Google) is stepping down Feb 5.
White collar job layoffs are only in the beginning stages. Its only going to accelerate. Before I left my position in a top Intel Agency I was asked by a relative how many employees could be let go and still perform the necessary functions for maintaining the infrastructure and performing the necessary Agency functions. I came up with the figure of 50% of the management and about 75% of the contractor workforce. I stand by those figures. Those figures would probably apply to most of the large corporations in America today.
but don’t the fed bucks floweth freely?
an army of goldbricking contractors is a great vascular network for stimulus
they shall remain employed and well fed, for inflation is their duty
The pandemic has hit hard to mostly blue-collared jobs and not much of white-collared who inturn are enjoying work from home policies. We might take the brunt hit now but the future is building up and no sooner than later machines will replace more jobs, but people will figure out, economies will figure out and there will be a balance.
Will work from home be the future?