What is the signal of change?
Stripe, a San Francisco-based payments processing company, is offering employees $20,000 as a one-off bonus if they opt to relocate outside big (and expensive) cities such as the Bay Area, New York City, or Seattle, and take a cut in their base pay of up to 10%, Bloomberg informs.
Since the pandemic started and white-collar employees started working remotely en masse, there has been an exodus from big cities to other less expensive areas, in the US and other countries. Some countries, such as Bali or Bermuda, are trying to position themselves as new hubs for remote workers. When it doesn’t matter where you can work from, why not do it from an idyllic place surrounded by palm trees and white sand beaches?
People like James Altucher believe that cities like New York will never recover. There have been stories of the New York and San Francisco home markets been flooded and prices going down.
Is this exodus something temporary or is it a permanent trend? It will depend partly on whether flexible working arrangements and remote working are here to stay or are a temporary solution linked to the pandemic. As I’ve written elsewhere, the jury is still out on this one.
Another factor to consider is whether big cities will continue playing the role of magnets and hubs for people to gather and share ideas, and seek career opportunities, entertainment, arts, and gathering with different or like-minded people alike. In an increasingly digitised world where a bigger part of our lives happens in the virtual world, it may no longer be necessary to physically live in a city or nearby to have access to all those things that until now you could only get there.
What would happen if this signal were more widespread?
We don’t know how Stripe got to calculate those $20,000, and whether there is a retention or permanence clause attached to it, but if more companies start implementing similar schemes we can expect the prices of houses in affluent areas of big cities to decrease further, and these cities to be home to fewer people, especially the higher paid office employees who can actually work from anywhere.
This would start a downward spiral in those cities. Small businesses that depend on the commuting masses would close, city halls would collect less taxes from companies and citizens and therefore would offer fewer and worse services, there would be fewer bars, restaurants, theatres and other businesses linked to leisure… Would some of these cities become the new Detroits?
On the other hand, many people would stop spending, or wasting, hours commuting to work every day and would probably increase their quality of life by being able to live in bigger houses and in the places they choose because they like, not because their offices are located there. Flexibility will be the new keyword in the organisation of work, and this benefits workers.
Great cities have fallen and risen in the past, and they will do so again. If the white-collar employee exodus materialises, some of these cities will have to reinvent themselves and become something else. Cheaper housing isn’t necessarily a bad thing. On the contrary, housing in some of these places has become a privilege at the reach of very few, so if it becomes more affordable it will be a welcome change for many.
In the 19th and 20th centuries, we saw the great migrations from farmlands to the cities, giving birth to the great megacities of today. Are we going to see a return to the countryside and to smaller towns in the 21st century? I doubt it. I think we will continue having great, medium, and smaller cities. It will be exciting to see how these cities transform themselves and adapt once again.