WEBVTT - The Work-From-Home Boom Is Here to Stay 0:00:00.080 --> 0:00:03.600 I'm Carol Masser. Are Bloomberg Business Week cover story this week. Well, 0:00:03.640 --> 0:00:06.120 you've no doubt heard about the urban exodus by now. 0:00:06.160 --> 0:00:09.040 How many working professionals have traded the city for the 0:00:09.119 --> 0:00:12.520 suburbs or even the country during the pandemic. Of course, 0:00:12.520 --> 0:00:15.800 the question remains if all those relocations are just temporary 0:00:16.200 --> 0:00:19.239 or if they become more permanent. And perhaps the most 0:00:19.280 --> 0:00:21.680 interesting element to watch in all of this is going 0:00:21.720 --> 0:00:25.440 to be pay Already, we're beginning to see companies accommodate 0:00:25.480 --> 0:00:29.080 employees who have embraced that change of scenery. But those 0:00:29.120 --> 0:00:33.919 decisions can also come with a cost, namely a localized compensation. 0:00:34.400 --> 0:00:36.800 So that's the big question. Would you take a pay 0:00:36.840 --> 0:00:39.000 cut to keep your job but live where you want? 0:00:39.440 --> 0:00:42.240 Before the pandemic, the US had never been less mobile 0:00:42.280 --> 0:00:45.919 in its entire history. So what transpires next and how 0:00:45.960 --> 0:00:49.440 that question gets answered could bring some profound changes for 0:00:49.479 --> 0:00:52.760 the US labor market, the economy, and the country as 0:00:52.760 --> 0:00:55.880 a whole. This episode is brought to you by Principal 0:00:55.920 --> 0:01:00.680 Financial Group, combining actionable insights with specialized solution scans to 0:01:00.720 --> 0:01:03.960 help you meet your investment goals. Get to know us 0:01:04.200 --> 0:01:10.560 at Principal dot com. Go burboard, young knowledge worker. The 0:01:10.600 --> 0:01:13.520 pandemic has meant that white collar workers can suddenly live 0:01:13.560 --> 0:01:18.679 anywhere that will have implications for pay. How does salary 0:01:18.720 --> 0:01:23.480 cut sound and could reshape the US? By Noah Buhire 0:01:25.840 --> 0:01:28.920 Rachel music Er was on maternity leave, stuck in a 0:01:28.959 --> 0:01:32.520 two bedroom basement department with a newborn when COVID nineteen 0:01:32.600 --> 0:01:36.119 started spreading in New York City. Her husband, who works 0:01:36.120 --> 0:01:39.160 in the insurance industry, was still commuting on the subway, 0:01:39.560 --> 0:01:42.760 so she started making him shower before holding the baby. 0:01:43.000 --> 0:01:45.200 It was just starting to feel unsafe to even go 0:01:45.319 --> 0:01:49.480 for walks, Musicer says, so on March fourteen, they packed 0:01:49.480 --> 0:01:53.560 a few bags and drove to Rochester, New York. Musker 0:01:53.680 --> 0:01:57.440 had loved her Brooklyn neighborhood. The rent was ridiculous, but 0:01:57.480 --> 0:01:59.680 there was a bistro a few steps from her apartment 0:01:59.720 --> 0:02:02.400 that ord a fabulous brunch if you were willing to 0:02:02.400 --> 0:02:05.000 wait for a table, and a daycare a half block 0:02:05.040 --> 0:02:07.680 away where she planned to send the baby. None of 0:02:07.680 --> 0:02:10.840 that mattered now the daycare might not even be open 0:02:10.880 --> 0:02:13.760 when she went back to work. Brunch was a before 0:02:13.800 --> 0:02:17.880 times indulgence. She and her husband had planned to stay 0:02:17.880 --> 0:02:21.079 with her parents for two weeks in Rochester. They ended 0:02:21.160 --> 0:02:24.720 up there for nine Afterward, they rented a house outside 0:02:24.760 --> 0:02:28.000 town on Lake Ontario, and Musker settled back into her 0:02:28.040 --> 0:02:30.680 job as director of communications at the real estate and 0:02:30.720 --> 0:02:35.400 technology company Redfin. In August, the couple bought a four bedroom, 0:02:35.440 --> 0:02:37.960 thirty four hundred square foot house for three hundred and 0:02:37.960 --> 0:02:41.320 fifty five thousand dollars. There was a time when the 0:02:41.360 --> 0:02:44.560 thought of relocating to her hometown would have been something 0:02:44.600 --> 0:02:48.480 close to a nightmare for Musicer, But to her pleasant surprise, 0:02:49.040 --> 0:02:52.919 Rochester wasn't that bad. Her mom was helping with childcare, 0:02:53.480 --> 0:02:56.040 it was easier to shop for groceries in a car, 0:02:56.520 --> 0:02:59.480 and there was a straight out of Brooklyn Craft Brewery nearby. 0:03:00.240 --> 0:03:01.960 It was a whole bunch of young people in a 0:03:02.040 --> 0:03:04.800 field at picnic tables, drinking in the middle of the day. 0:03:04.919 --> 0:03:09.440 She says. We could picture it in Williamsburg. Like many 0:03:09.480 --> 0:03:13.720 people during the pandemic who could suddenly work remotely, Musicer 0:03:13.760 --> 0:03:16.880 had moved without figuring out all the details with her employer. 0:03:17.680 --> 0:03:20.920 One thing they hadn't discussed was salary. Now that she 0:03:21.000 --> 0:03:24.360 lived in an inexpensive city, Redfinn asked, would she be 0:03:24.400 --> 0:03:27.960 willing to accept a pay cut. It's a question that's 0:03:27.960 --> 0:03:32.400 been foisted on many white collar employees. In February, only 0:03:32.440 --> 0:03:34.720 eight percent of the U S workforce did their job 0:03:34.920 --> 0:03:38.160 entirely from home, according to research from the Federal Reserve 0:03:38.240 --> 0:03:41.560 Bank of Dallas. It spiked to thirty five percent in 0:03:41.640 --> 0:03:45.600 May as offices stayed closed and workers fled to less 0:03:45.600 --> 0:03:49.400 densely populated areas. The work from home rate has fallen 0:03:49.400 --> 0:03:53.200 a bit since and will drop further as vaccines are distributed, 0:03:53.800 --> 0:03:56.680 but a substantial number of workers are likely never going 0:03:56.720 --> 0:04:00.520 back to their old offices. This shift has been especially 0:04:00.600 --> 0:04:04.080 pronounced in the tech industry, which has a high concentration 0:04:04.080 --> 0:04:07.120 of employees who can work from anywhere but are based 0:04:07.160 --> 0:04:12.320 for now in expensive coastal cities. Facebook, Microsoft, and Stripe 0:04:12.600 --> 0:04:14.960 have announced that more employees will be able to work 0:04:15.000 --> 0:04:20.240 remotely indefinitely. Like Redfin, those companies are also adjusting pay 0:04:20.320 --> 0:04:24.080 for workers who relocate. Music Er salary and bonus will 0:04:24.120 --> 0:04:27.159 go down about next year if she stays in Rochester. 0:04:27.960 --> 0:04:31.440 She's resigned to the tradeoff, at least for now. So 0:04:31.560 --> 0:04:33.280 much in the world is not how I thought it 0:04:33.320 --> 0:04:36.880 would be, she says. What music Er and workers like 0:04:36.960 --> 0:04:39.240 her do in the long run, could be one of 0:04:39.279 --> 0:04:42.680 the lasting legacies of the pandemic. If the exodus to 0:04:42.800 --> 0:04:46.719 second cities and exerbs becomes permanent, it has the potential 0:04:46.760 --> 0:04:51.240 to improve corporate balance sheets, remake labor markets, and profoundly 0:04:51.279 --> 0:04:55.800 reshape the American landscape. Millions of upwardly mobile urban dwellers 0:04:56.120 --> 0:04:58.800 may find that they can move out without sacrificing their 0:04:58.800 --> 0:05:03.040 career ambitions. It's only just started, says Nick Bloom, an 0:05:03.040 --> 0:05:06.520 economics professor at Stanford who studied work from home trends. 0:05:07.080 --> 0:05:13.320 There's going to be a reverse of the urban boom. 0:05:13.360 --> 0:05:17.320 There are doubters, of course. Jamie Diamond, Larry Fink, and 0:05:17.400 --> 0:05:21.160 Reed Hastings, the bosses of J. P. Morgan, Chase, black Rock, 0:05:21.279 --> 0:05:25.520 and Netflix, respectively, have all argued against the shift, suggesting 0:05:25.560 --> 0:05:29.359 in various ways that remote employees aren't as productive, that 0:05:29.480 --> 0:05:33.039 corporate cultures will be eroded, and that worker's mental health 0:05:33.080 --> 0:05:38.720 could suffer. Musicker's boss Glenn Kellman shares some of those concerns. 0:05:39.000 --> 0:05:42.800 The Red Fend chief executive officer loves his company's Seattle headquarters, 0:05:43.120 --> 0:05:46.280 which features catered meals and a video game room, but 0:05:46.440 --> 0:05:49.120 he now wonders if he was imposing his preferences on 0:05:49.200 --> 0:05:53.400 his employees. There's a narcissism to it. He says that 0:05:53.560 --> 0:05:56.240 if somehow they're in close proximity to me, we will 0:05:56.279 --> 0:05:59.719 share some kind of weird energy. That's part of why 0:05:59.760 --> 0:06:02.719 he's set a new corporate policy in August, allowing what 0:06:02.800 --> 0:06:06.919 Redfinn calls headquarters employees, the one thousand or so people 0:06:06.920 --> 0:06:10.039 who aren't real estate agents or field operations staff, to 0:06:10.080 --> 0:06:14.640 work remotely full time as long as they accept localized compensation. 0:06:15.520 --> 0:06:18.240 The policy makes sense for redfin, which has more to 0:06:18.279 --> 0:06:21.960 gain than most employers from a wholesale labor shift. The company, 0:06:22.080 --> 0:06:24.640 which has been around since two thousand six, is a 0:06:24.680 --> 0:06:28.160 low cost real estate brokerage that also maintains a popular 0:06:28.240 --> 0:06:32.680 home shopping app. It employs about nine salaried agents in 0:06:32.760 --> 0:06:35.520 more than ninety markets in the US and Canada and 0:06:35.640 --> 0:06:38.040 offers listing fees that can amount to as little as 0:06:38.080 --> 0:06:41.559 a third of the industry standard. When the virus shut 0:06:41.600 --> 0:06:45.279 down the economy this spring, investors worried Redfin would be 0:06:45.279 --> 0:06:49.200 saddled with big losses. The company had expanded into mortgage 0:06:49.279 --> 0:06:52.200 lending and had been buying homes for cash and flipping them. 0:06:52.600 --> 0:06:56.679 Business practices that had begun to look dicey. Home sales plunged, 0:06:57.080 --> 0:07:01.080 Hurting agent fees Redfin's stock law two thirds of its 0:07:01.120 --> 0:07:04.960 value from February one to March eighteenth, falling to ten 0:07:05.000 --> 0:07:08.200 dollars and thirty three cents of share. By early April, 0:07:08.400 --> 0:07:10.880 Kellman had decided to forego the remainder of his three 0:07:10.960 --> 0:07:14.280 hundred thousand dollar based salary for the year and temporarily 0:07:14.280 --> 0:07:17.400 cut the pay by ten percent for all headquarters staff 0:07:17.640 --> 0:07:20.560 who made more than eighty thousand dollars a year. He 0:07:20.600 --> 0:07:23.360 furloughed or let go two fifths of the agents and 0:07:23.400 --> 0:07:27.320 their support staff. Then, almost as quickly as things had 0:07:27.320 --> 0:07:31.200 fallen apart, they came roaring back. Low mortgage rates and 0:07:31.280 --> 0:07:34.720 newfound work flexibility gave people a reason to buy homes 0:07:34.720 --> 0:07:38.240 in places they would never have considered before. In August, 0:07:38.280 --> 0:07:42.040 the National Association of Realtors reported that the area around Kingston, 0:07:42.080 --> 0:07:45.040 New York, a working class town about two hours north 0:07:45.120 --> 0:07:49.040 of Manhattan, had the fastest appreciating home prices in the US. 0:07:49.720 --> 0:07:53.480 Throughout the West, communities near national parks and ski resorts 0:07:53.520 --> 0:07:58.040 were becoming zoom towns for remote workers. Dramatically pushing up 0:07:58.080 --> 0:08:02.120 home prizes. Maln Niels, who had spent a decade horrifying 0:08:02.160 --> 0:08:05.160 their parents by paying three thousand dollars a month to 0:08:05.240 --> 0:08:08.800 occupy tiny, roach ridden Warren's near farm to table restaurants 0:08:08.840 --> 0:08:11.920 in big cities, had already started seeking out farm to 0:08:12.000 --> 0:08:16.960 table restaurants in the suburbs. The pandemic accelerated that trend too. 0:08:17.680 --> 0:08:21.280 Redfin took advantage of all this, allowing homebuyers to video 0:08:21.360 --> 0:08:24.520 chat with agents or to take virtual reality tours on 0:08:24.560 --> 0:08:28.600 its website. Revenue ended the second quarter at two fourteen 0:08:28.640 --> 0:08:32.280 million dollars, up eight percent from a year earlier. The 0:08:32.320 --> 0:08:36.040 company reinstated salaries for headquarters staff in June, and by 0:08:36.080 --> 0:08:38.720 the next month had brought back the agents at furloughed. 0:08:39.240 --> 0:08:42.040 In September, the stock climbed to more than fifty dollars 0:08:42.040 --> 0:08:46.880 a share. Inside the company, though employees had been demanding answers. 0:08:47.400 --> 0:08:49.800 We had people asking, well, when are we going to 0:08:49.880 --> 0:08:52.920 come back, Kellman recalls. Some of them wanted to know 0:08:53.000 --> 0:08:56.400 if they could move to Montana. The head of product design, 0:08:56.559 --> 0:08:59.760 Colin Grigson, eight, had been spending part of his time 0:08:59.800 --> 0:09:03.280 in an airstream on land. He owned outside Walla Walla, Washington. 0:09:03.920 --> 0:09:06.320 There was no running water, but he was logging on 0:09:06.360 --> 0:09:09.640 to video calls through a Verizon hot spot and using 0:09:09.640 --> 0:09:12.600 solar panels to power his computer. I'd be in these 0:09:12.640 --> 0:09:16.079 meetings and they're like, how is this working, Griggson says. 0:09:16.920 --> 0:09:21.319 More common, though, were questions about regional moves. An employee 0:09:21.320 --> 0:09:24.760 wanted to leave Seattle's Queen Anne neighborhood for Mill Creek, Washington, 0:09:24.960 --> 0:09:28.000 about twenty five miles north. How often would she have 0:09:28.040 --> 0:09:32.280 to come into red Fenn's headquarters. Even Kellman's executive assistant 0:09:32.320 --> 0:09:36.320 was thinking about moving to a far flung suburb. In June, 0:09:36.480 --> 0:09:39.439 Redfinn told employees they wouldn't be required to come back 0:09:39.480 --> 0:09:41.600 to the office for the rest of the year, and 0:09:41.720 --> 0:09:44.360 Kellman started working with his executive team on a longer 0:09:44.480 --> 0:09:49.840 term plan. Many companies and large organizations, including the federal government, 0:09:50.200 --> 0:09:53.520 pay differently in different places because the costs of living 0:09:53.520 --> 0:09:57.320 in labor can vary widely. Red Fenn had been no exception, 0:09:57.720 --> 0:10:00.240 and it already had a process for changing pay for 0:10:00.360 --> 0:10:04.079 agents when they moved between markets, But until that point, 0:10:04.360 --> 0:10:07.920 relocations and salary adjustments for headquarters staff had been handled 0:10:07.920 --> 0:10:12.199 on a case by case basis. Over the summer, Redfin's 0:10:12.280 --> 0:10:16.560 human resources team began surveying employees and researching how businesses 0:10:16.600 --> 0:10:21.000 such as Facebook, Uber, Amazon, and MasterCard were approaching the challenge. 0:10:21.720 --> 0:10:25.040 Even in normal times, getting the numbers right is tricky. 0:10:25.280 --> 0:10:27.920 Pay too little and a business will struggle to recruit. 0:10:28.360 --> 0:10:32.360 Pay too much and profits suffer. So companies constantly keep 0:10:32.400 --> 0:10:35.080 tabs on the cost of labor in markets where they operate. 0:10:35.800 --> 0:10:39.920 Before the pandemic, Redfin considered raising engineer salaries every six 0:10:39.960 --> 0:10:43.600 months to stay competitive with the big tech companies. Remote 0:10:43.600 --> 0:10:46.640 work introduced a whole new set of challenges. Kellman says 0:10:47.160 --> 0:10:49.960 it was like opening an office in every American city 0:10:50.080 --> 0:10:55.080 all at once. Suzanne Sanders, director of Compensation, started her 0:10:55.120 --> 0:10:58.640 analysis by getting data on roughly se cities from the 0:10:58.679 --> 0:11:02.640 Economic Research instoo out, which compiles information on wages and 0:11:02.640 --> 0:11:06.200 the cost of living across the US. She grouped the 0:11:06.280 --> 0:11:09.679 data by state and metro area and focused on professionals 0:11:09.720 --> 0:11:12.720 who made around one hundred thousand dollars a year, roughly 0:11:12.760 --> 0:11:17.160 the midpoint for redfin Seattle headquarters staff. She also included 0:11:17.240 --> 0:11:20.840 variations for different kinds of jobs, such as software engineer 0:11:20.880 --> 0:11:26.280 and product manager creating an insane spreadsheet. By late August, 0:11:26.440 --> 0:11:29.440 red Fend executives had settled on an approach that divided 0:11:29.480 --> 0:11:34.199 metro areas into tiers based on cost. Should Portland, Oregon, 0:11:34.320 --> 0:11:36.719 where the median home sold for about four hundred and 0:11:36.720 --> 0:11:40.080 fifty thousand dollars, be lumped in with Seattle, where it 0:11:40.120 --> 0:11:44.600 fetched sixty dollars? Was it right to separate the huge 0:11:44.640 --> 0:11:47.640 sprawl east of Los Angeles County, which is part of 0:11:47.640 --> 0:11:52.320 the Riverside metro area, from Los Angeles itself. People sometimes 0:11:52.360 --> 0:11:54.880 commute between the two, but the cost of living is 0:11:54.920 --> 0:11:59.760 about twenty five lower in Riverside. Then there was Bend, Oregon, 0:12:00.200 --> 0:12:02.400 a sun soaked city on the eastern side of the 0:12:02.440 --> 0:12:06.240 Cascades that's popular without doorsy types and thus a bit 0:12:06.280 --> 0:12:10.880 more expensive than comparable locations. On August twenty fourth, the 0:12:10.920 --> 0:12:14.040 executives went back and forth during their weekly Google hangout, 0:12:14.360 --> 0:12:16.959 debating where to put the town or whether to call 0:12:17.000 --> 0:12:20.160 it out at all. Have you been to Bend. It's 0:12:20.160 --> 0:12:24.160 so small, said one executive, suggesting they could safely ignore it. 0:12:24.760 --> 0:12:29.360 Kelman disputed this. It's growing incredibly fast, he argued, It's 0:12:29.400 --> 0:12:36.400 like the Austin of Oregon. Two days later, Kellman sent 0:12:36.440 --> 0:12:39.800 an email to all staff outlining the new policy. He 0:12:39.880 --> 0:12:43.360 said he expected most headquarters employees to eventually come back 0:12:43.360 --> 0:12:45.600 to a red Vent office at least a few days 0:12:45.640 --> 0:12:48.040 a week, but they'd now have the option to work 0:12:48.080 --> 0:12:51.080 wherever they wanted full time if they got approval from 0:12:51.120 --> 0:12:54.800 their manager and a senior executive. Employees would also get 0:12:54.840 --> 0:12:58.880 six weeks of notice before offices reopened. Then he turned 0:12:58.880 --> 0:13:03.679 to the juicy stuff money. Extremely expensive areas the San 0:13:03.720 --> 0:13:07.520 Francisco and San Jose metro areas would continue to command 0:13:07.559 --> 0:13:11.720 the highest salaries and equity awards. Recruiting and retaining people 0:13:11.760 --> 0:13:13.960 in two of the most costly housing markets in the 0:13:14.000 --> 0:13:18.600 country would be impossible without paying top dollar. Expensive areas 0:13:18.600 --> 0:13:22.560 such as Boston, Los Angeles, New York, Portland, and Washington, 0:13:22.640 --> 0:13:25.760 d C. As well as their suburbs, would hu to 0:13:25.800 --> 0:13:28.880 the same levels Redfin had been paying employees in Seattle. 0:13:29.559 --> 0:13:32.760 After that, there was a big group of mid tier areas. 0:13:33.320 --> 0:13:35.680 Anyone who moved from an expensive place to one of 0:13:35.720 --> 0:13:38.439 these would get a ten percent to fifteen percent reduction 0:13:38.520 --> 0:13:42.800 in cash compensation, salary plus bonus, as well as ten 0:13:42.800 --> 0:13:49.960 percent to twenty percent less in stock These included Austin, Baltimore, Chicago, Denver, Houston, Miami, 0:13:50.000 --> 0:13:54.320 and Philadelphia, as well as Frisco, Texas, just outside Dallas, 0:13:54.360 --> 0:13:57.720 where Redfin has an office. The company also threw in 0:13:57.760 --> 0:14:01.200 a few cities in the Pacific Northwest, including Olympia and 0:14:01.240 --> 0:14:06.160 Bellingham in Washington and Bend. Everything that didn't get called out, 0:14:06.400 --> 0:14:10.360 which included vacation spots such as Aspen, Colorado, rust belt 0:14:10.400 --> 0:14:14.160 towns like Detroit and Rochester, and some major metro areas 0:14:14.200 --> 0:14:17.840 like Atlanta, ended up in a vast and vaguely insulting 0:14:18.000 --> 0:14:22.120 bucket called rest of the US. Employees who moved to 0:14:22.160 --> 0:14:25.000 these places could expect a twenty pent reduction in cash 0:14:25.040 --> 0:14:28.720 compensation and to twenty five percent cut to equity awards, 0:14:29.160 --> 0:14:31.360 even though a few of these locales were bound to 0:14:31.400 --> 0:14:35.480 have higher costs than Seattle. Almost a hundred questions poured 0:14:35.520 --> 0:14:38.520 in during a live employee Q and A in late September. 0:14:39.240 --> 0:14:42.200 Workers wanted definitions of the costs of living in labor 0:14:42.520 --> 0:14:45.200 and to know how their specific circumstances would be treated. 0:14:45.680 --> 0:14:48.840 A few asked the obvious question, why was it fair 0:14:48.920 --> 0:14:51.480 for people doing the same jobs to be paid different 0:14:51.480 --> 0:14:55.760 wages depending on where they lived. Kelman had anticipated the pushback. 0:14:56.520 --> 0:14:59.120 Even for a business where everyone is in one office, 0:14:59.520 --> 0:15:01.800 pay is a hornet's nest, he wrote at the end 0:15:01.800 --> 0:15:05.160 of his email outlining the policy. What makes pay especially 0:15:05.200 --> 0:15:08.720 tricky now is that simplicity and fairness trade off with 0:15:08.760 --> 0:15:12.400 one another. Most employees chose to see the bright side. 0:15:12.800 --> 0:15:15.840 Nick Smith, a thirty five year old senior product manager 0:15:15.880 --> 0:15:18.720 in Seattle and avid snowboarder who had been with the 0:15:18.720 --> 0:15:21.440 company for two and a half years, was already headed 0:15:21.480 --> 0:15:24.600 to Bend when the policy was announced. The ten percent 0:15:24.720 --> 0:15:28.680 to pay cut seemed fair to him because his research 0:15:28.720 --> 0:15:32.040 suggested wages in Bend were as much as less than 0:15:32.080 --> 0:15:35.280 what they were in Seattle. A senior product manager at 0:15:35.320 --> 0:15:39.480 Redfen in Seattle can make between onety seven thousand dollars 0:15:39.480 --> 0:15:43.160 and one sixty three thousand dollars in salary before bonus 0:15:43.200 --> 0:15:46.360 is in equity. It was a sigh of relief. Smith says, 0:15:46.720 --> 0:15:50.320 I was like yes. He and his wife sold their 0:15:50.360 --> 0:15:53.920 four bedroom craftsman style home in a walkable Seattle neighborhood 0:15:54.440 --> 0:15:57.920 and for roughly the same money bought a rural property 0:15:57.960 --> 0:16:00.760 that felt like a palace. Their new house is forty 0:16:00.800 --> 0:16:03.680 eight hundred square feet and has an in law unit 0:16:04.000 --> 0:16:07.520 on about three acres outside Bend and thirty two miles 0:16:07.520 --> 0:16:11.920 from the closest ski mountain. Redfin's remote work policy and 0:16:12.040 --> 0:16:15.320 what Smith was reading about other companies made him comfortable 0:16:15.360 --> 0:16:18.920 that he wasn't committing career suicide. He says. He plans 0:16:18.960 --> 0:16:20.920 to stay in Bend for the rest of his life 0:16:21.000 --> 0:16:23.520 and raise his two kids there. I don't want my 0:16:23.600 --> 0:16:27.240 options to ever be limited, he says, and I don't 0:16:27.240 --> 0:16:30.120 think they will be, at least for a narrow slice 0:16:30.160 --> 0:16:33.200 of the workforce. This seems to be the case. The 0:16:33.240 --> 0:16:36.480 remote positions US employers most want to fill right now 0:16:36.760 --> 0:16:41.040 are dominated by tech roles, including front end developer, full 0:16:41.080 --> 0:16:46.080 stack engineer, and product manager. According to LinkedIn, For these jobs, 0:16:46.120 --> 0:16:49.000 the pandemic has created what amounts to a national labor 0:16:49.040 --> 0:16:52.680 market that could ultimately cause salaries to stagnate in tech 0:16:52.760 --> 0:16:57.080 hubs while they gradually rise elsewhere. If companies can source 0:16:57.120 --> 0:17:00.920 talent anywhere more cheaply, the extremely high salaries in the 0:17:00.960 --> 0:17:03.720 Bay Area in Seattle may look a lot less reasonable. 0:17:04.640 --> 0:17:08.080 Kellman has been attuned to this for years. Redfin used 0:17:08.080 --> 0:17:10.639 to pay engineers fresh out of school about eighty thousand 0:17:10.680 --> 0:17:13.399 dollars a year, but that had spiked to around one 0:17:14.160 --> 0:17:17.520 thirty thousand as the company has tried to keep pace. 0:17:18.280 --> 0:17:21.000 Part of what we've always been doing is rationalizing the 0:17:21.080 --> 0:17:25.320 higher pay, he says. Our CFOs perspective on this isn't 0:17:25.640 --> 0:17:28.800 why are we lowering pay in Dallas. It's tell me 0:17:28.840 --> 0:17:32.119 why the worker in San Francisco earning more than the 0:17:32.160 --> 0:17:39.400 worker in Seattle is that much more productive? Much wider 0:17:39.440 --> 0:17:44.200 adoption of remote work has implications beyond money. Many companies 0:17:44.200 --> 0:17:48.360 say remote work will help recruit more diverse employees. Redfinn 0:17:48.440 --> 0:17:51.280 has been somewhat of a leader on this front, hosting 0:17:51.280 --> 0:17:54.240 a symposium on real estate and race two years ago 0:17:54.600 --> 0:17:58.920 and publishing data regularly on diversity in its workforce. Even so, 0:17:59.119 --> 0:18:03.199 only three of its technology employees are black. As Kellman 0:18:03.280 --> 0:18:06.480 points out, one reason engineering has been this enclave of 0:18:06.480 --> 0:18:09.560 white privilege is because we created a cult around a 0:18:09.560 --> 0:18:13.960 certain type of person. Consider Phyllis Geroggi, who grew up 0:18:14.000 --> 0:18:19.159 in Massachusetts. After graduating from Toughs University in with a 0:18:19.240 --> 0:18:23.360 degree in cognitive and brain science, she started making spreadsheets 0:18:23.359 --> 0:18:25.960 of places in the US that had a warm climate, 0:18:26.240 --> 0:18:29.840 were diverse and had a reasonable cost of living. Houston 0:18:29.960 --> 0:18:32.680 won out, and she moved there in March to start 0:18:32.680 --> 0:18:36.560 looking for jobs. She initially found work as a hostess 0:18:36.600 --> 0:18:39.440 at a restaurant, only to have it closed after her 0:18:39.480 --> 0:18:42.560 first day because of the virus. Meeting people in a 0:18:42.560 --> 0:18:45.280 city where she knew no one proved challenging with so 0:18:45.359 --> 0:18:49.040 much shut down. Then in June, one of her former 0:18:49.080 --> 0:18:53.399 college classmates contacted her on LinkedIn saying Redfin was hiring 0:18:53.480 --> 0:18:58.560 product managers. Jeroji, who is black, initially hesitated because she 0:18:58.600 --> 0:19:01.840 didn't want to move to San Francisco, go she'd never visited, 0:19:02.119 --> 0:19:05.600 but it's extreme wealth, inequality and widespread homelessness were a 0:19:05.640 --> 0:19:08.480 turn off. A friend had also told her that he'd 0:19:08.520 --> 0:19:11.640 become hyper aware of how few other black people were 0:19:11.640 --> 0:19:15.440 in the city. Over the summer, though, Gero j realized 0:19:15.480 --> 0:19:18.080 she could work from Houston at least until the end 0:19:18.080 --> 0:19:21.000 of the year. Her job even came with a Bay 0:19:21.000 --> 0:19:24.320 Area salary, despite her living with roommates in a city 0:19:24.320 --> 0:19:27.920 where the costs are about forty five lower. As much 0:19:27.920 --> 0:19:32.040 as she feels productive working remotely, there are drawbacks. It's 0:19:32.080 --> 0:19:34.240 been a hard adjustment to learn how to make casual 0:19:34.280 --> 0:19:38.720 conversation with coworkers. She says Gerogi plans to eventually move 0:19:38.800 --> 0:19:41.960 to the Bay Area once Redfin's office is reopened, though 0:19:41.960 --> 0:19:45.480 it's unclear when that will be her situation. Hence at 0:19:45.520 --> 0:19:48.800 the potential complexities to come for Redfinn and its employees. 0:19:49.560 --> 0:19:52.680 A senior product manager may be able to acquire acreage 0:19:52.680 --> 0:19:54.880 and bend and do his job remotely in a way 0:19:54.920 --> 0:19:57.680 that a more junior staffer from Houston with no built 0:19:57.720 --> 0:20:01.240 in network can't. Another big question is how to treat 0:20:01.280 --> 0:20:03.560 workers who want to come back to the office for 0:20:03.600 --> 0:20:07.040 only a few days a week. For now, Redfinn isn't 0:20:07.080 --> 0:20:09.920 making a distinction between those who come in every day 0:20:10.000 --> 0:20:13.280 and those who sometimes work from home, which means Grigson, 0:20:13.520 --> 0:20:16.119 the airstream guy, will still be able to collect his 0:20:16.160 --> 0:20:19.639 Seattle paycheck even if he occasionally logs in from Walla 0:20:19.720 --> 0:20:22.879 Walla while he builds a house out there. Not that 0:20:22.960 --> 0:20:26.639 anybody is coming back soon. In October, amid yet another 0:20:26.680 --> 0:20:30.600 wave of COVID infections, Kellman announced that Redfinn won't expect 0:20:30.640 --> 0:20:34.119 people in its offices until at least June one. He 0:20:34.240 --> 0:20:37.359 also said those who moved only temporarily during the pandemic 0:20:37.600 --> 0:20:41.679 wouldn't have their pay changed. In general, Kellman says he 0:20:41.680 --> 0:20:45.520 wouldn't be surprised if salaries eventually inch up in smaller 0:20:45.560 --> 0:20:49.280 cities as more companies allow for remote work, and the 0:20:49.320 --> 0:20:51.879 promised cost savings on real estate might not be as 0:20:51.960 --> 0:20:55.399 great as some expect. The overall need for office space 0:20:55.440 --> 0:20:58.000 could drop about ten to fifteen percent in the US, 0:20:58.359 --> 0:21:01.480 according to the research firm Green Street, but that could 0:21:01.520 --> 0:21:04.640 be offset if companies spread employees out more to make 0:21:04.640 --> 0:21:09.040 them feel more comfortable. As Facebook CEO Mark Zuckerberg conceded 0:21:09.040 --> 0:21:11.920 in a live stream with employees in May, it's really 0:21:12.000 --> 0:21:14.440 unknown what the economics of this are going to look like. 0:21:15.160 --> 0:21:19.000 The uncertainty goes well beyond real estate and business. Where 0:21:19.040 --> 0:21:23.480 people live will have profound implications on everything, including politics 0:21:23.480 --> 0:21:27.280 and climate change. An exodus from California could make the 0:21:27.320 --> 0:21:31.680 state more competitive for Republicans and turn Texas more toward Democrats, 0:21:32.359 --> 0:21:35.080 but it's also possible that people who leave will select 0:21:35.160 --> 0:21:39.320 regions where they feel more among their political tribe, deepening divides. 0:21:39.920 --> 0:21:44.359 Telework could significantly decrease carbon emissions, but it could also 0:21:44.480 --> 0:21:47.520 lead to dirtier commuting patterns if more people end up 0:21:47.600 --> 0:21:50.360 driving in from exerbs a few times a week rather 0:21:50.440 --> 0:21:53.520 than writing public transit or walking from an apartment near 0:21:53.560 --> 0:21:56.639 the office. What this means for cities is going to 0:21:56.680 --> 0:22:00.960 be complicated too. Younger workers will probably still come to 0:22:01.080 --> 0:22:04.399 urban areas to start their careers and have fun. For 0:22:04.520 --> 0:22:08.720 highly educated people, cities are marriage markets, says Jenny Shoultz, 0:22:09.000 --> 0:22:12.600 a fellow at the Brookings Institution who studies housing policy. 0:22:12.880 --> 0:22:15.639 Married drivers may also stick around to be close to 0:22:15.680 --> 0:22:19.000 the action, or if both partners can't find fulfilling work 0:22:19.040 --> 0:22:21.919 in the zoom town of their dreams. But lots of 0:22:21.920 --> 0:22:24.040 other people are going to decide they can get more 0:22:24.080 --> 0:22:27.200 of what they want in cheaper cities or suburbs, whether 0:22:27.280 --> 0:22:30.040 that's access to nature, a home with a yard, or 0:22:30.119 --> 0:22:33.320 good schools, even if the dating scene leaves something to 0:22:33.359 --> 0:22:38.280 be desired. This potential shift could have devastating consequences for 0:22:38.359 --> 0:22:42.600 extremely expensive places, but it could also spread wealth more evenly. 0:22:43.240 --> 0:22:46.760 Before the pandemic, America had become less mobile than almost 0:22:46.760 --> 0:22:50.080 at any point in our history. Kellman says, no matter 0:22:50.119 --> 0:22:53.000 what the economic cost of being in San Francisco, people 0:22:53.040 --> 0:22:56.560 would pay it. Having more remote workers means wages in 0:22:56.600 --> 0:23:00.199 Texas are going up, he says, so our housing price is. 0:23:01.000 --> 0:23:03.560 You can't have a two million dollar, two thousand square 0:23:03.560 --> 0:23:06.359 foot house in San Francisco and to two hundred thousand 0:23:06.359 --> 0:23:08.720 dollar house in Dallas that are basically the same for 0:23:08.840 --> 0:23:13.440 very long. When there are airplanes and internet connections and zoom. 0:23:13.520 --> 0:23:16.160 None of this makes the decisions employees have to make 0:23:16.200 --> 0:23:19.600 over the next several months any easier, especially for those 0:23:19.600 --> 0:23:24.440 who relocated in a hurry. Music Er, the Redfind Communications director, 0:23:24.800 --> 0:23:27.280 has until May to figure out whether she's staying in 0:23:27.400 --> 0:23:31.520 Rochester permanently and taking the pay cut. She's still not sure, 0:23:32.040 --> 0:23:34.879 and the decision will depend partly on whether her husband 0:23:34.960 --> 0:23:38.120 is allowed to work remotely after the pandemic. But she's 0:23:38.160 --> 0:23:40.440 more open to living up state than she ever thought 0:23:40.480 --> 0:23:44.320 she'd be. We were making a lot of sacrifices in Brooklyn, 0:23:44.560 --> 0:23:48.200 music Er says. In Rochester, we get so much more 0:23:48.320 --> 0:23:51.160 for our money. And that is this week's cover story. 0:23:51.240 --> 0:23:53.480 Check out more stories in the current issue of Bloomberg 0:23:53.520 --> 0:23:56.920 Business Week magazine. It's on newsstands, online and at Bloomberg 0:23:57.000 --> 0:24:00.280 dot com and on the Bloomberg terminal. I'm Carol Mam sir, 0:24:00.400 --> 0:24:03.160 and check out Bloomberg Business Week Radio Monday through Friday 0:24:03.200 --> 0:24:06.320