State and city competitiveness in the age of telework

By Nathan Smith

Gardiner, ME (February 9, 2022) - As state leaders consider how to use the unprecedented federal broadband funding now available, they should think a little on how the emerging telework economy changes the meaning of state and local economic competitiveness. Economic competitiveness in the age of telework will depend less on job creation and more on quality of life — but only where there’s broadband. Where broadband gaps aren’t fixed, it will be a lost cause.

In spring 2020, the COVID-19 pandemic forced America’s office economy to flee from its buildings and take refuge in working from home instead. There were some hiccups, but mostly, it worked out better than expected. While unemployment surged due to the closure of restaurants, stores, and hotels, and schools struggled to cope with remote education, in areas where broadband was affordable and accessible, the organizational backbone of the U.S. economy pivoted smoothly to telework and kept right on functioning. 

The question now is: why go back? Many managers, and some employees, look forward to a “return to the office.” But a recent Gallup poll finds that 50% of full-time workers think their jobs could be done from home, and of those, 30% would prefer to telework permanently. Only 10% want to work on-site full time. The BBC reports that 72% of U.S. managers of remote workers would prefer all subordinates to be back on-site. But with a record 47.4 million resignations in 2021, and the 10.9 million job openings in December far outnumbering the 6.3 million unemployed, a lot of bosses will need to adapt to what workers want rather than the other way around.

While the pivot to remote work proved strangely easy in areas like urban city centers where internet service was good, the effects on labor markets and human geography may be dramatic. Already, for example, telework may be a factor shaping the national boom in housing prices. Just like today, the housing price boom of the mid-2000s was brought on by factors such as low interest rates and lots of federal deficit spending. But back then, the boom was concentrated in certain, fashionable metro areas. This time, it’s far more evenly spread. The below comparison of housing price trends in Miami and Dallas shows why this time is different.

With telework on the rise, these trends make a lot of sense. Why pay top dollar for location, location, location, when you can work from anywhere? Housing price trends are consistent in markets where telework is expected to spread the wealth of economic opportunity to struggling areas. While COVID-19 hasn’t particularly accelerated migration, it has tended to push people outward, most city centers experiencing net out-migration, while suburbs and some smaller cities and towns have seen growth.  

Telework promises a bright future where people can live where they choose, instead of just living where there’s a job for them. 

Some remote workers might use this locational freedom to live in a beauty spot, a pleasant climate, or a place that supports their hobbies. We can look forward to more amateur farmers, and beach towns and ski towns should do well. In my home state of Maine, a traditional “vacationland” that also has a lot of hobby farmers, house prices have been rising at a record-breaking pace, and Realtors estimate that one-third of the home-buying activity has come from non-Mainers. Meanwhile, others will choose to stay close to their families and hometowns, which should foster tighter-knit communities in some areas. Telework is a new opportunity for small towns and rural areas to keep their young people.

The telework future hasn’t fully arrived yet. Many organizations still vaguely treat remote work as a temporary pandemic expedient, and as long as a “return to the office” is on the table, happy teleworkers who like their jobs but want to live somewhere else can’t feel safe in moving away. A partial return of mandatory office attendance still seems likely, but it’s a safe bet that it will never again be as standard as it was before the pandemic. So, it’s not too soon for states to begin to plan for an age of telework.

How states and cities can plan for the telework future

For states and cities, telework makes it less important to create local jobs. Many of your residents won’t need to rely on the local economy for paid work. They’ll tap into the national or global telework economy instead, earn their money that way, and spend it locally. 

Of course, telework isn’t for everyone. Some people don’t like it or aren’t qualified for telework jobs. But if your area can attract teleworkers, they’ll create jobs for other residents as they spend their wages. There will still be plenty of jobs that do require physical presence for non-teleworking locals to do. For those who would like to telework but aren’t currently qualified for telework jobs, programs like Connected Nation’s Digital Works can help them get the right training.

At the same time, quality of life will become more critical to competitiveness. States, cities, and towns where teleworkers want to live will see an influx of people and money that buoys the local economy. But places where the quality of life isn’t competitive can expect to see out-migration, even if jobs are locally abundant. In some cases, people will keep their jobs while moving away. If those local jobs require physical presence, people may find new telework jobs first, then take advantage of the locational freedom that provides and move away.

All this applies where broadband connectivity is good. Where it’s poor, even great quality of life in other respects may not help much. Local organizations will struggle to adapt to the age of telework. Footloose teleworkers will stay away. Residents may be unable to get, or keep, telework jobs. Once telework becomes part of standard operating procedure, even the best-intentioned employers may not be able to avoid discriminating against job candidates who can’t show up for online interviews, or incumbent workers who can’t show up for online meetings. Even before COVID-19 and the transition to telework, poor internet access caused out-migration and depressed entrepreneurship. The future will only intensify these problems.

That’s why it’s so important for states and cities to take advantage of a flood of federal broadband funding, through the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, by which Congress is empowering them to achieve universal broadband access for their citizens once and for all. 

There’s room to define what universal broadband access means. States can address edge cases in different ways, and some states may decide that a Starlink internet connection should be good enough for some people living 50 miles out of town. But there needs to be focused attention, vigorous effort, and ultimately, intolerance of failure. Digital connectivity has become a basic need, a precondition for full participation in the U.S. economy and society, and it can no longer be left to chance or the vagaries of the market.

Nathan Smith, Ph.D., is an economist working for Connected Nation to help states use federal broadband funds.