One Up on Mainstreet: Remote Work

One year after Covid-19 and the remote work utopia has become mainstream ready as companies ramp up their capabilities in managing employees on remote operations stacks. Regulation will follow to make the new utopia happen.

What exactly is this utopia?

The Utopia for the Employed

The pictures drawn are romantic and inspiring. No longer any time wasted on commuting. Living in affordable and larger apartments and houses outside of the urban center. Being closer to family and friends. Or choosing to relocate to the beach, the forest, the skiing area or whatever comes to mind. Being free from countless offline meetings and the hassle of talking to colleagues. And having the opportunity to wear sweat pants at work without anyone noticing. What a boon it is.

The new utopian worker also has a new opportunity ahead which nobody mentions just yet. Many jobs perfectly allow to run daily work in micro badges and hence give the opportunity to do things in parallel. Online shopping, calling friends, working on a book, day trading, going running at the beach during lunch break and actually having a second full time job all come to mind. The opportunities are endless for choosing ones lifestyle and having more control over ones income.

The Utopia for the Employer

Learning how remote work works is of course also boon to the company. Cost per FTE that is ladden with renting or purchasing office space is going down. The slight reduction in per hour productivity is compensated from a “always on” mentality and longer working hours as humans take longer breaks but therefore work longer.

The socially isolated worker living in his new utopia in the suburb has time saved for commuting and now also has no place outside of work to be apart from his garden and couch. So he should be excited about being a bit more productive.

On top, being able to manage the efficiency of remote workers opens the door for more contract workers and gig economy workers. It opens the door for more service out-shoring as data and information systems allow better organization of processes by clearly defined batches of human activity interacting with well-architected corporate systems.

Offshoring opportunities, flexibly allocated gig workers and people living in lower-cost suburbean or rural areas of course promises an overall lower cost per FTE both via the compensation component and the infrastructure around it.

With the ability of the employed to also run two full time jobs in parallel as we described earlier, the supply of workers on the market will also improve. Highly talented and ambitious workers will start to do double the work and compete on the existing jobs. The law of supply and demand will naturally further depress the compensation component and allows to increase productive manhours at the same level of cost.

Dystopia 1: External effects

It goes witout saying that this whole development will hit someone external to the new economy. While internet providers and office furniture will maybe have an uptick. The urban center is one of the bigger losers. Real estate values can easily drop. Lack of commuters will bring the end to lunch offerings and even tourists that spend their day in the urban center. The urban center itself can decay and corrode and with it all the small businesses, the tax income and jobs from these businesses. The infrastructure which includes utilities like water, waste management, power grid, and local transport will all run empty and eventually die out. Destroying many more jobs and the tax income that is needed to develop the urban area.

Dystopia 2: Social Forking

With jobs remote, education remote, what we will see is a collapse of the university and service towns. Along with the collapse of these towns, you have people who no longer socialize around universities, cultural facilities and life style. People will naturally be more addicted to online services for culture and entertainment and will be more estranged to the social fabric of todays society. They will turn into socially isolated online consumers, learners and workers. Without a clear guidance on how to design life, choose locations and define what really makes a meaningful habitat, this will lead to rather unhappy and isolated people living in neighborhoods where they can interact on human rather than intellectual level and they will move their intellectual pursuits and communities online. It is very clear that the regular working human will be more isolated and live a less enriched life.

At the same time, there will likely be areas for the affluent and they will refuse to join this diaspora of the new utopian world. They will inhabitate the centers of culture and lifestyle and the most elite universities and highest paid industries will remain urban. Just a lot more gentrified and a lot more ecofriendly and thanks to the remote service worker’s impact on wages will be more unaffordable for the average human being.

So we will see very likely a larger divide between the haves and have nots.

Dystopia 3: Global Diaspora

The utopia of living where one wants to live will rather be short-lived. In the best scenario for the economy, the new paradigm allows companies in the supply chain economy to shift the workforce to the most cost efficient regions with very low per unit costs. The workers there will run two full time jobs at the cost of one original local full time salary. And competition for meaningful work will be so fierce that the cost per dual-full-time FTE will likely move downwards even more. The AI and automation economy will increase this trend.

In this scenario, the affluent worker in the industrialized economy will have little to do and will have to think about how to survive with the existing capital. The natural assumption would be to migrate to the lower income economy and start competing on income there while living from the existing wealth and investing more actively into outlier companies and anything that has the chance of increasing the wealth cushion.

But of course, this is neither easy from a logistics point of view, nor is it realistic given that this will lead to a rejection in the new culture. The xenophobia and cultural differences will likely make it more difficult to compete with local workers in the foreign economy, but only very few can become the local arm for their former global employers.

Dystopia 4: IP theft and global shifts in wealth

There is also a big divide between the data and production economy. For the data economy it does not matter who steals IP from different technical solutions in the data economy as long as the data itself is protected and stored in the developed economy. For the production economy, shifting production to offshore economies means that one is growing ones future competitors in that region. Entrepreneurs in the low income economy that is used for outsourcing will simply start competitors and hire away the offshore workers and thereby transfer the intellectual property on processes, material purchases and so forth to the low income economy. Producing the products for lower price and competing in the global market is a rather simple thing. But that is of course good for the consumers in the developed economies who, despite lower real wages, can still consume the same basket of industrial goods. So this dampens the effect on (perceived) inflation.

One has to understand that today education and knowledge have become a low price commodity that is available in abundance. It only takes the commitment of time to become a good engineer and the very same knowledge can be built with a computer in the deepest of the rain forest as can be produced in the top university institutions in the industrialized world.

The procurement of raw material also is readily available and fairly easy in our data and service platform economy. The capital needed to build production facilities and the machines needed to build production chains also are today readily available and can be shifted to anywhere in the world.

It is hence extremely easy today to relocate supply chain centers as long as the human capital can be formed to operate the production equipment. And here we can clearly see that this is a matter of committing individuals to a subject rather than anything else. Any government if focusing its higher education systems on a new industrial good and paradigm can build the industrial base at any location if there is no power restricting the flow of capital.

So all boils down to numbers (population) and commitment (education system) to refocus supply chains. This is all nothing new. The only thing that prevents more aggressive reshuffling of the global supply chain is the question how to keep developed societies from imploding as their employment is taken away slowly. But the trends are already clearly visible and the remote work paradigm will accelerate this trend. Everyone is out on his own and has to find a way to add value to the global economy without being employed. And maybe, but only maybe, if the industrialized nations still remain the ultimate beneficial owners of all the global activity, that their surplus capture from any behaviour in the global market is enough to finally start with universal basic income. But having UBI running sustainably in the industrialized economies and living from pure capital appreciation (a) is a very strong form of economic fascism, and (b) is only sustainable as long as military and diplomatic stability protects the rents of the industrialized nations. It all hinges on the stability of global financial markets.