The Super Commute

Melanie Green (host):

Flexible work is changing not only how we work, but how we live. And for a beautiful example of that, we’re going to Wisconsin. Nestled on the shores of a spring-fed lake in the southeastern portion of the state - is a town called Lake Geneva. The population: about eighty-five hundred. Lake Geneva was settled around 1836. Like a lot of towns, it began with a mill. Then a few decades later -  the pastoral woods, hills and water drew people from nearby Chicago to build their summer homes on the shores of Lake Geneva. Then, when the Great Chicago Fire of 1871 hit, Lake Geneva had another boom. After the fire left a third of Chicago residents homeless - more people packed up their bags and headed to Lake Geneva - making it their permanent home. So why are we talking about immigration patterns in Lake Geneva? There is a new wave of relocation happening in parts of the US. There’s a pattern to what’s happening:

Nick Bloom:

Basically, there's still going to be some residual fear of density. People are nervous about density, even post pandemic.

Melanie Green (host):

That’s Nick Bloom.  He’s a professor of economics at Stanford University in California.  He has been looking at the movement of people out of more densely populated areas this past year - and the impact on employees and the companies they work for.  We’ll hear more from Nick in a few moments. But first, I want you to meet Daryl Fairweather, who has just moved to Lake Geneva.

Daryl Fairweather:

I'm in this, you know, beautiful lake town where in the summer I'll be able to like go kayaking and in the winter there's skiing and sledding. So it's been great.

Melanie Green (host):

Daryl and her family made the move to be closer to her in-laws.

Daryl Fairweather:

I moved during the pandemic. I was working out of Seattle, going into the Seattle Redfin office every day. And. Well being second home, it's made me reevaluate where I want to live and Redfin implemented a remote work policy. So they said, basically, if you want to work remotely, just ask.

Melanie Green (host):

Redfin is a real estate brokerage based in Seattle.  Daryl is Redfin’s Chief Economist.  Daryl has been working remotely during the pandemic but even when the pandemic ends Daryl will be able to continue living in Lake Geneva.

Daryl Fairweather:

Even before the pandemic, I was traveling quite a bit for work. So I do plan to travel when things open up again and go back to the headquarters maybe once a month or maybe I'll go to one of the other offices, during that once a month trip.

Melanie Green (host):

Not only will Daryl and her family be able to stay in their new city - about two thousand miles to the east of her office in Seattle - Redfin is coming up with a long term flexible work plan for its employees. So how does Daryl’s story fit into the bigger picture? There’s a picture emerging that shows a shift away from the traditional large urban centres where many Americans work. US postal service data shows the number of people moving out of big cities in 2020 was far greater than the year before.  So where are they going?

Daryl Fairweather:

At the beginning of the pandemic, people wanted to get out of the cities and searches for rural homes shot up. Purchases of rural homes, shot up because people always want to have wide open spaces and to be out of the crowds. That part has calmed down a bit.

Melanie Green (host):

In March, Redfin published a survey that shows what kind of impact the last year has had on the housing market.  They found that thirty percent of users on their online service have been looking to move to a different city.

Daryl Fairweather:

So if you were living in San Francisco, you might be thinking, why am I paying so much to live here and looking towards Sacramento, which is three hours away or to Lake Tahoe, where you can live in a beautiful home, on a Lake with a view. So everyone's preferences have kind of changed, but the through line is that people aren't as attached to where their office is anymore.

Melanie Green (host):

Many are looking to move to smaller cities. Burlington, Vermont - Tulsa, Oklahoma - and Greenville, South Carolina are in the list of top ten destinations people chose to move to from bigger cities last year.  Statistics from moving companies show that New York and California lost the most residents in 2020.  Like Daryl Fairweather, Meghan Corasaniti moved because she didn’t have to go into an office every day.  Meghan is Senior Manager of Brand Communications and Integrations at Citrix.  Her team was already working remotely 2 days a week before the pandemic.  When that changed to five days a week - Meghan and her husband moved from their apartment in Santa Clara to Cinnaminson, New Jersey, population: sixteen thousand.  I called Meghan to find out how she was feeling about her move.

Meghan Corasaniti:

I think it was the fourth day that I was here, that we got a massive snow storm and I was out there shoveling the driveway and I kept thinking to myself, ‘It's okay, because I have this office, a home office now. I have more than one bedroom’. I just kept telling myself that it was worth the move from California to shoveling snow. So I think that was the biggest change, but I think more importantly, that same first week that we were here, I got to see my sister every single day. And so I think that's, the pandemic really put that into perspective how important that was to me. So I would take shoveling snow to be near family any day I would too.

Melanie Green (host):

Like Daryl, Meghan relocated to find a work/life balance that might not have been possible before flexible work took hold last year.

Meghan Corasaniti:

I think when it comes to moving and companies are thinking about their employees and what's best for their employees and the experience they want to be able to provide and also the talent pools that they want to tap into -  I think there's this shift that's happening that has happened, and that will continue to happen, that more employees are feeling empowered to make decisions about where they want to live that isn't tied to an office. And that's such a simple statement, but I actually think it's going to really change how our city centers are set up, how offices are set up, how we hire people and we already see these changes happening, but I think it's going to become more and more critical over the next couple of years. And I think that companies really need to think strategically about the future of how they're managing their employee experiences. And then from the employee side, if you're able to work from home and be just as productive as you were in the office, I think that it's time for us to also start thinking about what we really want when we show up to work every day. And so for me, that was not having to live somewhere just close to the office because the office was there. And I think that that's a really cool part of what's come out of the past year in this, in the shift that we've seen.

Melanie Green (host):

When it comes to the changes people are making to where they live, there’s another option that’s becoming popular. It's called the donut effect. Nick Bloom says the donut effect is another part of the story about recent migration out of cities.  In some large American cities people who are moving - are not going far.  They’re just looking to move a little further outside of the most densely populated centers.

Nick Bloom:

So if you think of San Francisco, for example, they're leaving the center, they're moving out to Eastern North Bay or in New York, they're moving out to the Bronx, et cetera. So that's the kind of movement out of the center of cities into the suburbs of cities.

Melanie Green (host):

Flexible work - is one of the reasons some are choosing the suburbs.  They can be away from urban centers but still close enough to the office to be there part of the time.

Nick Bloom:

What's happening is people are realizing, look, post pandemic I'm going to probably be in work, let's say Monday, Tuesday, Thursday, I'm going to be working from home Wednesday, Friday. That makes it much more attractive to move out to the suburbs. I'm commuting less. I actually need a bit of space to have an office at home, but I can't possibly move to say, you know, Alaska. Cause how on earth can I come in on those two days a week? So that's what's driven this big shift out to the suburbs, but it's kept people tethered to the large cities that they were in before.

Melanie Green (host):

Daryl Fairweather has noticed another pattern in real estate that’s directly connected to flexible work.  People are thinking differently about how they can carve out a space in their  homes to work comfortably and if they can’t, they’re shopping for alternatives.  Early in the pandemic, home sales slowed right down.  But then -

Daryl Fairweather:

It only took a couple of months and the housing market just came back really fiercely. Part of it was because mortgage rates had dropped so much with the Feds intervening and lowering interest rates. And part of it was also the way that people's relationship to housing had changed. People were spending more time in their home looking around, needing more space because they're working from home.

Melanie Green (host):

So people are moving to have more space.  Flexible work is allowing them to move further from the office.  And the pandemic has people thinking about quality of life issues - people whose jobs can be done remotely can ask themselves where they’d be happiest.  It may be too soon to know if people like Daryl and Meghan will stay in the suburbs and smaller cities. Nick Bloom offers a compelling reason why they might.

Nick Bloom:

People are nervous about density, even post pandemic. So we asked people after the pandemic, uh, you know, when a vaccine is widely available, What are your views on how much you returned to the way you lived before the pandemic? And what we see is 75% of people will do everything except they get nervous about getting in packed subway trains, packed tube trains, and crowded elevators. Basically, there's still going to be some residual fear of density. And I think that's another factor pushing people out from city centers.

Melanie Green (host):

But what does this mean for the big urban centers like New York City and San Francisco?

Nick Bloom:

Do cities need to re-imagine their own future a bit? I think they need to do what's called right-sizing in consulting literature. I was actually talking to Palo Alto city council the other day. And it's clear for cities at Palo Alto, San Francisco, New York, that I see the prices of properties are going to go down and also that tax revenues are going to go down.

Melanie Green (host):

Nick Bloom points out that the picture of falling property prices in big urban centers isn’t all bad news.

Nick Bloom:

One thing that in some ways is quite helpful is it's going to push back on the affordability crisis. So the history of American cities, if you go back to the 1980s, the center of U.S. cities were, low cost kind of often quite scary places. But ever since the 1980s the center of US and in fact European cities too, have become more and more expensive as young people have flocked into the center. They pushed up prices, bars, and restaurants have followed and it's become - particularly if you’re young - really nice places to live. In some ways you can see that's good. I live out in California that there's been a huge crisis of affordability. It's been so expensive that many people can't afford or couldn't before the pandemic, at least to live in these big cities. And one of the positives from the pandemic has been while suburb prices have gone up, city center prices have fallen and some essential service workers, maybe some artists, bohemian types, I guess can move back into cities that were really pushed out over the last 10 years.

Melanie Green (host):

So where do companies fit into this emerging picture - of employees moving further from work - whether to the suburbs or further afield to another, smaller city?  How do business leaders plan for 2021 and beyond?

Nick Bloom:

I've talked to a lot of firms. There are a few things firms are thinking about. One is for managers, what to tell your employees. There's been a pretty firm plan for the last six to nine months, which is to go back to the office. But for typically three days a week, So most firms are thinking like that. They’re trying to get it organized. Of course it will take a while. Many companies have said, look, we're not probably gonna have people come back until Labor Day. So one thing is - we will return to the office or do it gradually, or end up three days a week. Another thing is, where those offices will be, there's a number of firms that are thinking or already starting to try and move out from city centers. So skyscrapers, high-rises in particular, in downtown areas are problematic. So if you think of something like Salesforce Tower in central San Francisco. How do you - A - get to the front door?  And then - B - when you're at the front door, say - get up to floor 50? In both cases, you first had to take crushed subway trains on the way in the morning and on the way back in the evening, and then to get up, you have to ride up the elevator, which of course going up in the mornings is extremely packed, and coming down in the afternoons.

And so for employees that feel nervous about packed spaces, which many people will do post pandemic, that's a problem. So a lot of businesses are saying, we want space. We're going to keep our offices.  People are going to come in for three days a week, but I'm not sure it's going to be in the city center. I'm thinking about locating out to Brooklyn or out, to East Bay or out to basically, some part of the city that's out in the suburbs, not in the very center itself, so that’s another change.

Melanie Green (host):

Some companies are only starting to consider how their policies and practices would need to change in a permanent move to flexible work.   At Redfin where Daryl Fairweather works, management already had laid the groundwork for remote work policies including compensation based on where someone lives.

Daryl Fairweather:

Basically, if you want to work remotely, there is a bit of a pay adjustment based on the cost of living. So you just have to know that going in. If you want to work somewhere that has lower costs, you're probably going to take a pay cut. I took a bit of a pay cut. And part of the reason that Redfin did that is that even before the pandemic, we had different offices in different locations. And then we have real estate agents all across the country and pay has always been somewhat tied to the cost of living in those places. So it wasn't really like a new policy, but we did have to standardize it for our headquarters employees who wanted to work remotely.

Melanie Green (host):

Companies have been divided about whether they will base compensation on where an employee lives.  Some are cutting pay by a certain percentage when employees move away from cities with a higher cost of living. Others are paying employees the same, no matter where they’re based. And when it comes to creating other policies for flexible work, Redfin has had to think carefully about next steps.  Like so many companies, they plan to re-open their offices at some point. I wanted to find out how this would affect people like Daryl - who moved across the country.

Melanie Green (host): What happens, you know, for you, for example, to other employees that have moved elsewhere? Do they have to return to the office? How does that work?

Daryl Fairweather:

Well, even before the pandemic, I was traveling quite a bit for work. So I plan to travel when things open up again and go back to the headquarters maybe once a month or maybe I'll go to one of the other offices during that once a month trip. I do plan to go back and visit, but I'll be staying in for the most part where I am, and also another thing is that we're not requiring people who didn't leave the Seattle headquarters to go back to the office five days a week. It's pretty much been learning now that people can work remotely and be productive. So we're thinking about a model where people are back in the office two or three days a week, or they can come back to the office more if they want to, but the requirement would only be two or three days a week for the people who are still in Seattle.

Melanie Green (host): Do you think people are on the same page when it comes to going back to normal or reopening offices?

Daryl Fairweather:

We did a survey of home buyers and asked them if you could work remotely all the time, would you consider moving to a different city or area? And only a third of people said no. The majority of them so that they already had moved farther away or they would like to move farther away. So I think that there really is this desire for people, if they're able to work remotely, to really reconsider where they're going to live. And I know there's been a lot of business leaders who have said that things will go back to normal and people are overestimating the remote work trend, but I'm one of the people who thinks that it's kind of here to stay, that we did this really big grand experiment to see if working remotely works. And for the most part, it seems to work. I mean, everyone's always going to have different preferences. Those 33% of people who don't want to move far away, even if they could work remotely - they’ll be able to go back into the office, but I think we'll probably see a bifurcation where some employers will be really strict about getting people back into the office and then the people who want to keep working remotely, will probably find different employment somewhere else where they could be more flexible. So it'll probably just bifurcate into two different kinds of employee markets, the remote workers and the office people.

Melanie Green (host):

Nick Bloom says it’s the fault lines dividing people who will want to work remotely and those who won’t - that companies need to address, to make flexible work a success.

Nick Bloom:

if you look in the data, you notice that people that choose to work from home four or five days a week are not random, they're more likely to be women and more likely to be people with young kids, and more likely to be people with disabilities. So what you could find is if you go down the choice route, so everyone chooses how many days you work from home. Then five, ten years down the road, you have a diversity disaster and a kind of legal minefield whereby you’ve just discovered, because say women have young kids are more likely to have chosen to work from home. You can see that this group is going to have lower promotion rates if you know, ten years down the line, senior management is entirely comprised of younger single men. So that is an issue that is sensitive and has come up a lot with managers. And most firms' views is, we're probably not going to let people choose. We're going to mandate that the entire team or divisions or work from home two days a week and come into the office three days a week to make sure that there's fairness in the way that different groups have promoted.

Melanie Green (host):

And for companies that worry about productivity being hurt as people move where they want to be and work how they want to work - Nick put this idea to the test recently with a former student of his - and found that the opposite is true.

Nick Bloom:
For employees, you know, surprisingly enough this month, this, but you know, despite the nickname “shirking from home” - working from home is actually more productive. So I got into this through a weird route back in 2010, I had a student called James Liang that studied in my Stanford PhD class. And about a third of the way through the class I discovered that this was a guy that had co-founded a large company in China and is currently the chairman. He had been the CEO and they were thinking about working from home because they're based out of Shanghai and office rent's really expensive. And so James and I came up with this plan to run a big randomized control trial. We basically asked two divisions -  hotel and airfare - who wanted to work from home. Around 500 people volunteered.

Melanie Green:

Half of the volunteers worked from home four days a week and the other half continued to work in the office.

Nick Bloom:

What we found is massive, literally enormous 13% improvements in productivity for home-based employees. And when you interviewed them, it's quieter at home. It's easier to concentrate. I remember one person telling me that the person in the cubicle next to them at work used to clip their toenails under the desk.

Melanie Green (host): I’m sorry, what?

NICK (laughing) Yeah, she said, ‘You know, the office is so distracting. You cannot believe, the woman in the cubicle next to me clips her toenails. You're like, Oh my God, I can't believe I'm hearing this. She said, ‘I can't work when they pull out this large toenail clipper, I have to pause.

Melanie Green (host):

I’d move to the suburbs in a heartbeat - to avoid toenail clipping in the next cubicle. I can see why Nick sees the upside to flexible work.

Nick Bloom:

And that's why working from home is here to stick. If you're a manager of a firm, your employees are more productive if they're working from home three days a week, and they're also happier, therefore they’re less likely to quit. So, you know, it's a clear winner and anything that makes firms much more profit, much more money is going to stick and working from home clearly falls in that camp.

Melanie Green (host):

The story of how we work now, compared with how we worked a year ago - and how that’s influencing where we live - is far from over.  When Nick Bloom looks to the future, he sees great possibilities for the reshaping of our cities - and a new way of thinking about how work fits into the bigger picture of our lives.

Nick Bloom:

The US labor force is about 160 million. So you're thinking seven, 8 million people that in theory can live anywhere across the U S and some of them will go into rural areas and will end up helping a little bit to revive the rural economy. In general, most of this I see as positive -  the reformatting of American cities and the move towards work from home is one of the few positives I think we're going to come out of what's otherwise been a really, truly awful pandemic.

Melanie Green (host):

I’m Melanie Green. You’ve been listening to Remote Works, an original podcast by Citrix.  Subscribe and come back in two weeks. Next time - the moveable desk.  What can’t you do without in YOUR workspace, when you’re working from anywhere?