The Impact of Remote Work on Local Economies

In the years following the COVID-19 Pandemic, remote work has gained popularity across the board. While there are few restrictions on who can work from home (with the exception of blue-collar and service industry employees), this trend is most prevalent in the legal, business and finance, and computer and mathematics sectors, with 35%, 27%, and 24% of available job openings being remote, respectively. Evidently, remote work has enabled many individuals to find a work-life balance, gain geographical independence, and save money on transportation. With large companies like Adobe, Nvidia, and PayPal almost entirely embracing the transition, Upwork estimates that 22% of the workforce in the United States will work remotely by 2025. 

So what’s the issue? Broadly, remote work has entirely altered the very nature of employment. On the employer side, the communication challenges, social network degradation, and reduced creativity that come with remote work have decreased productivity by 10-20% (per a Stanford Study). At the same time, remote work enables employers to find talent from distant regions (and, in most cases, for cheaper wages) through a process known as ‘offshoring’ All of this begs the key question I’ll explore in this article: how will remote work affect local economies in the years to come?

Source: FlexJobs

Let's delve into the many outcomes of this changing work dynamic. With remote workers no longer feeling tethered to urban centers, which are the focal points of employment, many choose to relocate to suburban or rural areas. In these non-urban areas, things like coworking spaces and local coffee shops tend to rise as remote work hubs. 

In theory, this directs money away from businesses in cities and towards local establishments. The “doughnut effect,” as some economists call it, has been observed to occur at a scalar rate; on average, cities where commuting rates decrease by 20% (as a result of remote work) see a 7% decline in consumer spending. However, the decentralization of the workforce is, on net, a good thing because it allows individuals to break free from the high cost of city life. It's also important to realize that remote workers save thousands every year by not having to spend on transportation. Assuming their salaries remain relatively similar (which they mostly do), this means they have extra cash to pump back into their local economies. 

Source: UpMenu

Overall, remote work is poised to create significant and lasting economic shifts, with profound implications for local businesses. In addition to the decentralization of cities, the trend may redefine the housing markets as digital nomads continue to relocate. Property values in non-urban areas will likely rise while new construction projects will form to accommodate the growing demand. With such a flexible work dynamic, individuals will prioritize factors beyond mere proximity to the workplace, highlighting the importance of community adaptation and innovation in embracing the remote work revolution.