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Urban Shift to Remote Work Leaves Many Workers Behind

A new report outlines the economic toll brought on by the pandemic in our largest cities, showing how pre-existing inequities became worse for lower-paid workers, while leaving white-collar workers largely unscathed.

A newsstand vendor in Times Square wearing a mask.
A newsstand vendor in Times Square in New York City — the type of worker who relies on the white-collar economy for a livelihood, but has been left behind when so many fled to work remotely during the pandemic.
Before the pandemic, the economies of most large American cities focused on attracting highly paid professionals to work in downtown office towers. A vast system of lower paid service workers, from waiters and hairdressers to newsstand owners and unionized janitors, supported the firms in those skyscraper canyons.

COVID-19 threatens to upend that model, with all its inequities and opportunities. The highly paid professional jobs at the center of this political economy went remote with stunning rapidity, while the service workers that catered to them did not enjoy that luxury.

A new paper published in the National Bureau of Economic Research (NBER) seeks to show the economic toll of the shift to remote work, and the end of commuting, for those in big cities whose jobs could not move.

“As remote work potential was realized, a lot of highly skilled workers left cities, moved to other parts of the country, and started to work remotely,” says Lukas Althoff, one of the authors of the paper and a Ph.D. economics student at Princeton University. “As a consequence, workers in service jobs in those big cities were left behind, had less work to do, and suffered earnings losses that were much higher than those of other workers in the U.S.”

The paper finds that cities with higher population densities tended to specialize in the kind of highly paid service jobs that easily made the transition to remote work. In 2020, that consumer demand was removed from central business districts, and often the city as a whole, causing a sharp reduction in employment hours for lower paid workers. (The authors tested their hypothesis by removing San Francisco and New York from their data set, to see if the findings were similarly robust without those unusually dominant job hubs. They were.)

By January 2021, those workers in the densest commuting zones who weren’t able to go remote accounted for almost 60 percent of all work hours lost in the U.S. economy — even though they only account for 41.1 percent of the nation’s workforce. Smaller cities were not as affected, mostly because they didn’t have the same number of highly paid workers who could shift to remote work.

This is another instance of COVID-19, and our response to it, heightening pre-existing inequalities instead of acting as a great leveler.

Which Way Will Housing Prices Go?

It is still unclear how dramatically the pandemic will reshape America’s living and working patterns in the long term. But as the delta variant rages, and many employers again delay a return to the office, the possibility of a full return to the pre-pandemic norm seems increasingly unlikely. The paper’s data only goes through January 2021, but Althoff says he has seen no strong evidence of a reversal since then, despite frequent headlines about rebounding housing prices in coastal cities.

“[In our paper], we see population outflows are pretty stable and we don’t see population flooding back into cities,” says Althoff. “I just looked at rental prices in the bigger U.S. cities and they still substantially lag — especially compared to overall U.S. price growth. Compared to overall rental prices, which reflect general inflation, they’re not picking up at all.”

The paper postulates that perhaps this trend could permanently lower housing prices in cities like New York, Seattle, and Washington, D.C., making it less onerous for people of a variety of incomes and classes to comfortably live in such places. But a recent article in the Financial Times raises concerns even about that outcome. Average rental prices in Manhattan remain well below their pre-pandemic peak — although still expensive at around $3,000 a month — while costs in the more working-class Bronx borough are already higher than they were pre-COVID.

For worker advocates like Stephen Lerner, one of the architects of the Justice for Janitors unionization campaign, it is important to not just read these findings as a call to return to the 2019 norm. He emphasizes how unequal this economic model has proven, especially as housing costs have skyrocketed, leaving even unionized, blue-collar service workers struggling to afford convenient shelter.

“The idea that everything is based on luring us back to where we were is a mistake,” says Lerner, a fellow at Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor. “This is an opportunity to ask what should the economy look like going forward versus bemoaning that it may be worse than it was before. Before was completely unacceptable.”

Lerner says there are proven ways to boost outcomes for these workers, like increasing the minimum wage and encouraging union drives. (In many of these cases local officials may have limited power, especially if they are handicapped by an unfriendly state government.)

He also points to innovative policy approaches that have emerged from the pandemic. In New York City, for example, a $2.1 billion fund for excluded workers was created to support those ineligible for federal benefits. He also points to bills that cap the charges delivery apps can extract from local restaurants and protect tips for workers from employer skimming.

Public Officials Have Work to Do

For Richard Schragger, author of City Power, the NBER research is not surprising and it is easy to overinterpret. For policymakers, he emphasizes the lessons that he distilled in his book, which are that tax breaks and other traditional economic development incentives have little track record of success. Instead, he encourages local politicians to focus on basic provision of services to encourage people to stay within their borders. Clean streets and consistent trash collection may be boring, but they go a long way to convince residents to stay.

Schragger also says that he is not worried about the future of superstar cities like New York and San Francisco. The amenities that attracted people to them — their walkability and the diverse businesses allowed by residential density — are not going away. Perhaps office space could be converted into housing, and perhaps many office workers will return when the pandemic finally dies down.

For those cities that were already struggling before the pandemic — from Birmingham, Ala., to Cleveland — Schragger says the rise of remote work may be a further setback. But it is a modest threat compared to the already grievous blows landed by urban sprawl, white flight, and balkanized regional budgets.

“The phenomenon that we’re talking about already happened, without a pandemic, in a much bigger way because of suburbanization,” says Schragger, professor at the University of Virginia. “We’re seeing a mini-version of that happening very quickly. What the pandemic did was arrest momentum for those places that managed to bring back some of those white-collar jobs.”
Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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