For the past 20 years, two-billion new workers from Asia entered the global workforce and the seeds of capitalism blossomed into millions of new companies as a result. The global standard of living shot upwards.
For decades companies have considered outsourcing or moving to cut cost. Ireland, Mexico and China benefitted, among others.
Knowledge workers to some degree were spared. There are exceptions – like in programming. There are many shops in Eastern Europe, Pakistan and India competing for these jobs.
But there was a feeling among many companies that a core group of knowledge workers needed to be housed in a physical headquarters in a big, expensive city.
However, the global work from home experiment has been a success.
Many companies are not going back to the old ways of doing things. This means there is far less need for a large corporate HQ or corporate branches in cities around the globe.
Workers will meet on Zoom, Slack, Teams, etc.
The next logical question is why hire someone from New York Cty and pay commensurate prices when you can just as easily hire the same team from anywhere?
These are not new concepts obviously but a large percentage of companies would never consider working like that. Now they have and they like it.
When you couple the fact that most businesses have taken a massive financial hit as a result of the pandemic, it seems obvious they will see teleworking as a great way to save money without affecting productivity.
Take this out to its natural progression. U.S. states with high taxes are more doomed than they were before the pandemic. People were already fleeing.
Knowledge workers will continue to leave because they can. This will leave the unemployed and low-skilled workers who need to stay in the cities. There will be few people to pay the taxes needed to keep the cities solvent.
The knowledge workers who do stay will face renewed competition from workers everywhere… Eastern Europe, Russia, India, etc.
About a year ago, I wrote Thank Moore’s Law For Government Debt. The idea was that technology puts downward pressure on prices which would typically go up as the U.S. government prints more money.
The Covid-19 pandemic will put massive downward pressure on wages. It will do the same for retail and commercial real estate. We are talking about MASSIVE downward pressure.
This will be fantastic for new businesses because it will be cheaper than ever to hire high-skilled, low wage workers and if they need real estate, the rent costs will be depressed for a very very long time.
These are huge changes to the economy which will create misery and opportunity if you are fast enough to take advantage of it. Good luck.