Work From Home Has Never Been More Popular – Could it Have Implications for Your Practice?
It’s no secret that Covid-19 has changed nearly every aspect of daily life. Inside dental offices, we will probably see vastly different behavior for the foreseeable future as practices do their best to prevent further spread of the virus. In the larger picture, demographers and government officials are beginning to think about how the pandemic could affect where millions of people choose to live in the future.
One of the biggest adjustments to life in quarantine has been the mass implementation of working from home. Though increasingly popular in recent years, the Census Bureau’s American Community Survey estimates that only about 5% of workers regularly worked from home in 2018. Needless to say, there is a lot of room to go up, and quarantine may just be the spark needed to facilitate the transition. While companies had worried in the past about productivity losses when allowing their employees to work from home, they’ve now been forced to figure out how to minimize the inefficiencies of a dispersed workforce. In the meantime, they are also seeing that they could reduce or even eliminate office space-related expenses. In fact, some employers, including large firms like Twitter and each of the three largest commercial tenants in Manhattan, have already announced that they won’t be renewing their office leases or will be downsizing when their current agreements expire.
For employees of these companies and others that allow working from home, greater freedom over where they live is going to be a new perk. Maybe their commute can be extended by fifteen or twenty minutes if they no longer drive to work five days a week. Perhaps they could even relocate to a different state (or country) and work 100% remote. Of course this won’t affect everyone equally, some areas are positioned to benefit while others may struggle with an increasingly mobile, choice-enabled population. For this article, we’ve analyzed the factors that may lead someone to relocate and which markets are anticipated to be winners or losers.
When given the choice of where to live, many people may choose to stay right where they are, but others might not be as enamored with their current living situation. Here are some of the most common reasons that someone might choose to relocate. Keep in mind that for most people, a combination of factors is usually what leads to the ultimate decision of where to live.
1. Migration out of HCoL Areas
High cost of living (HCol) regions like New York and San Francisco could be especially vulnerable to workers looking for more bang for their buck. Imagine making a Silicon Valley salary but living in Montana or Texas. Without the requirement to regularly report to an office, this is entirely possible. Others may not choose to relocate across state lines but instead a little farther from their place or work, like to a more distant suburb with more space at a lower price. Companies are likely to be on board with this as they can save not just on office space, supplies and utilities but also on wages. If the employee won’t necessarily be in Silicon Valley, the job doesn’t require an inflated wage to account for the cost of living.
2. Quality of Life
But money isn’t everything, as the saying goes. For those tied to a location that doesn’t suit them for a reason other than the expense, perhaps they’d prefer somewhere with more sunshine like Florida, North Carolina or Arizona. Or maybe they enjoy the outdoors and would be interested in joining the throngs of households that have recently moved to frontier states like Colorado, Utah and Idaho. Still others may prioritize the quality of public schools, accessibility to dining or the beach.
3. Personal Ties
The final primary category of people who might seek to relocate when they are allowed to work from home are those with personal ties to another community. For instance, mobile workers may decide to be closer to aging parents or to shorten the distance in a long distance relationship. For states experiencing brain drain (the loss of educated adults and particularly young professionals), this may be an opportunity to capitalize on a newly mobile workforce. Unlike cost of living or quality of life concerns, personal ties might actually favor regions that we have recently viewed as “losers” of the demographic game. Places like Ohio and Michigan have seen large amounts of domestic outmigration, in part, because they didn’t offer the same work opportunities that other states do. Even California could see some former residents that are less concerned with the cost of living return to enjoy all that the Golden State has to offer.
Who are the Likely Losers
The driving factor for many households when determining where to live is affordability relative to one’s wage. Thus, high cost of living markets, especially those with undesirable climates or other quality of life issues, could be among the biggest losers. The New York City and Chicago regions come to mind with Boston and California also likely losers on this particular front. More concerning for these areas, each would have already been losing residents were it not for international migration. New York, Boston and Chicago are not only relatively expensive areas to live but also experience harsh winters. Outside of these big three markets, the Upper Midwest and Northeast in general, while not necessarily expensive, may see an uptick in residents leaving for warmer climates.
Who are the Likely Winners
If expensive and cold are bad, affordable and warm (or at least temperate) are good. Nationwide, the speed at which Americans are leaving places like Illinois, California and New York for states such as Texas, Arizona and Florida might have just cleared one of the biggest hurdles to acceleration.
Within metropolitan areas, there may be a surge of households over the next few years leaving expensive central neighborhoods for suburban and even exurban communities. Expect these lower density areas near large and medium sized cities to benefit, along with many of the Sun Belt states and those in the West that had already been benefiting from domestic migration.
What kinds of numbers are we talking about?
So just how big of a change might be coming; is this something that the typical dentist needs to worry about? Recall that as of 2018, only 5.3% of the nation’s approximately 154 million jobs were remote. If this number increased by 10%, the nationwide increase would be fewer than one million jobs making the transition. Overall, that’s not a huge change. But if the numbers were really to swell, the figures could conceivably run well into the millions or possibly even tens of millions over the next few years. On the aggressive end, an approximate doubling of working from home could lead to around ten million jobs being transitioned to work from home. While a doubling may sound like a lot, an MIT Survey of 25,000 Americans in April of 2020 intended to measure the impact of Covid-19 on commuting patterns found that up to half of workers are working from home during the pandemic. Though many will eventually return to the office, this figure shows just how much room there is for working from home to become more than a blip on the radar. In time, we may see a spiraling effect where the ability to work from home is viewed as a perk. This would incentivize employers to allow remote work or risk losing talented employees.
What Could Slow Down the WFH Revolution’s Demographic Changes?
Like anything in the future, our crystal ball uses current conditions alongside past observations to make predictions about the future. Of course, as the last few months have exemplified, things can and do change. Maybe working from home does begin to show more inefficiencies after the initial excitement of wearing pajamas at the “office” wears off and fatigue and indifference toward work without a community of coworkers set in.
1. Decreased Rents as Supply and Demand Even Out
Living in a market economy means that supply and demand affect price. If people begin to leave one area for another, expect the latter to become more expensive or require an increase in the supply of housing. Already, we’ve seen rents increase in midsize cities recently, in part due to residents of higher cost of living areas relocating and finding even premium neighborhoods to be affordable. Added to the future supply and demand equations is a potential influx of former office space being converted to residential uses should they fail to find commercial tenants. If this is the case, markets like Manhattan could be drastically overbuilt and see desperate landlords lower rents, or at least increase them at a slower rate.
2. Unreliable Internet
Leaving a big city for a small town, however, isn’t a decision that can be made on cost and quality of life alone. Rural areas and small towns may struggle to provide the internet connectivity required to support remote work. Especially for those working in certain fields like big data which require consistent high speed connections, isolated cabins in the woods just may not be in the cards.
3. Market Segmentation
Increasingly, goods and services are positioned as either the best product overall due to a superior quality or experience and use this to justify a higher cost, or they compete on price alone as commodities. Think of the rise of Amazon and Wal-Mart and the struggle of companies positioned as mid tier, value-oriented stores like Macy’s and Sears. We’ve seen this trend in retail, restaurants and even the dental industry. As it applies to demographics, it’s possible that some high earners in smaller markets actually choose to move to less affordable areas where they can afford to enjoy living by the beach or in close proximity to cultural amenities. Places like Manhattan, Chicago’s Gold Coast and Southern California may become even more exclusive as middle income households are enabled to flee to the less expensive markets and high income residents from elsewhere take their place.
4. It’s Just Not the Same for Anyone
Perhaps the tired city dweller currently obsessed with moving to a more affordable location finds that they would miss the restaurants, the museums and the professional sports offered by big cities. Or maybe employers find that virtual collaboration, especially over longer periods of time, is less efficient than an office full of employees.
How Can You Prepare Your Dental Practice?
To be clear, this is hardly the first time that society has envisioned the demise of urban centers. In fact, many cities may have looked like they were already down for the count during much of the latter part of the 20th Century. After September 11th, it was a commonly held belief that companies would choose to take their employees out of Manhattan skyscrapers. Going back further, past outbreaks of disease like the Spanish Flu, Bubonic Plague and Cholera have resulted in temporary relocations of people to lower density settings yet cities always come back. But could technology have finally bucked that trend?
So if you are a practice owner or are considering ownership in a market that you think might be affected, what can you do? Especially if you’ve noticed a local downturn in recent years and think you might be affected by the increasing popularity of work from home, it’s important to consider all of your options. We’re not suggesting that every practice should pick up and leave New York for Texas, and we’re definitely not suggesting severing close families. But if you’re on the fence, this could be the straw that breaks the camel’s back and makes a relocation, local or otherwise, a viable solution.