I recently had the opportunity to interview Matthew Kahn, a very productive and well-respected urban economist and senior professor of economics at Southern California University. Our meeting anticipated the publication of his new book, Going remote: how the flexible work economy can improve our lives and our cities. Famed Harvard economist and city expert Edward Glaeser describes the book as a “future spin” around the social, environmental and economic consequences of teleworking. It’s a groundbreaking book, packed with clear economic arguments relevant to every career owner on the planet. Moreover, as you will see, Kahn is a master at highlighting the overall message that his book conveys.
Michael B. Arthur: It’s very nice to talk with you. Where would you like to start?
Matthew E. Kahn: I start the book with the recently opened Apple headquarters. They built this mothership, and I asked my book editor “If Apple had had a second chance, would it have built the same circular spaceship that it did, or would it have built a different ship, smaller?” We are locked into several decisions that will play out over decades, including where and why companies will build their headquarters, with a range of implications for how and where people will work and what career opportunities they will experience.
Arthur: So with the mothership as your point of reference, how would you like to proceed?
Kahn: I would like to talk about three main topics, the short-term impact on workers eligible to work from home (WFH); the medium-term impact for women, their managers and their spouses; and the long-term impact on expanding opportunity for African Americans and other disadvantaged workers. All of these have parallel implications for the cities where the work is hosted and for the people doing that work, including people living in different cities. In our discussion, I will try to look three years ahead from where we are today.
Arthur: So can we take these three subjects in turn?
Kahn: Regarding Short term impact I calculated one day that my father had spent two full years on the commuter train, going from Scarsdale, New York, to New York University Hospital where he worked. Going forward, for WFH-eligible workers who have the green light from their bosses to do much of their work from home, commute times will drop significantly.
You can’t be a WFH dentist, but for those lucky people who can now work from home, they can use the extra time they earn to attend their kids’ events at school, take care of a sick parent, exercise more or pursue hobbies. . Or, they can use the time to improve their mental health or help them build social capital in their communities. Ask yourself if the Lord gave you one or more hours a week away from work, what would you do with those hours? We are talking about a boon of less travel.
Another point which urban economists were doing before Covid hit low-speed commuter issues. Rush-hour congestion dictated an average commuter speed of 30 miles per hour, which meant you had to live and work in or around the same urban space. If you love opera in New York, then living downtown is fine. But what if you like to ski or snowboard and want to unbundle where you live and work? Or, what if you have a sick mother in Charlotte, North Carolina and want to work for Amazon’s soon-to-be-opened second headquarters in Arlington, Virginia, 400 miles away. ? These types of combinations become much more accessible in an WFH economy.
Arthur: Can you move on to the next topic and expand on what you said?
Kahn: Absolutely. Medium-term impact relates to what I have already said, but the effects will take longer to occur. Several years ago, a University of Chicago study showed that when men and women graduated from business school, their earnings were the same, but eight years later, men clearly earned more than the women. My explanation for this was that women, on average, were dropping out at higher rates than men. Senior managers were also likely to stop mentoring young women because managers anticipated women would give up. This has created an unfortunate self-fulfilling prophecy and a persistent income gap between women and men.
However, I anticipate that the WFH will change this dynamic. If the young women at the University of Chicago Business School foresee that they can continue to work, even with a young child, they will be much more likely to do so. This in turn will lead to a new balance where senior managers will need to invest in these women, as they see that women will re-enter the company as WFH employees. Additionally, there will be more continuity in women’s careers, and a business benefit in retaining valuable talent as well as saving on recruitment and training costs.
This reinforces my mentor Gary Becker’s observation that if young women anticipate in college that they can have continuity in their careers, it will affect their choice of skills in which to invest. Think of it like people think of dynamic programming, or a game of chess. The further ahead you look, the more it will influence the first moves you make. Women and men go both are more likely to have a long-term view of their careers. This raises an interesting likelihood of “chore wars,” where either couple can work from home, so they compete over who does what to keep the house running. This is a problem that same-sex couples will also face.
Arthur: Let’s move on to the third main topic?
Kahn: It’s the one on Long term impact. I spent two years in Baltimore on the faculty of Johns Hopkins University. Although I cannot claim to be an expert on Baltimore, my discussions with people I have met there suggest the following. There are a lot of talented young people in Baltimore, but it doesn’t feel like there are a lot of jobs in Baltimore. This can cause teens, many of whom are African American, to not pay much attention to school because they don’t see the point in developing the skills they are being taught.
I met with current Baltimore Mayor Brandon Scott and he agreed that in an WFH economy, Baltimore benefits from its proximity to Washington, DC. Home prices are low in Baltimore, although there is great culture and history there. Additionally, in a WFH economy following Amazon’s opening of Headquarters 2 in Arlington, Virginia, there are new opportunities for African Americans to live in Baltimore while working at Amazon. There are other opportunities for people to live in Baltimore and work not only in Washington, DC, but also in Philadelphia, Pennsylvania, both of which are relatively close to Baltimore and accessible for intermittent meetings.
Then there’s that unbundling point again. Baltimore will benefit from separating the place of work from the place of residence. Anyone, regardless of race or gender, can work from their home in Baltimore for three or three and a half weeks a month, but travel to the mothership for face-to-face interactions. Moreover, the quality of these interactions will be much higher than the quality of daily interactions before Covid.
Kahn: Can I move on to a fourth topic? I call him Musical chairs, which I played with as part of the title of my book. I remain optimistic about the success of superstar cities like San Francisco and New York. However, these cities have become extremely expensive in terms of real estate prices, so people who cannot afford a family home will want to work for superstar companies without living in the same city. These people will “suburbanize” adjacent towns and take advantage of available FMH opportunities, while younger people may prefer more crowded housing around the center of the supercity. Additionally, there will be a ripple effect as there will be new jobs in these cities – especially in services – for people who actually want to live and work in the same city.
Kahn: A final topic I would like to talk about concerns the future of small towns. These are the potential of small towns – for example, Boise, Idaho; Boseman, Montana; or Santa Barbara, California to qualify for an WFH savings. These are high convenience places that in the past did not have many jobs. In the future, these beautiful rural parts of America will attract WFH workers who have cultural roots or hobbies there. I think we’re going to see successful people moving into these cities as long as the cities allow real estate development to accommodate these people.
My editor was concerned that working from home isn’t accessible to everyone. It is true that a high school graduate has much less access to WFH jobs than a college graduate. However, if smaller towns attract WFH workers who want to live there, it will also create a ripple effect on a new service industry where locals can earn money. For example, if I like to ski, I can work at a local microbrewery that serves beer to people who now live in this new WFH residential community.
Arthur: Thus, the increased WFH workforce creates an immediate benefit in the windfall of less travel, as well as a range of opportunities for quarry owners to utilize that windfall. It also triggers medium-term effects where women are more likely to anticipate largely uninterrupted careers around the birth of children, attracting more long-term mentorship and reducing the gender pay gap. This in turn allows cities without supercity status to benefit from retaining or attracting relatively prosperous wage earners, as well as creating expanded service sector work for local workers. Should we be grateful for everything the Covid pandemic has taught us?
Kahn: I firmly believe that we should be grateful.
Arthur: Thank you for your time – and for your ideas!