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As the Digital Workforce Changes, So Will the Economy


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This is an Op-Ed about the relationship between remote work, the economy and our physical communities health and well-being. 

As people are glorifying the remote work WFM trend, for some reason the dark side of digital transformation isn’t being told. Yet technology, data science and the future of artificial intelligence impacts how society functions, how economies evolve and now even how neighborhoods and communities will ‘feel’. 

There is a very stark reality that€™s not being talked about during the pandemic very much. It€™s actually how remote work (the WFM movement) is bad for the economy. While it gives workers more freedom and saves on time and productivity, the powerful side effect is less spending for local businesses and small businesses that depend upon commuters.

While people like to blame the pandemic for this, it€™s actually digital transformation leaders that permanently upend the small and medium-sized business (SMB) sector here as accelerating the WFM remote work trend. While companies like Zoom, Microsoft and others thrived during the transition, many SMBs and local business are already gone including restaurants, coffee shops, independent retailers, dry cleaners, etc€¦ you get the idea.

Basically all the things commuters do on their daily runs to and from the office could be somewhat upended. So is the real story that remote work is bad for the economy or that digital transformation has a dark side on the nature of the economy?

The Impact of Remote Work on the Economy is Underreported 

In 2020, the number of people working from home nearly doubled, to 42% of America€™s workforce, according to the Bureau of Labor Statistics. Several companies in the tech sector are giving employees the option to consider hybrid or full on forever remote work. Less commuting also means lower consumption of oil, among many other things. So the impact of remote work on the economy will in some ways have better productivity for Big Tech giants but severely impact the sustainability of small businesses who already have tight margins.

CNN goes on to state that you pay train conductors€™ salaries with your subway fare. The dry cleaner by the office and the coffee shop around the corner all count on workers who have been largely absent for nearly a year and a half. The pivot to hybrid and remote work is not very well understood, since it€™s so recent and new. But the dark sides of digital transformation are certainly being suppressed from the mainstream news.

Those train tickets or lattes really do add up and taking them away can also hurt local transportation networks and the future of urban commuting itself. The WFM movement could accelerate the profits of certain companies while disrupting others. For many SMBs this is really sad since the pandemic marks a permanent shift of how their business model will no longer be viable, this impacts local economies, the destruction of neighborhood commerce and SMBs.

Is the Digital Workforce Harmful to Local Economies?

Companies like Microsoft, Zoom, or Peloton will argue the pandemic is to blame; they were just opportunists who helped us through the transition. But digital transformation will, in this way, accelerate wealth inequality and low paid service jobs will be impacted by those lost small businesses. The huge corporations profiting during the lockdowns and pandemic work situations hugely accelerated their revenue and seek to keep the switch of all things digital and remote work as a permanent trend.

In the debate of whether remote work harms or helps the economy, a lot is lost in translation.

To put this in perspective, New York€™s public transport system is the largest in the nation and at the heart of the city€™s economic power. Before Covid, it brought in nearly $17 billion in revenue. But with ridership still depressed, revenue predictions have been slashed too. The Metropolitan Transit Authority received nearly $4 billion in government funding through the CARES Act, but fare and toll revenues aren€™t expected to come back to their previous levels until 2023, according to a report from the Office of the New York State Comptroller earlier this year (CNN).

The rapid spread of the Delta variant and the coronavirus becoming endemic basically means the digital transformation natives are validated, they will further disrupt the local SMB sector all over the U.S. and to some extent, most urban centers in the world. This is a huge transfer of wealth and for local economies will have real and significant costs that aren€™t being monitored or regulated.

Corporate Individualism and the Push for the Digital Workforce Could Upset Communities and Small Businesses 

What€™s for the individual worker (actually the Big Tech corporation) is not always good for the collective. It€™s great to have the freedom as a knowledge worker to work remotely, we don€™t want to hurt local businesses or impact the economy with our decisions. But just remember that when digital transformation occurs, there€™s a dark side of the corresponding disruption of the way things were.

The pandemic has been a grand global experiment in the costs and benefits of a remote workforce. But long before the coronavirus hit, many people worked from outside offices. When opportunistic digital value providers can benefit from the pandemic as we have seen with software services, advertising, social media, gaming or entertainment €“ what happens in the real world isn€™t talked about as much.

The artificial intelligence, cloud computing and software as a service models at the backbone of these transformative new services that cater to the remote worker, and the more remote work wins in the equation of the digital workforce, the harder it becomes for many brick-and-mortar retailers, local shops, services and businesses to even have the opportunity to make a living. In this way the best companies in AI, cloud and subscription software services are disrupting the rest of society and taking their money (wealth distribution, wealth inequality rising and exploiting their advantage against less digitally native companies).

What if Digital Transformation is Not All Good?

We used to fear what Amazon was doing to local retailers, but now it€™s Microsoft as well. It€™s Zoom, Peloton and so many others who have triumphed when many of us are at our most vulnerable. Hybrid work, remote work and freelancing is likely here to stay to some extent in a post-pandemic world.

More than two-thirds of professionals were working remotely during the peak of the pandemic, according to a new report by work marketplace Upwork, and over the next five years, 20% to 25% of professionals will likely be working remotely. 

By late April, more than half of all workers, accounting for more than two-thirds of all U.S. economic activity, said they were working from home full-time. According to Nicholas Bloom, an economist at Stanford University who has studied remote work, only 26 percent of the U.S. labor force continues to work from their job€™s premises.

Some, including several Silicon Valley giants, have announced that they will allow employees to work from home permanently. Yet huge swathes of the labor force are unable to work remotely, and experts say these developments could have profound implications for the economy, inequality, and the future of big cities. Of course Silicon Valley love the idea of making remote work as permanent as possible, they are the main beneficiaries of the new normal!

So what will the new normal look and feel like? The destruction of local communities? €œJob ads increasingly offer remote work and surveys indicate that both workers and employers expect work from home to remain much more common than before the pandemic,€ Goldman Sachs economists said in a note to clients.

Digital transformation leads have accelerated the WFM reality with their products, services and getting us hooked to new ways of life that involve spending less on local businesses and going to the office much less, if at all. Now employees crave more hybrid work convenience or even a full transition to remote life. The danger to local small businesses and neighborhood commerce is being totally ignored.

Indie Retailers and Local Businesses will be Severely Impacted by Remote Work

In Capitalism, we just assume a natural selection of how businesses compete for advantages is fair or par for the course. But remote work stacks the cards even further against the little guys, the indies, the small Mom and Pops store, the family business, the struggling immigrants, the low paid workers of retail and so forth. Remote work will decimate the local economy and significantly degrade the experience and immersion of neighborhoods and communities, and in 2021 we aren€™t even talking about it.

If lockdowns weren’t positive for local businesses who had no customers, what will the WFM be for them honestly speaking on one third to half less foot traffic? Small businesses that used to depend on traffic from offices, won’t just struggle, most of them will gradually go out of business. 

Remote work is mainly the luxury of knowledge workers, but here we are widening the gap of white and blue collar to an absurd degree. It basically guarantees that much of the lower middle class falls lower on the spectrum while some in the upper middle class get a lot of more benefits. Remote work weirdly augments inequality and if I was an economist, I€™d be ringing the alarm bells. The WFM movement is great, until you realize not everyone will be along for the ride.

The remote work trend is likely to accelerate wealth inequality and lower the quality of life and well-being in many communities as the demand for many kinds of SMBs dries up due to less foot traffic in the new normal of the digital workforce. 

It€™s perhaps the weirdest untold story of the pandemic people ignore unless it impacts them personally. The WFM trend is not all good, and its economic impacts to the SMB sector is going to be significant and likely, permanent. 

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