Last week, Twitter CEO Jack Dorsey, in a forward-thinking, unprecedented statement, told his employees that they may remain working from home “forever.”
Dorsey is unique in many respects, including gifting $1 billion of his net worth to help fight Covid-19, taking long meditation retreats in exotic locations and contemplating living in Africa as he contends the continent will “define the future.” In addition to running Twitter, Dorsey simultaneously serves as the CEO of Square, a successful publicly traded payments company based in San Francisco. After announcing that Twitter employees can continue working from home even after shelter-in-place orders end, Dorsey extended the same opportunity to his Square employees.
“We want employees to be able to work where they feel most creative and productive,” a company spokesperson said. “Moving forward, Squares will be able to work from home permanently, even once offices begin to reopen. Over the past several weeks, we’ve learned a lot about what it takes for people to effectively perform roles outside of an office, and we will continue to learn as we go.
What started out as a necessary program to stem the spread of Covid-19, companies required their employees to work from home. An unintended positive consequence of dealing with the pandemic was that remote work was met with a resounding success by both the employees and corporate executives. The widespread availability and ease of use of technologies to collaborate and stay in constant contact, such as Zoom, Slack, Google Hangouts and others, enabled people to smoothly adapt to the new setup.
Employees appreciated the chance to avoid long commutes, look after their homebound children (as schools closed) and tend to family members who may have been impacted by the virus. Executives noticed the potential cost savings, as expensive long-term leases for office space may no longer be needed.
The surging popularity of working from home was noticed by SHRM, the world’s largest professional society dedicated to serving human resources professionals. The group pointed out that a large number of companies, including Facebook, Capital One, Amazon, Microsoft, Zillow and others, have announced that they’ll extend their work-from-home programs. CEOs and top executives participated in a Bay Area Council survey, which reported that almost a fifth of companies are planning to transition to full remote-work policies and 89% are planning at least partial remote-work policies.
There’s a dark side attendant with this new trend. Companies won’t be limited to the pool of applicants that reside within just commuting distance. Once people are permitted to work remotely, what difference is there if a Square employee lives in San Francisco or Wyoming?
Square, Twitter and other corporations will be able to select the best, smartest and most talented job seekers nationwide. Companies based in large cities, such as San Francisco, have to pay larger salaries to their workers due to the high cost of living there compared to those who are based in smaller or rural locations. Square could now select job applicants who possess all of the right skills and experience and live in lower-cost places. They would be able to offer less compensation compared to what they’d give to a resident of San Francisco. This will cause a ripple of serious repercussions. Salaries for workers in San Francisco and other large cities may fall due to the introduction of job seekers that weren’t previously considered. Compensation could also be suppressed due to the overhang of over 30 million Americans who are out of work.
Dorsey was forthright about this situation. At the JPMorgan Global Technology, Media and Communications conference last week, the chief executive said, “We can get talent anywhere. There’s a lot of folks out there that do not want to move to San Francisco. They feel comfortable working in a much smaller office or just home.”
This could be a big hit to the value of San Francisco commercial and residential real estate. The Bay Area greatly benefited from a booming economy. Along with the growth, San Francisco became expensive with rent and home prices rising to an almost unaffordable level for most workers. Residents complain that it’s dirty, overcrowded and the infrastructure’s taxed due to the growing population.
If people can work from home, they don’t have to live in San Francisco or close by to maintain a reasonable commute. They can now freely leave the city and move to a less expensive area. Consequently, housing prices will fall. Similarly, commercial real estate will plummet, as companies will let their leases expire and decide to take smaller space or forgo a physical location. This trend will be exacerbated if other tech companies in Northern California pursue the same work-from-home strategy as Twitter and Square.
If other companies based in cities similar to San Francisco, such as New York, Boston, Chicago and Philadelphia, enact work-from-home plans, the same fate will play out there too. Home and commercial real estate in and around the cities will fall in value, as a good amount of people will move to less expensive locations. They’d gladly trade their small, cramped apartments and pricey homes for larger places, especially since they’d be spending all of their working and downtime in their homes.
Dorsey, a brilliant dual CEO, may reshape the way people work, where they live and how much they’ll be paid.