Remote Work and Development – A Law-and-Economics Perspective

Abstract

As we emerge tentatively into a hopeful post-COVID-19 future, it has become clear that the pandemic has had a large impact on the traditional office, particularly in the developed world. Major office centers such as Silicon Valley, New York, and London have seen great reductions in the number of workers who spend their days there in-person. One lesson of the pandemic is that many workers can be as – or even more – productive working from home, thanks chiefly to software such as Zoom, Microsoft Teams, and Slack, among others, which enable better collaboration across distances than was previously possible. While these tools existed before the pandemic, it took the pandemic’s lockdowns and disruptions to make clear to workers and employers how impactful technological innovation could be to the traditional office. As a result, across the developed world, a large percentage of office workers’ labor has continued to be performed remotely. The shift to remote white-collar work has significant implications for investment, development, and migration. First, the traditional office building or office park represents a massive fixed cost for many industries: the office buildings of Manhattan or the City of London, and the office parks of Silicon Valley, were expensively built structures on extremely costly land. The rise of hybrid- and even completely remote firms – first, in the tech sector, but spreading beyond it – creates the potential for businesses unable to afford locations near traditional developed world talent aggregations to hire and collaborate despite that. Second, from the perspective of development, one important implication is that the investment to create a successful firm may have shifted to at least some degree away from buildings and real estate to software and worker talent. At the very least, this shift requires taking a more flexible view of what development, particularly in leaving the alleged middle-income trap, may require. Finally, there are important implications for migration. For the past half-century, knowledge workers have left the developing world for the world’s major business centers, located mostly in the developed world. The ability for firms to collaborate at a distance may reduce that part of migration pressure generated by the “pull” toward traditional developed-world office centers. As a result of these implications for investment, development, and migration, the law should take a proactive stance aimed at preventing entrenched interests from slowing or even reversing the shift taking place. The law should instead defend and promote these shifts, which should have a tendency toward making the world economy more equitable, not least by reducing that portion of the world’s production drained by economic rents accruing to landlords in developed world megacities – a significant portion of which was generated by talented migrants from the developing world.