The problems facing Minnesota’s small businesses: higher welfare
In April, I had an op ed in the Star Tribune titled: ‘A new unemployment problem: it pays too well.’ In it, I noted the phenomenon of elevated levels of…
For much of the past year, a good number of office workers have been working from home as a measure to fight COVID-19. As the threat recedes, will people go back to the office as normal? Or will remote working become the way of the future?
The answers is likely to be somewhere in between. Working from home will probably be a bit more normal than it was. But neither will the office die out. In fact, there are good reasons to think that the office’s comeback might be stronger than many think.
Why does Silicon Valley exist? Why do competing firms park themselves so close to each other, especially in a state which is so unfriendly to business? Geographic proximity must offers benefits which outweigh those costs. These benefits are known in Economic Geography as ‘Economies of agglomeration’ (the costs are known as ‘Diseconomies of agglomeration’). Being close to your competitor means you are close to their ideas and their staff: the first of these allows ‘knowledge spillovers’ and the second puts you closer to a pool of workers skilled in what you do.
The same goes for the office. Paul Swinney, director of policy and research at the Centre for Cities, told BBC Radio 5 Live recently that: “I expect we will see three or four days a week in the office as the UK recovers,”
“Over the longer term, I’m quite hopeful that we will see people return five days a week.
“The reason for that is, one of the benefits of being in the office is having interactions with other people, coming up with new ideas and sharing information.”
He said people could not do this by scheduling a three o’clock meeting on a Tuesday – it had to happen randomly.
“If you’re in the office on a Monday but someone else is in the office on a Wednesday, then you’re starting to miss out. Or, if your colleague is in the office and having a meeting with your boss and you’re not there, all of a sudden that changes the dynamic again.”
These are those knowledge spillovers. They make it beneficial for competing tech firms to work in geographic proximity and they make it beneficial for colleagues to do so as well.
This doesn’t mean that people will necessarily return to their previous office. Meet Minneapolis and the Downtown Council recently launched the 6-1-2 campaign which aims “to attract people to once again spend time and money in the heart of the city.” But, with crime soaring, that might be a tough sell. While the people who were working in offices in downtown Minneapolis might well return to an office, they might not return to that office.
John Phelan is an economist at the Center of the American Experiment.