What will the new “normal” be?
As COVID-19 vaccines make possible the potential for a return to everyday life as we once knew it, the impacts of living over a year amidst a global pandemic may very well continue to linger on long after the coronavirus crisis enters history books.
The convenience — and often necessity — of online shopping and food delivery became strikingly important, as did the use of telemedicine. While students faced challenges in remote learning, many of their parents likely saw potential perks in their own newfound ability to work from home, or practically anywhere with a wifi hook-up.
With a workforce now intimately familiar with the benefits of working outside the office, Massachusetts officials are now trying to suss out exactly how the trend will carry on even when more employers re-open brick-and-mortar offices in the months ahead.
Michael Kennealy, the state’s secretary of housing and economic development, said recently his office is wrestling with questions about how an increase in remote work might impact everything from employers and employees, commercial real estate, and economic investments in cities and towns to internet broadband accessibility and transportation policy.
“The biggest question of all is, how will we compete in this new world?” Kennealy said, while speaking during a webinar hosted last week by the Massachusetts High Technology Council, a technology and research leader group.
“The environment is different now,” he added.
Recent analysis by management consultants at McKinsey & Company found that 20 to 25 percent of the workforces in “advanced economies” could continue working from home somewhere between three and five days a week. The bump is roughly four to five times higher than the amount of work conducted outside of the office before the pandemic’s onset.
Broadly speaking, the shift could mean more companies and employees leave large cities in favor of suburbs and small metropolises, according to McKinsey.
And a study conducted last month by the Boston-based Pioneer Institute found that a third of workers could make a permanent shift to telecommuting by the end of the year.
But with Massachusetts’ ever-increasing cost of living and perpetual housing crisis, could the Bay State’s regional magnetism in recent decades wane with the rise of remote work? And what could be done to keep employees local?
A recent study by the Pioneer Institute highlighted that Massachusetts has lost jobs and wealth most often to New Hampshire and Florida, two states without personal income taxes, in the last 25 years.
“These trends are not new, but the pandemic has served as an accelerant,” Pioneer Institute Executive Director Jim Stergios said in a statement last month. “Policymakers who care about recovering the pandemic’s lost jobs will need to create a more business-friendly environment. That means a focus on policies related to taxes, regulation, and the additional costs we are imposing on small employers.”
In February, Gov. Charlie Baker indicated his office planned to bring in an outside firm as early as this month to delve into how work-from-home practices could become a fixture of post-pandemic life, and what that means for state policy and the local economy.
Baker told the Greater Boston Chamber of Commerce he suspects many office workers will no longer need to be in the office five days a week. In fact, officials are already planning to have about half of the state’s 44,000 full-time employees continue working under a “hybrid” format after the pandemic.
“We need to really kick the tires on a variety of scenarios here,” Baker said. “It has the potential, if we lean into it in the right way, for a lot of great things to happen. If we miss it and we aren’t strategic about the way we make investments … it will be a big missed opportunity.”
The promise and challenge of remote work
For decades, communities like Springfield, Pittsfield, Chicopee and others in Western Massachusetts — historically proud manufacturing hubs of New England — have experienced a migration, particularly of its young workers, to the Boston area in search of jobs in the 21st century economy.
“If they wanted an opportunity, (they) were really kind of told that they had to leave town to find it … and that’s contributed to all kinds of very broad problems in our state. The inverse happened in Boston,” state Sen. Eric Lesser, a Longmeadow Democrat, told Boston.com. “It was like a lottery ticket to live within commuting distance of Kendall Square, which exploded the housing crisis, (and) led to completely dysfunctional traffic and transportation patterns.
“I mean, I spent seven years in Cambridge,” he added. “I don’t know how anybody lives there. It’s so expensive.”
Since his election in 2014 to the First Hampden & Hampshire District seat, Lesser has focused on bringing the same economic growth disproportionately seen in the eastern half of the commonwealth back to his home region.
He sees promise in remote work as a vehicle for attracting workers to his area, which he boasts has excellent schools, cultural resources, open space, and quality of life.
Western Massachusetts, he noted, is also situated between Boston and New York City, or roughly a two- to two-and-a-half hour drive from each major city, making trips for employees that need to attend occasional, in-person work events in either one possible.
In 2019, Lesser sought to create a $1 million pilot program through a bill that would have provided up to $10,000 for telecommuters who move to Western Massachusetts to cover re-location costs as well as expenses for office equipment or co-working space.
The bill was modeled on a similar program launched in Vermont that same year. The proposal garnered support from the Joint Committee on Economic Development and Emerging Technologies last year, though Lesser opted not to re-file it this year, citing how remote work’s potential was clearly demonstrated over the course of the pandemic.
Now, Lesser, the committee’s co-chair, sees “both tremendous opportunity and tremendous peril” in a long-term shift to work-from-home practices.
“If done correctly and if done with the right policy supports, it can be a tremendous opportunity to expand job creation and opportunity, especially to regions that had been left out of the last 20-plus years of tech and biotech growth,” he said. “But it could also really hyper-charge inequality, if not done correctly.”
Workers could leave the state in search of lower costs of living and, in turn, price out residents who were living in those areas, Lesser worries. And while remote work is a promising option for many sectors of the workforce, it’s one that applies largely to white-collar jobs, he noted.
If done correctly and if done with the right policy supports, it can be a tremendous opportunity to expand job creation and opportunity … But it could also really hyper-charge inequality, if not done correctly.
The in-person workforce is disproportionately made up of jobs with low, hourly wages filled with women, people of color, and immigrants, Lesser said.
“I often think that when we when we talk about remote work trends, the way we describe them is to assume that the entire labor market could work remotely, and that’s simply not true,” Mekala Krishnan, a partner at McKinsey, told the Massachusetts High Technology Council last week. “When we look at the data … a large portion of work is going to continue to require some form of in-person interaction that is quite substantive — 60 percent in the U.S.”
Michael Goodman, professor of public policy at UMass Dartmouth and an expert on the Massachusetts economy, noted that while remote work may be a more tangible reality for many employers, that also does not necessarily mean they’ll it put in motion.
“I mean, it’s possible to automate a lot of work, but there are whole, vast areas of economic activity that have been largely untouched, even though that potential is there,” Goodman said in an interview. “There are certainly lots of employers that can do remote work, that are going to want employees back because there are things that can be done better in person once it’s safe to do so.”
The ‘gravitational pull’ of Mass. — and how to make it stronger
For those sectors that could see a semi-sizable shift to remote work, Kennealy sees some advantages Massachusetts has in attracting and retaining workers in-state, namely, the local talent.
“We’re the world leader in life sciences.” he said. “We have incredible communities people can live in. I do think we’re getting stronger in advanced manufacturing. And so as companies rethink their supply chains, I think we’ll win some of that activity as well. So there’s some great tailwinds.”
The Bay State, Kennealy said, has “gravitational pull.”
“Every year, you know, companies and individuals decide they need to be here and they want to be here,” he said.
But Kennealy also acknowledged a couple of strikes against Massachusetts, such as the state’s high cost of living and cold climate. The state’s strategy moving forward has to recognize both the pros and cons, he said.
“We have to face up to the fact that we have large numbers of people here who work in technology, professional services, and financial services, and a lot of those jobs can be done remotely,” he said. “And so we have to make sure we’re a place where we’re going to retain talent and attract talent.”
Part of that work is already underway, according to Kennealy. He pointed to the $626 million economic development legislation signed by Baker last month aimed at supporting business competitiveness and addressing the region’s housing crisis through making it easier for local officials to create zoning reforms.
“We are addressing one of our major areas of competitive disadvantage in a pretty meaningful way,” Kennealy said. “At the same time, we’re going to continue to make all of the investments we’ve been making to make sure our competitive advantages are as strong as ever.”
For Lesser, part of the work for officials also includes building the infrastructure to support remote workers.
Internet connectivity remains a problem in many Massachusetts communities, especially in those in the western half of the commonwealth.
“You’ve got multiple communities that don’t have broadband hookups at all,” Lesser said. “And then, you know, you have, especially lower income communities, communities of color, especially in our gateway cities that … on paper have connectivity, but it’s very expensive, or is of not great quality. So those those issues are really going to be at the top of the agenda.”
Lesser also sees opportunity for revitalizing local downtowns with co-working spaces for remote workers who want a desk outside the home. Similar resources can be provided in public libraries, too, he said.
And while a rise in remote work would naturally mean a decrease in the number of daily commuters, the state senator maintained a strong railroad system across Massachusetts will be a necessity for connecting remote employees to job centers and offices for moments when an in-person presence is required.
Lesser has been a strong proponent of an east-west rail link from Springfield to Worcester to Boston and a workforce that is more largely made up of remote workers will require “linkages over broader geographic areas,” he said.
“Because you’re going to be connecting people for less routine trips, right?” Lesser said. “So Springfield-Boston, now, may be a train trip that, you know, a worker takes a couple times a month.”
I think there are certain things that are almost no-regret priorities.
For remote workers who may move out of state to avoid high costs of living but keep their Massachusetts-based jobs, Goodman, the UMass Dartmouth professor, said lawmakers should also be considering how to make sure the state continues to collect income taxes from those individuals.
“I do think policymakers in Massachusetts need to be attentive to the threats that could be presented by whatever new normal emerges, post pandemic, particularly around the ability to retain employers, and, you know, collect income taxes from employees that may be residing outside of the state,” Goodman said.
That issue has already become apparent. Last fall, New Hampshire Gov. Chris Sununu filed a lawsuit against Massachusetts for taxing income of Granite State residents who are employed in the Bay State but had been working from home over the course of the COVID crisis.
As to what degree large portions of the workforce would actually make the remote shift permanent, the jury is still out, Goodman notes.
“But this is something that I think it’s highly appropriate for our policymakers to be focusing on,” he said.
Krishnan, of McKinsey, concurs there is uncertainty in the air about what the future holds.
“Having said that, though, I think there are certain things that are almost no-regret priorities,” she said.
Investing in digital infrastructure, making local communities attractive to employers and employees, job training, and determining areas of possible job growth are all worthwhile endeavors, whether a switch to widespread, permanent remote work happens or not, she said.
“There are some investments that are going to be required in all communities, and I think that’s very important for both companies as well as policymakers to pay attention to, right?” Krishnan said. “I think there is a risk that we say there’s a lot of uncertainty and therefore don’t act, but I actually think we know more than we may be giving ourselves credit for.”
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