San Francisco Paves the Way on Remote Work

October 7, 2020
Author: Jay Denton

COVID-19 was a catalyst to the trend of remote work like we have never seen, but the business world is already looking to the post-pandemic world and contemplating what the norm will be on the other side. Whether it is company policy, employee preference or local government ordinance, working from home (WFH) will be a headline that stretches well beyond the discovery of a vaccine for the virus. Considering these different influences, the San Francisco Bay Area will offer some interesting trends worth observing in the coming years.

San Francisco will soon force most office workers to go virtual permanently, which will impact the local economy.

According to multiple news reports, many of the largest tech companies headquartered in the Bay Area have no plans for an immediate return to the office for their employees. And some of those firms have announced many positions will work from home permanently for the foreseeable future.

From a talent acquisition standpoint, two big themes have risen from these storylines. If you can work for those firms, but you do not need to be physically present in the Bay Area, what might that mean for local job growth? Additionally, if you choose to move away from the Bay Area, what might that mean for your salary?

Prior to COVID-19, the Bay Area was one of the strongest areas in the country for job growth. From 2011-2019, San Francisco-Oakland-San Jose averaged approximately 3.0% job growth per year. During the same period, the national average was 1.7%. While the spread is projected to be closer from 2021-2026 at 2.8% and 2.1%, respectively, an argument could be made that remote work could throttle some of the growth potential.

San Francisco annual job growth graph

If workers do not need to physically be in the Bay Area to do their jobs, will employees move there in the first place? While the immediate thought is for tech workers, keep in mind the other jobs in the market that non-tech employees support. Local hairstylists, coffee shop baristas and Uber drivers are also dependent on the rest of the economy growing.

Related: Essential Remote Work Considerations for U.S. Companies

If existing residents are given the ability to move to another location where the cost of living may be lower, and perhaps they have another incentive such as family or friends, will some of the employment base be siphoned off to other locations throughout the U.S.?

Of course, an exodus from the Bay Area has prompted the discussion of salary adjustments if an employee decides to move. LaborIQ® by ThinkWhy has examined the salary differentials for employees with the same qualifications working in the same roles in a variety of locations. There tends to be a significant markdown in salary level when comparing other locations to San Francisco, which could dissuade some employees from leaving the Bay Area for another location, even if there is a lower cost of living there.

The Impact of Local Regulations

When it comes to local government policy for remote work, San Francisco takes it a few steps further than other cities. In September, its Metropolitan Transportation Commission approved a long-term vision that would require at least 60.0% of employees at large companies (those with more than 25 employees) to work remotely on any given day by the year 2035. According to the San Francisco Examiner, the WFH measure is intended to reduce traffic and lower greenhouse gas emissions.

While the policy has good environmental intentions, it might also have an unintended detrimental impact on business. In August 2020, the subsector of Food Services and Drinking Places had lost 30.4% of its jobs in Oakland, 36.6% in San Francisco and 39.4% in San Jose compared to a year earlier. Those numbers are more than two to three times worse than some other major cities like Atlanta (12.4%), Phoenix (13.4%) and Houston (13.9%). Many of the restaurants in the Bay Area are permanently closed, and without workers commuting en masse to downtown locations, it is hard to imagine many of them reopening anytime soon. Restaurants might relocate to more suburban locations, but it is hard to envision them gaining equivalent daytime traffic.

Additionally, some businesses prefer not to have such regulations imposed on them. Whether for cultural or productivity reasons, a segment of the economy will prefer to shift back to in-person collaboration once the dust has settled on COVID-19. Multiple technology firms have announced relocating or adding to headcount in locations such as Austin, Texas, rather than making what might in the past have been a de facto expansion into Northern California.

San Francisco industry performance table

The Bay Area has been one of the job growth leaders in the U.S., and LaborIQ by ThinkWhy’s base forecast is for the area to rebound strongly once the pandemic has passed. But there also are some unique headwinds facing the market. Will the broader San Francisco area set a trend to be emulated by other locations, or will it lose its place as one of the nation’s top talent magnets? Either way, it will certainly give us some lessons to learn.

LaborIQ by ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to MSAs, industries, occupations and business across the U.S.