The global API-based payments platform Stripe has offered its workers an interesting bargain. Take $20,000 and, in essence, get out of Dodge. Though Dodge, in this case, is San Francisco. And there is a catch. Wherever you go, it’s almost certain to have a lower cost of living than San Francisco. So you need to give some of that $20,000 back in salary.
So why is Stripe offering this deal? We think it’s getting out in front of a trend. If the COVID experience has taught us one thing, it’s that the office, while nice, is not essential for many jobs. And some jobs might actually be easier to do remotely. This is especially true for the kind of jobs Stripe hires for. You know, engineers, marketers, product managers, and so on.
Breaking the Cycle
If your workers can live anywhere, why do they need to live in San Francisco? And if workers aren’t coming into the office, why pay San Francisco salaries?
This experiment in remote work has interrupted a persistent cycle for knowledge workers and their employers. These jobs are concentrated in cities that are desirable, particularly for younger workers, but also expensive. You know the list. New York, LA, San Francisco. Then there is the second tier of “cool” tech cities like Austin that are experiencing a rapid increase in the cost of living. In order to attract and retain the best talent, companies located in these centers paid considerably higher salaries than they would if they were located in Tulsa or Boise.
Now, more companies are going remote-first, or at least remote optional. Google, Microsoft, Facebook are included on the list of companies that will not require companies to return to the office. Or at least not full time.
In a report on remote work I wrote recently for Localogy, we cite data on the massive growth in remote-first companies. Many Localogy member companies told us they are increasing their use or remote work, though some remain committed to the collaborative office environment. MatchCraft CEO Sandy Lohr, speaking on a recent Localogy Live! broadcast, encapsulated the culture shift we are all experiencing with this quote.
“You know, we used to say think ‘digital first’. Now we have to think remote first. And that’s just the new mantra. Our mode of operation has to be thinking virtual. I think that is the new norm.”
And last week, my colleague Neal Polachek wrote about an epic, viral Twitter thread on remote work. He raised many second and third-order implications of the burgeoning remote work movement. Not the least of which is the fate of downtown businesses catering to office workers.
I Hear Charlotte’s Nice
If you were a 25-year-old developer, would you take the Stripe deal? That $20,000 would go a long way toward setting up a nice lifestyle in a mid-market city. Or in some little town in the mountains. As long as the wifi works. The lower salary might give pause, but it’s likely to be easily offset by a lower cost of living. For example, Rent for a one-bedroom apartment in San Francisco is $3,600 per month. You could move to Charlotte and get what is no doubt a much larger one-bedroom for just $1,330.
Stripe ie reportedly cutting pay by up to 10% in exchange for $20,000 and hightailing it elsewhere. So let’s say a Stripe employee making $100,000 takes the deal and moves from San Francisco to Charlotte. They would easily come out ahead financially.
Hollowed Out Cities?
So what will this do to cities like San Francisco? In the short term, there will be downward pressure on both commercial and residential rents. But that pressure was already building in the wake of COVID’s massive impact on workplace policies across the spectrum, from small tech startups to major corporations.
I think there is another long term impact that Stripe’s policy might accelerate. It’s the demythologizing of the major hubs like San Francisco. The notion that you don’t matter if you are not in New York or the Bay Area may have been fading before COVID. Now, it’s on life support. Still, it’s important to remember that cities like New York and San Francisco have shown remarkable resilience. And not just over decades, but centuries.
I recently chatted with someone who described the remote work transformation we are seeing this way. The idea of teams working collaboratively and creatively in person will endure. But the recent remote work experiment has made one thing very clear. If the office’s primary purpose is to gather workers in one place every day just to show their faces and take attendance, then the office is finished.