Working from home is on the rise according to a new Census Bureau Report (PDF). Richard Florida at The Atlantic analyzes the data offering several useful points of comparison, but I think a few of the correlations he makes deserve closer inspection. First, he says, “working from home is modestly associated with larger, denser metros (with correlations of .22 to population and .30 to density).” If that were true, one thing you’d expect is that the rate of telecommuting has something to do with the type of work people are doing. Higher-tech industries tend to gravitate more towards New York and San Francisco and Chicago than Central Kansas and Eastern Montana, and as a result businesses in the big metro areas have been faster to adopt telecommuting arrangements with their employees than those in rural areas. Industries like agriculture, energy production, and logging, which tend to be located in the white parts of the map, just aren’t as conducive to telecommuting after all.
However, if you look at the data and then at Florida’s claim, many of the areas with a high rate of telecommuting seem to be further from big metro areas than you would think. Kingston, NY is somewhat near New York City, but not as close as any of the towns in the tristate area which have lower telecommuting rates. Medford, OR doesn’t seem to be particularly close to any big city. Boulder, CO is close to the Denver metro area but still doesn’t stick out as a big city. One point to consider is that there may be more overall people in New York City who telecommute than in Athens-Clarke County, GA, for instance, but because New York City has so many more people the rate is lower. But then it’s worth asking, what conditions need to be in place for a modest-to-small-sized city to adopt a comparatively high rate of telecommuting?
Here I think there are a variety of factors to look at. One would be the types of industries and businesses that can be found in those areas. Telecommuting in the Bay Area and along much of California’s coast is fairly popular, as expected, thanks in large part to the presence of Silicon Valley. The same is true along the northern I-95 corridor, which is home to many service and tech-based businesses. But in other parts of the country there doesn’t appear to be as clear a causal link between industry and telecommuting rate; Santa Fe, Southwestern Oklahoma, and Central Kentucky don’t exactly stand out as hubs of techy business. Another factor to consider is that many companies like to move pieces of their business away from big cities in order to reduce tax liabilities and labor costs. Thus you can find local outposts of service or tech businesses that are nowhere near a big city but nonetheless utilize their workforce in a more “contemporary” fashion than other local businesses. Many companies also do things like customer support and online commerce, which thanks to modern technology are fairly easy to operate out of small cities with a largely telecommuting workforce.
Another set of factors to think about is the cost of transportation and employee compensation. For the mast majority of New York City workers, it is expensive to get to work. However, New York City tends to offer many more high-paying jobs than does Tulsa, for instance, so there is some type of viable equilibrium that businesses can achieve there without resorting to en-masse telecommuting. But one of the dynamics that highlights is that employee compensation is a significant liability for most businesses, and part of the calculus that goes into determining employee compensation is how much it costs employees to live in that city and get to work. If you reduce or eliminate the cost of getting to work, it becomes possible to exercise a greater degree of control over employee compensation, which has to be appealing to certain businesses in certain instances.
For this reason I think it’s telling that cities like Dallas, LA, and Houston, which have have robust business sectors and poor public transportation, don’t have any nearby areas with really high telecommuting rates. That means there are businesses in these cities that are essentially paying their employees to drive to and from work five days a week, which seems like a dubious practice given modern technology. There have to be at least a few businesses in each of these cities that are equipped to utilize telecommuting to a greater extent, but either tradition is overriding common sense or some other set of factors is making the costs outweigh the benefits. I’d have to think, though, that especially as gas and housing prices increase in these metro areas, it would be useful for both businesses and workers to set public policy in such a way as to encourage a higher rate of telecommuting.
Mack Lannahan 