Posted on 08/11/2021 8:49:01 AM PDT by Brookhaven
The deserted auto manufacturing plants in Detroit are very impressive.
Google has made a major strategic blunder— but some lessons are best learned the hard way.
So?
The market will work it out.
In a lot of cases, it would make much more sense to live somewhere with good quality of life and cheaper costs, and better schools even with a pay cut.
Unless you live in Santa Clara and have to commute to Mountain View.
Still costs you 200k salary to afford a home in Santa Clara.
25% cut would be hard to swallow.
Google is a marquee employer. Work for Google, and you can go just about anywhere.
That gives them leverage.
But where this is really going to take hold is in multi site companies were their are facilities across the US. The way it was before covid is if you worked form home, you were “assigned” a site. So even if you never set foot in the site for years at a time, you were considered part of their payroll. That tied the employee wages to the site location cost of living.
I remember a few people being fired for claiming a site in California, living in Arizona, and pocketing the difference. One guy had a PO box he used for mail and had it shipped to him twice a month.
The problem is that wage adjustments (for high cost of living areas) never fully compensated employees for the full difference in cost of living.
Part of that cost is “unseen” in the form of commuting time and money, day care costs (just two examples).
Way back in 2004 to 2008 when I worked at Google the salary was low for what I could get elsewhere. The free meals and stock options did make up for it...wonder what happened to the free meals during covid panic...
In the face of double-digit inflation at that.
I can vouch for that. Painful.
I agree. It bit me a few times.
But businesses are not charities, and the biggest cost is often pay roll.
One old timer I used to work with had it figured out. He would take a job in a high cost of living area. Say Chicago. Work there for a few years then move to a smaller market. That would freeze his wages, but he didn’t care. Then he would take a job in another high cost of living market for more and repeat.
It worked, till it didn’t and he was laid off. But a great way to play the game.
Or because other employees make lifestyle choices to live in the expensive City itself.
Yes. I had a tax client in Illinois who paid NYS income tax, because of an unusual arrangement. And even more surprising, Illinois agreed to it. Usually, Illinois foregoing tax revenue is like a fat kid sharing birthday cake.
So here is how this idiocy plays out:
1. If you worked in midtown Manhattan before COVID and your company has 3+ years remaining on its office lease, you are being forced back to work. However, your employer is planning to reduce its office footprint by at least 80% and is expecting to have most staff working from home after the current lease term ends.
2. If you worked in midtown Manhattan before COVID and your company has less than three years remaining on its office lease, your employer is likely to be far more flexible about a work-from-home arrangement. Your employer is already negotiating lease terms for space that is at least 80% smaller than its current footprint.
It really is this simple. And it really is this stupid, too.
A 25% pay cut for working at home might work for employees, depending on length and method of commute, cost of parking or other transportation, hours saved not commuting, ability to avoid daycare for children and other factors.
It will be different for each employee.
Does this mean Google will cut your salary by 95% if you move to Detroit — since the place is such a sh!thole that you can buy a home for $1? :-P
One would think they’d get raises for not occupying expensive office space.
The problem for Google is that they own the building and won't be able to find other tenants. So now they have to pay the note on the building, the note on the furniture, electricity, air conditioning, security, cleaning staff, cafeteria staff, etc., with fewer employees to offset the cost.
The companies that lease their offices, especially those approaching the end of their lease, can soon recognize the cost savings by having staff work from home.
People need to recognize that they're going to be competing salary-wise against workers in other states with lower costs of living. (Any job that could have been sourced overseas likely already has). Companies don't need to search Appalachia or the Everglades to find talent, the talent they currently have is moving into those areas. The faster employees can bail out of a high cost area, the quicker they become more competitive.
This is going to have huge implications on commercial and residential real estate.
I know a guy who worked for Twitter. During pandemic that told him he could work remotely. He moved back to a Boston suburb. They cut his pay by 15%.
His state tax was dropped by about 5%.
He WAS paying $4k in rent.
He is living like a king on his San Francisco salary in a low cost remote location.
His answer would be that he would take that pay cut every day of the week.
They are finding people are generally as, if not more productive at home. People working in offices waste a ton of time (in an office work environment. Things like customer support/ service and contact centers don’t see much difference.)
My wife has worked from home since March 2020. She never wants to go back. No politics. No “what did you do this weekend” crap. And no having to be the “Office Mom” for the idiot kids.
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