Since the industrial revolution, the location of companies has been a key driver of prosperity.  Cities that attract growing companies bring jobs and tax revenue; thereby supporting local economies.

That playbook is about to become irrelevant for companies that employ knowledge workers. 

The only thing that will be relevant in the future for these companies will be the location of the workers they employ, and most of them will not be clustered around a headquarters.

We’ve written previously about the massive decentralization trend of knowledge workers that is about to accelerate.  As that occurs, companies will move to set up hubs in key cities around the world and they will likely offer coworking space to cover employees in regions where they don’t have an office hub.  They will go to where the people want to live instead of the other way around.

When a company has the vast majority of their workers scattered around the globe without a meaningful centralized presence, does it really matter where they are headquartered anymore?  Will there be anything preventing companies from moving official headquarters to the most favorable jurisdictions for tax and legal reasons?

Many tech companies don’t earn profits for years anyway so the tax revenue on those elusive profits hasn’t been relevant for local economies regardless. Payroll taxes go mostly to the federal government (although some comes back to local economies in various indirect ways such as healthcare spending). The largest single expense for tech companies is almost always the salaries of the people they employ.  That money subsequently flows into the local economies where those knowledge workers are located, which then fuels booms in places like Silicon Valley.

But, we are moving into a post-pandemic world where the vast majority of people want to be able to work from home at least some of the time and they will drive the adoption of remote-first policies. Those same remote-first policies are going to supercharge location agnostic hiring, which is going to radically redistribute that money to wherever those workers happen to live.

The future for cities clamoring to attract those dollars will be to entice workers instead of companies.  What will that mean?  Will you have cities rolling out citywide free high speed wifi?  Will investments in arts and culture be major drivers of where these knowledge workers flock?  Will investments in public transportation infrastructure become a must?  Will places without easy access to nature struggle to compete?

How cities and countries adjust to this new reality is not totally known. However, one thing is clear: we are at the beginning of a massive shift that will emphasize the importance of the knowledge workers rather than the companies that employ them.

Categories: Remote Work


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