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2024-10-01 07:00 by Karl Denninger
in Business , 240 references
[Comments enabled]  

The world is all "A-Twitter" about Amazon's RTO announcement -- as of the New Year all employees, with few exceptions, are expected to be in-office 5 days a week.

Many are saying "I'll quit!" and a few have.  Go right ahead, would be my answer were I Amazon management.

Why?

Well, for one thing most of Amazon's currently-remote workers are in information areas such as AWS (it is sort of tough to remote-work stuffing boxes, for example) and those data centers are mostly in higher cost-of-living areas.  Amazon was paying a premium in wages because of said location, and what's happened here is that the employees have arbitraged it with the pandemic as their excuse, often moving to lower-cost areas.  This sounds great for them (and it is) but its at the expense of both the employer and the places they moved to where they have wildly driven up the cost of living, particularly housing.

In most of those areas there are no $200,000+ a year jobs so if you start driving up median house prices from $150-200k to $500k+ you've destroyed the capacity of the people who live and work there to afford to live in that area.  This has occurred in many markets across the country over the last four years.

To those who claim this is the "free market" working I hope you're perfectly ok when your "entirely remote-capable" job is sent over to India where the dude that takes your place -- and you get fired as a result -- thinks $20,000/year is a princely sum.

By the way where he lives it is.

I've long opposed such games with the insistence that we impose wage and environmental-parity tariffs.  In fact more than a decade ago Leverage put forward precisely that as a policy mandate.  Guess what: My opposition to this sort of arbitrage is not limited to one side of the table or the other and at its root the reason I'm opposed to these games is that such arbitrage always screws someone.

In fact that's the entire point or nobody would do it -- if you couldn't get an advantage out of doing that you wouldn't do it and neither would anyone else and it is a fact that you simply don't care if you stick it to someone else in the process.

We can all debate as to whether remote work is "more productive" or not but that is not the point.  The point is that labor is in part priced on the cost of living where the person is and thus this entire "remote" thing is, to a large degree, about attempting to capitalize on that higher cost of living in a given place while evading spending the time and/or money that you are otherwise compensated for when you work in an office.

The wages I had to offer with a downtown office were considerably higher (by a quarter to a third!) than those that had to be offered in a modest college town 3 hours or so away.  I know what they were paying for comparable work at the time.  Why was it cheaper there by that much?  Because it cost more -- and not a little -- to live and work in the city.  Nonetheless that was where the customers were and thus all-in it made sense for me to put the equipment and office in that location even though both the office and the people to work in it cost more money.  That sort of debate and decision is one businesspeople go through every day and they come to different conclusions -- yet now we have a bunch of folks who think they can take that decision and twist it so they obtain an outsized benefit.

Amazon has said "no" to that and they have every right to do so.  Those buildings are expensive to rent (or own) and maintain, and if the company didn't think there was value both in having the people in one place and whatever enhanced degree of reasonably knowing the employees were working at their job they obtained by it rather than watching Youtubes or walking their dog then that's their choice.  You can argue that the outcome should run the other way but you have no right to impose it on them.  Of course you can quit and go work somewhere else if you wish -- and some people will.  That's the natural balance between employers and employees.

Amazon's bet, I suspect, is that those who quit are those who are walking the dog or watching Youtube during a reasonable part of the time they are allegedly "working" and thus those who quit are those who contribute less on balance to the enterprise.  I'm sure there will be exceptions but that's their math and its their call which they have every right to make.

The market will determine whether or not they're right, but in the meantime this will cause a decent amount of reversion in the price ramps in lower-cost of living places because those who do quit now will have to find either another remote gig (likely at a materially-lower wage) or compete in their local economy and if the $200,000 job in Seattle pays $100,000 where they are now guess what -- that's what their new paycheck will be and thus the overpriced housing they drove upward will come back down to earth for everyone.

That is definitely of benefit to those local populations where said ramps occurred and I look forward to it.

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