What happens when you integrate multiple cities and countries into a single labor market? Europe offers essential hints about the future of work.
I've been rereading Tyler Cowen's Average is Over from 2013. Tyler summarizes the results of the European experiment:
"What people expected from economic integration was a wealthier and slightly more ethnically diverse version of what they had ten or fifteen years ago. What they will be getting is a dramatic shift of labor resources into the most highly valued firms and also into the most highly valued business regions. There will be lots of “hollowing out” of various regions—at least in terms of well-educated high earners—and not everyone will be on the winning side of this process.
In other words, once you create a larger market, the result is not the gradual diffusion of success or convergence among different areas. Instead, the result is the flow of capital and talent into the spots that can use it most efficiently — and the hollowing out of the places that can't.
The European experiment made me think of remote work. Hiring from anywhere (or from a broader geographical region) essentially integrates multiple labor markets. Would this result in spreading economic growth across numerous cities and towns or in an even more concentrated economic landscape?
The natural tendency seems to be towards the latter. However, the European experiment itself occurred before the rise of remote work as a viable option. This means that talent and capital had to move to the leading European cities to access the best investment opportunities and jobs (or hire the best employees).
My hunch is that remote work will push the world towards the economic concentration we've seen in Europe, but it will also help moderate that effect in Europe itself. A larger market will lead to some big cities becoming bigger and more successful than others. Still, it will also enable many more locations to get bigger crumbs and attract more talent and capital than ever before. The biggest losers will be middle-sized cities and the few large cities that fail to adapt.
This was a short piece based on something I just read. I'm going to try to write more of these! Let me know what you think.