Looking Ahead: Remote Work's Impact On The Middle Class

What Globalization + Remote Work Means For The Western Middle Class

You need to be paying attention to the 2nd and 3rd order impacts of remote work on quality of life. Especially how remote work impacts the middle class around the world.

As remote work expands and companies leverage billions of global workers seeking good jobs, a large percentage of people in the developed world will experience a reduced quality of life as their jobs are filled by the global workforce. Keep in mind that many of the newly remote jobs are held by people that were considered middle class, white-collar workers in the late industrial age.

So, looking into the crystal ball, what does this mean for the future? In short, as remote work taps into the global talent pool, the incomes paid for these jobs will equalize around the world.

That means that in the developing world incomes will rise and in the Western world incomes will begin to fall. The net result - digital incomes will find an equilibrium that establishes what remote work is worth in a global job market. The point is that this average income is likely to be lower than what western middle class knowledge workers are accustomed to and higher for the rest of the world.

The deeper consequence of this trend is the methodical contraction of the middle-class lifestyle in the west and growth of the middle class lifestyle around the world.

To be clear, this is a trend that will evolve over a multiyear time frame. But you can and should watch for the signs and try to determine how much of what is happening right now is an early indicator of what to expect as jobs are lost to globalization.

Examples: what happens to the economy when layoffs happen in the white collar/knowledge worker sectors? How do the impacts ripple throughout an economy when the middle class struggles and begins to contract?

The Decline of the Nice-To-Have Economy

“Americans’ confidence in the economy is at nearly its lowest point since the 2007-09 recession, on account of inflation-battered spending power, a cooling job market, and a stock-market dip that is hurting the finances of retirees in particular. As a result, consumers are paring back their spending on most things.”

The meta-analysis here is that workers are intuitively scared of layoffs right now and they are reducing their expenditures where possible. Any prolonged and significant reduction in consumer spending is a serious contraction of the middle-class lifestyle.

Two in Three Can’t Cover $400 Emergency in US: Suze Orman Survey - Bloomberg

“millions of lower and middle-income families living on the brink, Orman said, with many forced to carry balances on credit cards with growing interest rates as others are priced out of apartments or facing repossession of their cars.”

The meta-analysis here: we can learn a lot about this trend by following spending habits. Is credit card debt increasing despite rising interest rates? Are cars being purchased and sold at the same rates as before? Are people starting to relocate to less expensive locations?

This post isn’t designed to promote doom and gloom. It’ll be a trend that forms over the span of several years and national policies will emerge to safeguard jobs. ie: subsidies and tax incentives for hiring local vs international workers just like when manufacturing jobs were offshored for globalization 1.0.

But nonetheless, it’s important to watch for the signs that this middle-class contraction. It’s just as likely that this trend gets misdiagnosed and the impacts of remote work get camouflaged by economic indicators adapted for an industrial age society, not a digital society.

ie: economists and politicians need to be very careful when assessing their economies and crafting policies. They’ll need to differentiate between what’s caused by inflation and geopolitical issues vs what’s caused by digital trends that are fundamentally transforming the global economy.

If economists and politicians misdiagnose the trends, they’ll be unlikely to implement effective policies.

Why does any of this matter to you and this newsletter?

It all fits the new class bifurcation of location-dependent and location-independent people. The people able to relocate to maximize income, leverage cost of living arbitrages, and take advantage of locations with better digital age policies will thrive. While those stuck in one location will be at the mercy of their local policies.

Watching how all this unfolds over the next few years will provide insight into how and where the sovereign individual class will emerge. (Hint: they are most likely to be represented by individuals from the contracting middle class trying to preserve their quality of life)

ANOTHA ONE - Washington DC Struggles In A Remote Work World

Downtown D.C.’s struggles mount as workers remain remote - The Washington Post (archive.is)

I’m not going to relitigate this story. It’s a repeat of the same facts from past newsletters and it’ll just keep happening again and again in other cities around the world. The overarching point to reiterate is that remote work negatively impacts city economies structured around in-person work. In this instance though, the takeaway is that if it can happen to the capital of the free world, it can and will happen anywhere else.

What’s also worth mentioning about this particular city though is that the trend will happen right before the eyes of US federal legislators. And if the DC government struggles to adapt to a remote work world, how will that gradual development influence the opinions and perspectives of the national legislators that see the struggles firsthand? Linking back to the story above, will we see a wave of national protectionist policies designed to penalize remote work? Or will we see policies that seek to support cities and communities as they transition to economies that don’t rely on localized workforces.

The bottom line: if San Francisco and New York make ideal case studies for what remote work can do to a city’s economy, then DC is the ideal case study for how a federal government might react to the digital transformation and its impact on local, state, and federal economies.

Rapid Fire

• Frequent Traveler Tips - by Ryan Lackey (substack.com) - This is packed with lots of great ideas. Some are new to me.

• Supply Chain Latest: Biden’s Africa Overture Collides With Russia and China - Bloomberg - This looks and sounds an awful lot like colonization 2.0.

• KCP | The Attention Span. “Weight of the World.” (thekcpgroup.com) - “We are currently in the middle of one of the most consequential financial events in human history. The boomer generation is transferring $68 trillion dollars of wealth to their spouses and children.” The essay itself veers into the nuances of how families manage inheritance which is only somewhat interesting. But this is an important stat to focus on. How will generational wealth transfers disseminate through the global economy? And how can you position yourself for that gradual event?

• 'Smart Cities' are just municipal authoritarianism (substack.com) - “In Oxford, and in a similar scheme in Canterbury, councils will require residents to have a permit to work elsewhere in the city and will limit the number of times they can drive across the boundary of their allocated 15-minute zone. If you don’t comply, the city’s automatic number-plate recognition systems will allow the council to levy a £70 fine.”

• Rich Chinese Plan to Leave With Money as Covid Zero Ends - Bloomberg - “China could face at least $150 billion capital flight: Natixis” - Personal sovereignty and practicing flag theory become especially important in places with authoritarianism.

• Round Tripping - by tolks - Page One - BTC dominance 41% | ETH dominance 17.5% | DeFi TVL $48B |Total Crypto Market Cap $1.1T | Stablecoin Supply $137.5B |

Extras

Show me the remittance flows and I’ll show you where crypto will experience the most adoption over the next few years.