In a twist of fate, it looks like blue collar and white collar are going to switch places. For the past decade or so, many people have cheekily told the blue collar to #LearnToCode. Manufacturing is gone, they said. Manual labor is over, they said. If you want to be well paid, go where the jobs are, they said.
But what if the jobs are… everywhere? Ben Thompson’s central tenet on Aggregation Theory is that as distribution costs go to zero, the product that owns the customer relationship matters more than anything else. Pre-existing business models that relied on geographical or distribution as a barrier to entry without any other differentiation outside of “I’m your only choice” will die and go away. We see this via online news sources and local newspapers. Online retailers versus physical retail (whose decrease the pandemic has only accelerated). And of course there’s Netflix versus the cable bundle.
We can take this same model and apply it to the job market.
Employees/Labor are the cable bundles. Though there’s a lot of us, ultimately supply was constrained by geographical and legal constraints. Many would love to work for Google for example, but not everyone is willing to move to Mountain View. And even if they were, the legal system might still not issue them a visa to do so. Those were the barriers.
But as we begin to see some companies decide that this full remote work-life can be maintained and announce permanent remote systems, this breaks down. Because now there does not need to be a centralized office that gentrifies an area but also raises the average salaries of that area. If offices can really be run digitally, and teams authentically internationally, then that means the entire world is now a possible candidate for a single role.
And yes, we can say that’s good. Competition goes up, the company can ensure higher quality. Perhaps more people globally will also be raised out of poverty.
But there”s some demonstrable drawbacks to this. I’ll start with the small one I teased in the first paragraph: blue collar and white collar will switch places. As the pandemic has shown us how utterly dependent nations are on our exported supply chains (shown via the shortage of PPE, medicines, and even food), governments everywhere have already issued incentives and edicts to begin to draw some of those production activities back within their own borders.
This will lead to a trend in reduced efficiency (100 plants making 2000 each and losing the efficiency of scale compared to 10 plants making 30000 each). But it WILL result in more local jobs in such activities. And this may be a good thing (depending on your thoughts on protectionism, economics, and politics– that however, I won’t touch).
At the same time, with the entire world’s population of software engineers no longer constrained by region being able to apply to the same job… Woe is to the applicant. Salaries will fall, competition will spike, and for the most part I assume those in cities will just be priced out. Which maybe is okay, since they no longer need to stay in the city and pay those high prices. But can they afford to compete in terms of pay with someone from another country?
I recognize that some of this discussion sounds dangerously protectionist. And engineers from Korea are not equivalent to say engineers from Japan. Schooling, culture, and background matter a great deal. But still, that’s often not enough to tilt a hiring decision– and it shouldn’t, because there’s a delicate balance before it tilts into bias.
It is especially ironic seeing that this caution is for an arguably incredibly current privileged group that as of this moment: still makes more than other industries, has less or 0 of the physical risks compared to other professions, and even now in this pandemic can still work comfortably. That however doesn’t remove that this can be a concern, because a large amount of the workforce IS in this field: and it will only grow as governments everywhere keep their fervent push to IT bears fruit on the graduating, soon-to-graduate, and younger.
Left or right. Idealistic or pragmatic. We can all agree that in any relationship, the one with the power is the one with leverage. And in what labor relationship have we ever seen the employees retain leverage (and thus benefits and assurances) when their employers realize there’s a viable replacement for each and every one of them in an infinite pool of applicants?
And so we have Freaky Friday but with White and Blue. Perhaps tech needs some unions.
Then there’s the second one, which I believe may be even FAR more important and less biased: this spells an end to the possibility of quality locally organically grown companies.
It extends to the same labor market realization. If big companies like FAANG can now compete totally and globally for all of their positions, they will essentially prevent all the top talent in every country from going to a “local-grown” business. Many Silicon Valley startups already know this pain. Outside of the promise of big riches upon IPO, they have no real way of competing with the salary promises of FAANG. If an applicant joins otherwise, it’s often the rare one due to personal interests.
Now reflect this same relationship, keep FAANG, but instead of an SV-VC-funded startup, it’s a newly-created startup in Thailand funded with a smaller proportioned public-grant. What outside of a huge sense of patriotism or belief in the specific product (which are luxuries to have as your priorities AKA a privilege of the few) would allow those applicants to reject meaningfully higher salaries and job security in exchange for that?
This protectionist concern expressed for workers now extends to countries and their race to find and own the next Decacorns. To humanity and the prospect for a competitive market for innovation. And for any specific locality to ever grow into the next centralized area of technological growth like Silicon Valley.
Through these means, the top powers in funding and companies only cement and aggregate their chokehold. Free to slurp up all top talent (at least, more so than ever), commoditize them more than ever, and starve the companies under them. Like the tall trees of a canopy, their shade covers yet more of the sun– leaving the undergrowth barren.
I’m not sure how I feel about this. On both fronts, this is a natural evolution of the world becoming a global economy. We’ve seen this in the physical economy, but never saw it coming for the digital. Now that we see the first one rolling back (to some degree, it’s up to time to tell if it’ll be permanent) and the latter sprinting for the end, it’s an opportunity for us to actually analyze and prepare for it this time around.
When we saw what happened to now barren towns as industries and factories moved, we were caught unaware the first time. Shame on us if we allow it to happen a second. And for the digital, there may not be a “chance” (though I despise to call it that) like the pandemic that will force us to reconsider and think about the risks in such global extension. The only parallels to the digital economy are perhaps security and IP risks. But seeing the complete apathy every single government has had towards privacy (even EU during this pandemic in records to contact tracing in their demands from Google and Apple) and security, I have little faith that there will be a cognizant enough reckoning until it is too late.