looking ahead

current update

It appears to me that most of the professional workplaces in California are still working from home, after more than a year of the coronavirus pandemic.

There's already been many discussions of "what is work gonna look like in the future," but I was kind of bothered by some stuff I read on twitter, so here goes.

how things are going to look in the future

Where I work now has multiple offices. The headquarters is located in California, but that's mostly due to historical reasons (founders, VCs, etc).

Corporate HQ is located in California. The corporate mandarins are all located here, since it's a 'California' company. This means all of them have to be highly paid and lots of taxes are going to be paid, expensive office leases, etc.

The customer service people are all American and located in the southeastern US.  I don't think it's possible to run a call center in California, nor is it a good idea. The southeastern US has a much lower cost of living and of doing business than California.

The engineering team is split between the United States (California) and Eastern Europe. The engineering team in the US is paid around the median market rate (from my personal experience). The Eastern European team is likely compensated much less. From payscale it appears that the 90th percentile salary for software engineers in Russia is about 3 million rubles per annum. In the US the median salary is $92,000.

So a company willing to hire people outside the US can buy the top of the talent pool for 50% of the price. And they'll be super stoked to work for you.

Only gotchas:

• they won't necessarily have perfect English
• they're not going to come into the office

Big deal.

inversion

Companies have long been outsourcing technical jobs to India through the litany of ICCs.

In my experience, the amount of resources spent on coordinating tasks for an outsourced provider exceeds the value of their output. Companies hire a team to 'support' a function and usually the main team looks for something for them to do.

Hiring someone outside of the primary country of operation faces some challenges:

• Cultural differences (can we get along and communicate with this person?)
• time-zone issues (how do I coordinate with someone who works on the other side of the world?)

However, I think the majority of Americans look at this the wrong way. The status quo is that the rest of the world has to figure out how to conform to our norms. If the company were majority-foreign, it'd be the other way around.

The culture of American corporations is created by the people that work in them. It's clear to me from working where I am now that there's no dearth of talented individuals outside the US. Many of them are still outside of the US because immigration, like in all countries, is tightly controlled.

These individuals would like to be paid more, but couldn't, because they had to be in America to do the work. Companies wanted to hire them, but couldn't, because they couldn't get a visa.

This year, companies have realized that the activation energy for these people getting hired is much lower than they thought.

you're next

Remote work is going to accelerate the decline of the American professional class.

The arbitrage game played over the last 30 years or so has been to ship manufacturing jobs away from the country and move everyone into professional work (as well as take on lots of debt, mostly in housing, now in automobiles).

This "worked."

However, the world is running out of low-cost producers, and manufacturing globalism is finally starting to go into reverse. Despite this, there will always be the management impulse to pursue cost efficiency. Given that we won't be able to squeeze any blood from the stone of manufacturing labor, the next orange to be squeezed is the professional class.

The first way this will play out in the US is companies will move headquarters to other states to immediately save on their tax treatment. US states are super 'smart' in their race-to-the-bottom behavior of competing with each other on tax credits and incentives, and this will end up pushing corporates out of high-tax states into low-tax ones.

Employees will be allowed to 'remain' remote but there will be pressure to reduce their salary for this 'privilege'. Eventually, what the companies are willing to pay for a position will become generalized to the country. There will be an amount X employee is worth if they live in the US. After all, it's not the firm's job to optimize your financial situation - they can always hire outside the US.

workforce reconfiguration

This dynamic will intensify and people will ultimately respond by moving. We can see this already with people fleeing California to states like Arizona, Texas, and Florida, which offer significantly lower cost of living and taxation (for now).

For the US broadly it will be a huge shift in workforce composition as the domestic vs. foreign calculation will narrow. If you are going to earn X in the US, but will still make X if you're outside the US, possibly in a low-tax locale, there will be pressure for you to make that move.

Because corporations outside the US have the benefits of open access to the US market, they can make money here, take all the money out, and pay no tax. As fiscal austerity sets in, the American workforce will eventually realize they should consider to do the same, otherwise there's just at a disadvantage to their foreigner peers.

I think there's some inkling of the consequences of this at the US federal level with the current suggestions of a global minimum corporate tax. I can't imagine the rest of the world responding with anything besides, "lol, no."

how to deal?

Try to stop being an employee as soon as possible and make enough money for it to not matter.

It's not a happy thought to think that I'm being made a sucker by staying in my own country. But the golden age of stratospheric technology salaries is likely coming to an end, at least in after-tax terms.