As Congress wrangles with its stimulus bill, more troubling Covid-19 data and factoids come in, such as a sharp rise in child hospitalizations in Florida. And more and more, they reveal a widening class divide. Even though the Wall Street Journal published a story last week where employers whined that they were getting less productivity out of now far-flung workers (erm, and why should having them work at home say up to 30 miles from office be less efficient than outsourcing to India?), it does not appear that many major employers will be arm-twisting workers to come back to the office any time soon. In other words, protecting yourself from disease via employer-sponsored hunkering at home is increasingly a luxury of symbol manipulators and knowledge workers. The rest are largely not fully employed or are taking health risks to earn a living.
The latest major sighting is Google’s announcement that it won’t be asking employees to come back to its campuses prior to July 2021. The Wall Street Journal attributes this decision in large measure to uncertainty about schooling:
Google will keep its employees home until at least next July, making the search-engine giant the first major U.S. corporation to formalize such an extended timetable in the face of the coronavirus pandemic….
[CEO] Mr. [Sundar] Pichai was swayed in part by sympathy for employees with families to plan for uncertain school years that may involve at-home instruction, depending on geography. It also frees staff to sign full-year leases elsewhere if they choose to move.
The comment about leases underscores a second issue: when Covid risk finally wanes, most employers will go back to the old normal. Execs feel more powerful and efficient when they manage by walking around and have in person meetings. And most people are extroverted and prefer being around people. But as we have said, that rollback looks to be a very long time coming. And business travel, will probably never revert to the old normal.
Needless to say, now that Google has thrown down a marker, other large companies have more license to follow suit.
Keeping highly paid workers at home, even in cities like New York City where Covid-19 risk has been tamed and mask-wearing discipline is high, does not bode well for the survival of restaurants and central-city small businesses. Again from the Journal:
In New York, fewer than one-tenth of Manhattan office workers are back to the workplace, a full month after the city gave businesses the green light to reoccupy buildings vacated in March.
“People are being rightfully careful,” said William Rudin, chief executive of Rudin Management Co. and head of one of New York’s most prominent real-estate families….
In New York City, only 8% of the employees who work in downtown office buildings managed by office colossus CBRE Group Inc. have returned from sheltering in place from the pandemic. The figure, as of last week, was based on unique card-swipes at security turnstiles. CBRE manages 20 million square feet of space in Manhattan.
The Journal wrote a bit more than a month ago about corporate reopening plans. The 8% seems on par with the tone of a report roughly a month ago. Aside from traders, no one seemed eager to return, and many employers appeared at most to be allowing, rather than requiring, employees to turn up at the office.
The number of former commuters and the resulting dependence on public transportation is a major impediment for Manhattan. Most people I’ve spoken to are reluctant to take the Metro North or the Path, yet Manhattan doesn’t begin to have enough road or parking capacity to allow former train riders to drive in. Any city with a dense central business district is likely to have a less-acute version of this problem.
Needless to say, office blocks turned ghost towns are bad for commuter-business survival and very bad for tax revenues: sales taxes, income taxes, and yes, real estate taxes, since those big corporate tenants are withholding rental payments to force renegotiation of leases, and big commercial landlords in turn are quick to press for lower appraised values when their rent rolls take a hit. So if you think a municipal revenue crisis is underway, you ain’t seen ‘nuthin yet.
Another slow moving train wreck is residential rent delinquencies:
This mind-blowing graph shows how much the USA is a failed state, and how capitalism has utterly cannibalized society.
In many US states, nearly one-half of renter households are on the verge of being evicted because they can't pay rent.
This is the terminal stage of capitalism pic.twitter.com/BJJBKZlduG
— Ben Norton (@BenjaminNorton) July 28, 2020
Mind you, this is the sorry state of affairs with the PPP to keep small businesses from collapsing, and with the $600 a week unemployment supplement and the $1200 per adult payment to prop up incomes and spending. The second supplement package is still in play, but it is certain to be less generous to households, which means the rental delinquency picture will only get worse.
Some landlords will presumably accept lower rents, likely first on an interim basis (they will be anchored on their historical rent levels and in denial that the Covid-depressed market will persist for quite a while). But some are either out of money or will be in the next few months. What happens when we have a big uptick in homelessness? Even if eviction moratoriums are extended, expect them to be challenged, both formally, as an illegal “taking” and informally, by some landlords harassing tenants.
Nevertheless, this result does seem to show that political pressures are producing an outcome not inconsistent with the one Richard Murphy recommended: of having property owners take losses in order to preserve businesses and residents. Or to put it more simply, if rents can’t be paid, they won’t be paid.
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Just some anecdotes – some friends who work for a contractor for FB are returning to the office full time this week – they’ve been working 3 days a week up to now (to be fair to FB, they were paid full time). They have a specific issue as for security reasons they can’t allow access to private FB accounts from home. To put it mildly, the employees are unhappy. They’ve been told they must wear masks at all times in the office, but its hard to see this being maintained.
There are major Google offices under construction in Dublin, they are still going full speed. So far as I’m aware, the Grand Canal area in Dublin (the center of the major IT companies) is still pretty much deserted. A lot of European staff have gone back to Italy, Germany, etc, and are working ‘from home’ from there. I don’t think any decisions have been made about the long term. A friend who owns a yoga studio says he’s noticed that a lot of his German/French clients have not renewed as they are now working from their home country, despite still being technically Dublin employees (it would be interesting to know where they pay their tax).
Amazon just announced 1000 jobs in Dublin, mostly in cloud services HQ. They’ve just rented a large amount of very expensive city centre office space, so they obviously don’t envisage a big change. They’ve also, incidentally, bought a very large windfarm to power all their data centres in the country.
One thing I’ve noticed in my work is the normalisation of ‘hybrid’ meetings. A few people in attendance, with a big screen for those either working from home, or those who just prefer to maintain isolation. They generally work quite well, but those ‘on screen’ find they have to shout a little louder if the meeting gets heated.
I have friends who work in defense who have never left the office as their work was deemed essential and classified work can’t exactly be brought home. They wear masks at all times and have reconfigured space to distance, but it’s been nerve wracking for one friend whose wife 6 is 6 pregnant. And they’re all programmers, so not all symbol manipulators are working from home.
I’m in the same boat as your friends. Many people have to go in most of the time, especially manufacturing. Otherwise, it’s project dependent.
We have mandatory masks, with free masks and bottles of hand sanitizer available. Cafeteria is now all prepackaged food, with widely spaced tables. All doors have been propped open. Daily temperature checks when coming in.
Procedures are in place to sanitize and time share secured facilities. More resources have been made available for remote access, with locked down laptops. One example is we’ve added serial ports, remote power switches, etc. to enable remote work.
Our office policy is now odd-even days in upstate NY which is one of the few places in the US with Europe/Canada levels of infections. People have told me that only about 10% of staff are in the office on any given day. Normally it would have been 50% or more. A lot of the work requires travel and being out of the office on job sites, so it is only close to 100% occupancy for a couple of months per year.
From what I have read over the years, plagues and epidemics generally take 2-3 years to complete unless there is already a fairly high percentage of the population that has prior exposure and complete or partial immunity as is the case with many flus, so herd immunity is arrived at in a single year. The 1918-19 flue took about 12-18 months to play out – they think a weak variant had circulated 40 years earlier which is why many people over 60 didn’t get sick (or at least didn’t die). Many of the “Black Death” or otehr similar plagues took 2-3 years to play out in a region.
I think this is going to take 2-3 years to play out. I am not expecting to travel abroad or go regularly to the office until 2022. However, once “herd immunity” has been achieved, I think things will largely go back to the way things were in 2019. People are people. The Roaring 20s came out of WW I and the 1918-19 flu – not a lot of social distancing once the flu was gone. The restaurant and bar industries will be rebuilt in a few years like a phoenix rising from the ashes. However, I think many places will have permanently closed and will have to be restarted from scratch.
Regarding the tax implications, I’ve heard some of the big London banks are putting in limits to foreign WFH arrangements and recalling employees back to London.
It’s not just tax there are all sorts of complications for employers. One example I know from a few years ago was where a consulting firm posted a London based employee on a project in Germany. When that person got pregnant, she was able to use German maternity benefits.
Google is also laying fiber across the Atlantic. Front page news at the BBC this morning. It would provide significant boost for their infrastructure, since it would be used as a private backbone.
Google have always been highly rational in how they manage their business and good to their employees. Providing visibility to employees and letting them deal with schooling in a timely manner is the prudent thing to do. Contrast this with Facebook ‘s approach – if you choose to not be in the Bay Area, we will have to adjust your salary down…
One thing this signals – Plan B – pandemic is endemic – is now plan A.
Google could launch its own Great Eastern, with attendant trials and such. The linked article provides more than most would like to know or care about past Trans-Atlantic cable ventures, but does give details about the work and people involved. That was still an era of iron men, even if the ships were transitioning away from wood.
Hah. That was very interesting. Thank you for sharing it.
Saw that messy eviction chart yesterday. Even if partially true my first thought was…. So the same police who murder and gas with abandon are about to forcefully evict tens of millions of people from their homes and business.
I don’t think it’s just the flu google execs are avoiding at the office.
Yes. And thus the martial law declaration practically writes itself shortly… Good times..
That eviction chart is very misleading. Following the source to Census’ Household Survey Pulse–they ask renters their confidence to pay rent next month. The options are: “No Confidence”, “Slight Confidence”, “Moderate Confidence”, and “High Confidence”. Adding together “No confidence” and “Slight confidence” and dividing by total appears to get you close to the percent given in the chart that is labled “unable to pay rent”. It seems disingenuous labeling someone with “Slight Confidence” as “unable to pay rent”.
Additionally, this is self reported data with no control. The survey did not exist before Covid so we do not know how many people normally have “slight confidence” to pay rent. Looking at the first week this survey was conducted (May 5th) the response of those saying no or slight confidence in paying rent was even higher.
The first purpose of modern police forces is to protect private property from the predations of those who have little or no property. Were you expecting something different?
I’d be interested in one potential outcome, if the Big Throwout comes to pass:
Cops know where the daily irritations are, and why. If they perceive mass evictions were to raise that irritation level a couple orders of magnitude, they might balk at throwing people out of housing, if only for their own peace of mind (read “reduction of hassle”).
What are landlords gonna do, sue ’em?
Reality begins to hit at universities, where more are throwing in the the towel on the `hybrid teaching’ model
that was being touted this summer. A big one yesterday:
George Washington University moving all undergraduate classes online this fall [WUSA9]
And 90% of regular tuition might still strike many parents as too expensive for what they’re getting.
GWU is (like many schools) highly tuition dependent, so expenditure cuts are undoubtedly coming.
More pain radiating out into the general economy.
Meanwhile, UNC plans to pack ’em in
Will Congress and the President sit still and watch mass evictions? Is “because markets” actually a reason? The governor general of India in the 1870s argued that any intervention in the market would be wrong and sat by as food was exported and millions starved. Also, consider Elon Musk’s quoted remark, “We can coup anyone we want.” if you want a bench mark for ‘elite’ thinking and behavior.
Somewhere in congressional offices there must be death by spreadsheet power points means testing how many can be evicted and starved while perception is managed. And inside bets, I mean investments made accordingly.
And Democrats want to put Biden in charge. The empathetic guy who championed a crime bill which included 53 ways to get the death penalty. Well he’s about to get his chance to kill more than any pres before him.
Joe Biden on the Senate floor selling his beloved crime bill:
30 years was a generation ago. Maybe 2.
How are you supposed to shelter at home if you have no home? Or self-quarantine? Or keep your hands washed? This is just evil–and stupid, from a public health perspective.
❌ Are the workers happy? (0/0 pts)
❌ Are the intellectuals happy? (0/0 pts)
❌ Did we invest in America’s future (0/0 pts)
❌ Did we manage the health crisis? (0/0 pts)
❌ Did we operate in the fiduciary interest of our citizenry? (0/0 pts)
❌ Did we avoid shame? (0/0 pts)
✅ Is the donor class happy? (100/100 pts)
________________________________________
100/100 points! Perfect score!
This government is not interested in your metrics.
> Mind you, this is the sorry state of affairs with the PPP to keep small businesses from collapsing, and with the $600 a week unemployment supplement and the $1200 per adult payment to prop up incomes and spending.
My intuition is that the money the landlords should have gotten for rent went to Amazon where every day there is a super spreader event, despite the fatuous commercials that show one package on the conveyor belt with happy talk by an actor about how great it is to be on the receiving end of a whip crack from an Amazon shopper.
I wonder where the landlords are going to find renters to occupy their soon to be empty apartments?
They are certainly not going to rent to anyone that has just been evicted from some where else.
The state of Michigan did set up a relatively small fund (about $50 million I think) to compensate landlords for not carrying out evictions. Oregon and Massachusetts had moratoriums on evictions, but put no money into their programs.
The Dem’s proposal in their Heroes Act in May had $100 billion in it for rent relief. Can someone tell me why Republicans are not behind this? (other than closet Social Darwinism?)
Had to look up that bit about the majority of people being extroverted. Interesting stuff.
https://www.psychologytoday.com/us/blog/the-gen-y-guide/201710/the-majority-people-are-not-introverts-or-extroverts
Of course Jung also had “ambiverts”, the largest group of all, who have some mix of the two. I like other people and have many text threads open all the time with friends. My wife, on the other hand, has text threads with one or two people and that’s all. But I still consider myself an introvert since I am least comfortable in anything larger than a group of three or four people.
It’s amazing how these social dynamics influence how work gets done. Rather than try to figure out how each individual might work best, we throw down the gauntlet of adhering to an extroverted model.
It is the tyranny of extroversion.
There is no small amount of schadenfreude for those of us introverts of late. “Oh, you don’t like being stuck at home, do you? Kind of like how I didn’t like being Shanghai’d into the office for the last few decades, taken from my family and nicely appointed home office to deal with endless and pointless distraction in the tiny noisy shared office your provided in the name of work? Let’s not even mention the wasted time spent in traffic and daily unhealthy meals. I believe it was a condition of my employment, you said. Well, a few months of quiet solitude and extra productivity is really not much to endure, I think. May you enjoy it as much as I do.”
The extra time with my favorite people, wife and children, has been a gift!
Wow, although I am not that extroverted and don’t like crowds, the isolation for me has been horribly punishing. Work is totally unrewarding when I don’t get to see other people at least a bit.
I know that it is not Google but I cannot help but think of Apple park – the huge ring-shaped headquarters that Apple built for themselves. They spent $5 billion building it and for all we know, the place is probably half-deserted right now. Is the Googleplex in the same boat at the moment? I can only wonder what they place is like of a nighttime.
One of my family is the maintenance guy for a school district. He has been putting up screens and other protective barriers all over the schools. But he shrugs his shoulders when I asked if anyone will actually use the building come the fall. In the meantime, they’ve gotten a lot of work done but others have been furloughed. No point in repairing X,Y,Z if they aren’t even sure if people will be in the school.
I think buildings need to be lived-in. So much of living in a building is reporting things that have gone sideways to those who can fix them. Maintenance folks can’t have their eyes everywhere. “Dad, there’s a wet spot on the ceiling in my room,” or “Maintenance, please see why the AC isn’t working in room 104.” My guess is that there will be a surge of maintenance requests right as the kids come back and things are discovered to not work.
But if you don’t make sure that the ventilation system has sterilization, what is the point?
A lot of organizations are controlling for fomites/surface transmission more than anything else. I see people talking about how their space is clean now that they have hand sanny around.
It is more than half deserted. Think ghost town. There are cars in the parking structure, but humans are hard to find, except for cleaning staff and health security screeners.
It would be hard to describe Apple Park as nightmarish, though. It is like Apple stores but moreso, full of glass and light and polished wood.
We are the UK tentacle of a European multinational corporate (IT consulting). We have a tall and thin period office building in one of the most expensive parts of London and, across the square, a floor in a modern huge floor-plate office building.
Our team is lucky enough to be in the period building (windows you can open, no chokepoints at the turnstiles or the lifts etc.). We never used to go across to the modern building anyway – too depressing, ranks of IT peons – and I have not been into the office since 27th January (that’s the date of the free newspaper on my desk!
Last week the chairman and CEO came to town (private jet, no contagion worries!) so I drove up for a meeting (180 miles each way, took 3 h each way because there is no congestion). Our part of London is at 50% foot traffic, at the very most. The local rail terminus, London’s second busiest, is open but the only shop open is WH Smith, the newsagent: no restaurants, no chemist etc. The modern office was empty. There were no consultants in. Ironically, the only people we saw amid the tumbleweed were the C-suite and their immediate reports like me who were meeting about the half year numbers.
From an IT company perspective, the virus is good for business. The manager with responsibility for a lot of the UK business units said that revenues are still growing strongly, only slightly slower than last year, and we are saving £500k pcm on opex. Some of this is travel but apparently a lot is recruitment fees because nobody is daring to quit! The company is also preserving cash by negotiating with its landlords and the Inland Revenue.
Long-term, I can see the company continuing with the new normal. For an IT company, the management practice was fairly traditional, working from the office. The sudden leap into working from home seems to be well received and I don’t think they will go back. So I would expect to see us disposing of office space (and we were already over-provisioned and had mothballed a third building in the same square). It’s not a good look for commercial office space in London!
It doesn’t look good for the service businesses either. The big up-market “food court” (two storeys plus roof terrace) is shut. This is a venue that has over a dozen outlets, each turning over £1m p.a. I had a picnic lunch instead. After our meeting, we went to the pub on the corner and sat outside. I drank the tea I had brought in my thermos (I’d brought a picnic lunch) but my colleague is less cautious (but ten year’s older!) and went inside to buy a pint. The pandemic has not prompted table service….
Sitting outside was OK but it was disturbing to smell the cigarette smoke from the other table, given it’s essentially a tracer for other people’s breath. :-( I’m not in a hurry to repeat the experience, however much I like drinking in the sun.
From my perspective in the commercial real estate business, I think Ian Welsh nails the evictions bit in his tweet below. There’s an insane amount of “dry powder” waiting specifically to be invested in multifamily rental properties. Huge fortunes were amassed by those who snapped up apartments at a relative discount between ~2010-2014. That’s recent enough that all these players are salivating waiting for the deals they expect over the next 12-24 months.
I am hoping that the compromise between the employer ‘need’ to have employees in the office and the employees preference to spend more time at home becomes a reduction of working time.
Companies with a high staff turnover are likely to have difficulty training up their new employees unless they can have their (few) senior employees in the office together with their junior employees. Or reduce staff turnover by treating them better but lets be realistic :-p
I suspect that a segmentation of the workforce might be beneficial as the people in the workforce have many diverse circumstances and preferences. The personal circumstance of employees might be a huge factor. People living in shared accomodation might not be as keen to work from home as the ones who live in larger accomodations etc etc. I’ve seen some indications that it is beginning to be segmented and evaluated.
And another hope is that that whatever happens then maybe a 10-20% reduction of commute together with a 10-20% reduction of inner-city rents could happen. I’d say that as rents is one of those things where price is set at the margin then the rents might fall even further but we will see.
At the moment then the uncertainty of what will happen together with natural inertia is keeping the changes relatively small – who’d buy a house with a long commute but with the space for a home-office if the work from home will not be here to stay?
But what I am fairly certain of is that places such as these:
https://www.qquarter.com/dublin-1/quayside-quarter/
Might not be able to get the projected rents for some time. The FIRE-economy is very very close to the powers that be in Ireland so maybe it can happen. I just do not see how.
It’s embarrassing that I’m young enough to have grown up with message boards and have never gotten the hang of posting links.
https://twitter.com/iwelsh/status/1288011060671373315?s=20
Homelessness is getting worse already, the tents are increasing, and I think by next week, by a lot here in Minneapolis (and I live in a nicer part of the city). Although they did also clean out a problem area (drugs, adolescent rape) in the Powderhorn east of me hit by the riots.
I get pictures if anyone cares. All I took a picture of so far was the board with requests (coffee, TP, etc.).
I already wouldn’t let my kid play hide and seek in the park we frequent (that I run through and he bikes through with me). Tents right along the path. Right across the street from million dollar homes.
Also, more people living out of their cars, but they are scattered all over the place.
The bifurcation of wealth/class in this country has been on the rise for decades. It is remarkable. I didn’t fully realize it until I stated seriously traveling/exploring the territory (including lots of flyover country) in my early thirties. It’s sobering.
I once got into an argument with a guy who flat-out refuted my observation that there are vast swaths of third-world living conditions in this country. I really think people just don’t see it. Maybe they don’t want to see it.
Years ago I visited a friend in a backwater Oklahoma rural area and was shocked to see lots of skinny poor kids and lousy housing. It hasn’t gotten better.
“… if rents can’t be paid, they won’t be paid.” I believe there is a sibling to this dictum: “If mortgages can’t be paid, they won’t be paid.” These are children of Michael Hudson’s principle — his iron law — “Debts that can’t be paid, won’t be paid.” Corona stopped the flows of consumer income, the headwaters and peak flows feeding the cash flows driving much of the US economy.
But in applying the first dictum — who are the “property owners” who should take losses? I can see how it might apply to those who own property unencumbered save for Taxes and Insurance. They are a special case that deserves some carefully crafted special consideration. But aren’t the mortgage holders — not the landlords — the ‘true’ property owners based on their property rights at law? Policies for rent subsidies, rent forgivenesses, or rent forbearance, are bandied about but what policies shift losses to the ‘true’ owners of rental properties [or single-family homes]. As I recall the ‘true’ owners of much/most real-property in the US have been well-cared for — even to excess — in filling the oceans of their past bad loans. Indeed, I believe Government has positioned these denizens for a great harvest of the fortunes of landlords and ‘home-owners’. The soon to be greatly massing armies of homeless are — in DoD speak — mere collateral damage.
Speaking of saliva; I sense that, finally, there is a real appetite emerging among the younger crowd for something else. ‘Multifamily dwellings’ conjures a dreary image of corporeal filing cabinets gobbling up a sad landscape. Atomized hive living with little communal warmth. Gotta be something higher.
Observation and prediction re Residential Eviction. Could there be a better way to insure that Covid 19 spreads and to insure that its effects are most damaging than mass evictions? Lots of people jammed into shelters and/or living in their vehicles with limited access to health care and no address to help the access such health care as will be availble. And the prediction: the reaction of the monied classes and their outriders who aren’t directly affected by the evictions will resemble the English ruling class reaction to the Irish Potato Famine. They’ll pretend that isn’t happening, and distract attention from it with euphemisms, while the news outlets cover it in the most soothing possible fashion for those folk who have regular access to MSM.
Clearly Google’s move is a good thing here. So why does this article pose it as a negative?
I’m not sure this is really true in software engineering. Most of the trend I see is that there are tons of super bright individual contributors perfectly content to spend all day conversing with a pedantic and unhelpful compiler and a very small smattering of people people who gravitate toward management. It can be challenging to find good managers, and many engineers who try regret the decision a year or two in and want to go back to individual contribution. It is fairly universal among the individual contributors that they would prefer to stay out of meetings and focus on their own task. Meetings are often a “waste of time” and the only one getting anything done is the attending manager.
Even if this survey for -potential evictions is off by a factor of 2 that’s still millions of people trying to work through the system. The courts are still closed in many jurisdictions. So I would imagine when the legal options are closed to them the landlords will get creative. And that’s what will unleash chaos in so many places in the country.