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U.S. Economy

So Much for IBM's Bright Idea on Remote Work

The tech giant will regret forcing employees back to the office, as Apple will regret its massive new headquarters.

We look to technology companies to build the economy of future. They supply the vision and the means to make us more productive and efficient, with tools like personal computers, smartphones and high-speed internet connections.

Tech companies are supposed to be the leaders. So it's surprising that two of the largest, IBM and Apple, are moving backward, preparing for office life in the decades ahead to look a lot like 2005. They are likely to be wrong.

IBM is ending its liberal policy that encouraged remote work, now forcing employees back into offices to facilitate collaboration. Meanwhile, Apple is preparing to open its vast new $5 billion corporate campus in Silicon Valley.

Silicon Valley culture is seen as the pinnacle of corporate success because of the explosive growth of the technology sector over the past 20 years. Apple, Google, Facebook, Netflix, Tesla, Uber and others have created products and companies that are the envy of the world. And they've done it in part by breaking the norms of what used to be considered corporate culture. Casual dress codes like Mark Zuckerberg's hoodie. Open floor plans instead of cubicles or stuffy offices. And walkable campuses with on-site amenities and free meals to cater to engineers working long hours.

And outside of Silicon Valley, more and more companies have relocated from suburbs to dense, walkable urban areas. They've done this for a variety of reasons. Productivity and innovation are believed to be higher in dense areas. But perhaps more importantly, dense, urban areas are where young, talented, college-educated people -- millennials -- increasingly want to live, and companies want to be close to the pools of talent they're chasing.

Although in the 2010s these millennials are young, single renters in walkable urban places, those same millennials in the 2020s will be in a different phase of life. They'll be getting married and having kids, they won't have as much free time, and they will be buying houses in more-affordable suburbs where the schools are better. Corporate offices located in walkable urban areas or in communities with exorbitant housing costs won't be as good of a fit for these aging millennials.

For midlife millennials, flexible work arrangements and remote work -- the kinds of work IBM is abandoning -- are what workers will want. And rather than being a desirable attraction, Apple's shiny new headquarters located in a region with million-dollar home prices may be an albatross for the company, if even well-paid workers cannot afford to live near the office.

There's a certain irony in Apple opening its new headquarters at the same time that Silicon Valley employment might be peaking. Employment in the San Jose-Sunnyvale-Santa Clara metro area has not increased since July. It's unlikely that this is because of any kind of technology-sector downturn, but rather because of the region's 3.4 percent unemployment rate and difficulty in building new housing.

Silicon Valley's Peaks

Nonfarm employment in the San Jose-Sunnyvale-Santa Clara metro area

Source: U.S. Bureau of Labor Statistics

Office life in 2025, rather than being about 20-something millennials clustering in downtowns or on lavish Silicon Valley campuses, is likely to be more about 30-something millennials spreading out into the suburbs and away from high-priced metro areas. Facing acute labor shortages, companies will be doing anything they can to win those workers' services. Tech companies did pioneer the solution; IBM's old model will be the template for more and more companies.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

(Corrects number of workers in Silicon Valley in chart.)

    To contact the author of this story:
    Conor Sen at csen9@bloomberg.net

    To contact the editor responsible for this story:
    Philip Gray at philipgray@bloomberg.net

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