MainStreet Macro: The new geography of work ­­­

Anyone who has ever done any hiring knows it’s not always easy to find the right person for the job. And if you’ve been on the other side of the interview table, you know that finding the right company to work for also can be challenging, even in a good economy.

This matching process between job candidates and hiring managers has changed a lot over the last four years due to the growth of remote-work arrangements. In part two of our series on remote work, economist Issi Romem reveals how hiring practices are shifting the geography of work. 

Leaders are heavily concentrated in large cities

In previous analyses, we showed that the share of direct reports who work at a sizeable distance from their managers has skyrocketed since early 2020. In this study, we turn our attention to U.S. cities and how post-pandemic hiring is creating a web of employee-employer connections that spans regions.

ADP data shows that large, expensive cities have a higher concentration of managers and people in leadership roles than smaller, more affordable cities.

That’s not entirely surprising. Large cities allow decision-makers to benefit from local amenities and they provide proximity to other decision-makers. Corporate decision-makers, elite universities, research facilities, clients, regulators, competitors, and the media all are disproportionately located in large cities.

Remote work has made big cities more management-heavy

The increasing ease with which workers can collaborate at a distance has shifted low-paying work to more affordable communities and concentrated leadership jobs in expensive ones.

That sorting—which began long before the pandemic—has been enabled by technology and propelled by the yawning housing affordability gap in housing costs between the country’s priciest cities and its less-expensive ones.

Remote work is boosting intercity connectivity

This shifting geographic distribution of workers has led to an explosion of employment relationships that straddle metropolitan lines. In almost every city, a growing share of workers are reporting to managers who are somewhere else.

Likewise, a growing number of managers in almost every city are responsible for workers who do their jobs somewhere else.

And there’s more

A labor pool unbound by location offers employers the potential to lower labor costs and improve the fit between a company and its employees. And there are other important implications as well. To learn more about how remote work is changing the geography of hiring, see Issi’s report on ADPRI’s Data Lab.