By John Hood
RALEIGH — As economist (and North Carolina native) Thomas Sowell once observed, “there are no solutions — there are only tradeoffs.”
To say this isn’t to throw up one’s hands in surrender or resignation. Sowell wasn’t arguing for inaction. Indeed, he’s spent a career advocating public policies that would, to his way of thinking, advance the public interest. The argument here is simply that for every decision, innovation, or policy change, there are always costs as well as benefits. In the aggregate, the latter may well exceed the former — but that doesn’t mean the costs will be equally distributed.
Consider the dramatic increase in work-from-home arrangements since the onset of COVID-19 in early 2020. Beginning as an improvisational response to both public policies (lockdowns) and private fears, remote work is now proving to be a viable option for many industries. While mostly a market-driven phenomenon, it does have implications for transportation, housing regulation, taxation, and other policy issues.
Among the beneficiaries of the trend, say the authors of a new National Bureau of Economic Research paper, are working-aged Americans with disabilities.
Remote work accounted for only 7% of work days in 2019. After soaring during the first few months of the pandemic, the ratio remained four times higher — 28% — by 2023. During the same period, the employment rate for the disabled rose by nearly a quarter while the rate for non-disabled workers changed little.
“The post-pandemic increase in working from home explains 80% of the rise in full-time employment” of disabled Americans, wrote economists Nicholas Bloom of Stanford University, Gordon Dahl of UC-San Diego, and Dan-Olof Rooth of Stockholm University. Remote work “increased the supply of workers with a disability, likely by reducing commuting costs and enabling better control of working conditions.”
A welcome outcome, no doubt. But let’s keep in mind that these increases in remote work have come with significant costs.
Central business districts, for example, have yet to fully recover from the sharp downturns of early 2020. In Charlotte, Raleigh, Durham, Greensboro, and other North Carolina cities, some large employers have either failed to entice or compel all their employees to return to full-time office work or made an affirmative decision to embrace a hybrid work model.
That means fewer folks fueling up as they commute to work. It means lower lunch receipts at restaurants and sales receipts at some stores. Over time, it will means fewer people employed in those establishments.
The effects on commercial real estate have yet to be fully experienced. As leases expire, tenants may opt for less square footage or other amenities. Nationwide, the office vacancy rate already hit 20.1 percent in the second quarter of 2024, says Moody’s — the highest since at least 1979, when the firm began tracking the number.
“If the past four years are any guide,” Columbia University finance professor Stijn Van Nieuwerburgh recently told Governing magazine, “there will be continued reduction in office demand, just from the simple mathematical fact that more than half of the pre-pandemic leases are still outstanding today. So, in that sense, the knife is still falling.”
North Carolina’s markets will be stronger than most, I’m sure, and plenty of employers still value the creativity and productivity that comes from teams working face-to-face. I mean only to suggest that even net-positive changes in how we live, work, or play often produce disruption and dislocation.
Sowell is, as usual, one of the clearest thinkers on such matters. “Economic changes include not only changes in the economy but also changes within the managements of firms, especially in their responses to external economic changes,” he wrote in Basic Economics.
“Many things that we take for granted today, as features of a modern economy, were resisted when first proposed and had to fight uphill to establish themselves by the power of the marketplace. Even something as widely used today as credit cards were initially resisted.”
In response to such changes, resiliency should be our default mode, not resistance.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
