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Wonder how this will affect income inequality and agglomeration effects in large rentier cities like Toronto. https://twitter.com/StandingHannah/status/1274309774830641152
Basic model: the primary industry in these cities is rent-seeking via FIRE sector, govt & other monopolies.
Most people work in the secondary industry, the non-traceable Service Sector: selling services to the rent-seekers & each other.
Most people work in the secondary industry, the non-traceable Service Sector: selling services to the rent-seekers & each other.
This is the sector that recaptures some of the wealth from rent-seekers, but to provide it you need to be physically close to them.
That allows the rent seekers to take most of the money back through housing costs.
That allows the rent seekers to take most of the money back through housing costs.
Because rent-seekers aren’t as cost conscious, a variety of bars, restaurants, arts, culture, & small stores and businesses can thrive even if they can’t compete on prices with Walmart etc.’s economies of scale.
That generates more employment.
That generates more employment.
Covid breaks the system down in the same way the closure of a mine destroys a mining town.
It’s still a resource economy, but the resource is rent-seekers to sell stuff to.
It’s still a resource economy, but the resource is rent-seekers to sell stuff to.
If this is a permanent shift, fewer gains will be captured by the service sector there. Online ordering etc will replace a lot of retail.
But the bigger shock happens via work-from-home and closing offices.
But the bigger shock happens via work-from-home and closing offices.
First, if geography doesn’t matter, why pay someone in Canada $100K to do what someone in Eithopia will do for $10K. A lot could turn into world-prices gig work too.
Office workers become subject to the same pressures agricultural workers face.
Office workers become subject to the same pressures agricultural workers face.
Second, a lot of office work is, frankly, unecessary BS, that helps rent-seekers show off how many employees they have.
Without the physical impression of employees in offices, will this kind of signal still have the value it once had?
Without the physical impression of employees in offices, will this kind of signal still have the value it once had?
Those two trends could permanently whack the economic system that let a few cities thrive even as other places kept falling further and further behind.
Meanwhile the economies of scale from bringing lots of different people together in one space for school, care (daycare & LTCs, & work (factories, bunkhouses) or to save on rent is broken by the increased risk.
And the longer this goes on, the more permanent the structural shifts will be away from services and the economy of the core cities.
Idle speculation but this can’t be good for most people.
