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Should Workers Return To Major U.S. Cities? - YouTube
Channel: CNBC
[1]
A cost of living crisis is
unfolding in America's major
[3]
cities.
[4]
We can't afford to live in
this city if you're a
[7]
working class New Yorker.
[9]
The problems are acute in
downtown Manhattan.
[11]
One bedroom units are
renting for nearly $4,000 a
[15]
month on average.
[16]
There's a reason people are
willing to pay.
[18]
It drives you and it
motivates you.
[20]
And it keeps you hungry. It
keeps you always thinking,
[22]
because no matter what, you
know, there's somebody out
[24]
there hustling more.
There's somebody thinking
[26]
something new. You can
never become complacent.
[28]
That's what's so beautiful
about this city.
[31]
People have returned to
cities to see their friends
[33]
and have a good time.
[35]
That's pushing rents to new
highs in places like Los
[38]
Angeles, Chicago and cities
across the Sunbelt.
[42]
While renters have
returned, many commuters
[44]
haven't, despite the return
to office push from major
[48]
companies like Goldman
Sachs and JPMorgan.
[51]
More days at home could
help workers escape high
[53]
city prices and long
commutes.
[55]
But there could be a cost
to that decision.
[58]
I think it's really hard to
form high quality new
[61]
relationships remotely.
[62]
I think it's easier to
maintain existing
[64]
connections.
[65]
There's just something about
meeting in person that you
[68]
can't replicate virtually.
[70]
During the pandemic, we saw
some jobs where it could be
[74]
done remotely. However, new
hires dropped dramatically,
[78]
about 40% for over a year
and a half.
[80]
This is really compatible
with a view that firms had
[82]
trouble onboarding new
workers because it was
[85]
difficult for them to
learn.
[86]
As prices keep rising across
the country.
[89]
We ask our American major
cities like New York still
[92]
worth it. The biggest
benefit of cities are the
[97]
people being close to
others in your field of work
[100]
can unleash powerful
benefits.
[102]
Economists call this the
theory of agglomeration.
[105]
When there's a concentration
of an industry in the city
[108]
that can make those firms
and people more productive.
[110]
You know, New York City is
a good example.
[112]
You have like this variety
of restaurants that you just
[115]
can't have in a population
of 50,000 people.
[119]
There's long been a
hypothesis of agglomeration
[121]
economies, which just means
that we get more productive
[124]
when we are enmeshed in a
maelstrom of economic
[126]
activity, both because we
can buy and sell, we can
[129]
find workers to hire, we
can find employers to hire
[132]
us, and we can learn from
one another.
[135]
Within large cities, the
benefit that you have is the
[138]
diversity. It's the
diversity of people.
[140]
The diversity of culture is
diversity of ways of life.
[145]
And I think that is not
what is always present in
[148]
smaller cities, but I think
that is an individual choice
[151]
on the person to decide if
they want to stay in a
[154]
larger city or not.
[156]
Evan Robinson runs America
on Tech, a nonprofit that
[159]
teaches young professionals
how to code.
[161]
They have offices in Los
Angeles, Miami and New York
[164]
City.
[165]
We're looking at it from a
data perspective about where
[168]
our most underestimated
communities are located, and
[170]
that happens to be within
or in proximity of the
[173]
largest cities.
[175]
Opportunities like this are
one of the big benefits of
[178]
cities, and it's what makes
many consider them to be
[181]
worth it despite the costs.
[183]
But in the age of remote
work, Sunbelt cities are
[186]
poaching talent from the
old titans in Silicon
[188]
Valley, in New York.
[190]
People are fleeing
governments and places that
[193]
they're not wanted or they
feel that they're not
[194]
wanted, or where they're
being taxed to death.
[197]
A lot of these tech
companies, they're saying,
[198]
Oh, yeah, you can work
remotely. But, you know, in
[202]
many cases they're also
saying like, we're not going
[204]
to pay you quite the same
amount.
[207]
Making it in any major city
has never been easy.
[211]
I always wanted to come into
Manhattan, be a businessman
[214]
in Manhattan. You can say
anything negative you want
[217]
to say. There's a lot of
negative things to say about
[219]
this place. It's a
financial epicenter of the
[221]
world, and it drives you
and it motivates you and it
[224]
keeps you hungry. It keeps
you always thinking.
[226]
That's the exciting part,
right?
[228]
And I'll be honest.
Actually, that's what the
[230]
city has lost the most with
COVID, is that it's lacking
[233]
that energy. You walk
around, you don't feel that
[235]
energy. You don't feel that
buzz.
[236]
Before the pandemic.
[237]
Manhattan could more than
double in population during
[240]
working hours.
[241]
You're looking at a
visualization of data that
[244]
was collected by NYU's
Wagner School in 2012.
[248]
Although this hasn't been
updated since the pandemic,
[251]
we can clearly see
Manhattan's heartbeat has
[253]
changed since then.
[255]
Foot traffic plummeted
during the darkest days of
[257]
the pandemic. At one point,
consumer spending fell more
[260]
than 50% across Midtown.
[264]
The business community
hopes that eventually those
[266]
vacant storefronts get new
tenants.
[268]
Where I am most fearful is
the retail space in the
[272]
business districts in the
Grand Central area.
[274]
You have about a 30%
vacancy of all retail
[277]
spaces. At best, we will
have two thirds of
[280]
pre-pandemic level foot
traffic in Midtown moving
[284]
forward.
[284]
Spending from high skilled
workers has kept major
[288]
cities afloat through the
years.
[290]
Tech workers in particular
have clustered into about
[292]
eight major US cities,
raising issues of
[295]
affordability in each.
[297]
Prospects for the software
engineers and data
[299]
scientists in this cohort
remain strong.
[301]
For example, the median
worker at Google made over
[304]
$270,000 a year in 2020,
according to SEC filings.
[310]
Other workers fare pretty
well, too.
[313]
The purchasing power of
these specialists can shoot
[315]
prices upward for housing
and other goods.
[318]
Silicon Valley is kind of
maybe the most famous
[321]
example where, you know,
it's really costly to live
[323]
and there's a ton of
regulation and yet software
[326]
companies seem to continue
to locate there.
[329]
And a lot of that is
because of agglomeration
[331]
economies.
[332]
If these workers leave the
usual major cities, it could
[335]
fundamentally change the
economy.
[337]
The ability to serve a latte
with a smile was a path
[341]
towards a steady paycheck.
[342]
Now, when people stop going
to to work downtown, those
[346]
jobs disappear.
[347]
If we have a shift to
hybrid work, maybe that will
[351]
mean fewer people in the
offices. But you'll also see
[353]
commercial rents going
down, and you'll see
[355]
younger, scrappier firms
replace older and more staid
[358]
firms that have sent their
office workers home.
[360]
Hopefully, those younger,
scrappier firms will
[362]
continue to demand things
from the urban service
[364]
workers and provide
opportunity for Americans
[367]
who start with less.
[368]
I am more worried about
cities like Cleveland and
[371]
Detroit that started on the
edge of of survival, where a
[374]
decline in demand for
offices can really mean just
[377]
increased vacancies, which
then spill through the urban
[379]
service economy.
[383]
The surge of people into
major rental markets masks
[386]
the sluggish return to
normal in downtowns.
[389]
Demand is still strong for
city life because, well,
[392]
it's fun. In 2018, the most
recent year with data
[395]
available, New York City
had nearly 20,000
[398]
restaurants and over 2000
bars.
[400]
I mentioned kind of the
diversity of restaurants,
[402]
but there's also the mating
market, right?
[404]
Like young people want to
be in a market where they
[407]
have other young people to
meet and friends, right?
[410]
Like we're kind of
inherently social creatures
[412]
and a density of social
connections which cities
[415]
provide is going to
continue doing that going
[417]
forward.
[418]
But those connections will
cost you.
[420]
Quite honestly, the cost of
living here is only gone up.
[423]
It has not gone down.
[424]
Quality of life is gone
down in many ways.
[428]
Rent hikes are hitting some
previously affordable
[430]
neighborhoods. Grocery
prices are rising, too,
[434]
squeezing even the most
frugal people.
[437]
Economists believe that
returns for living in a big
[439]
city have flattened for
less skilled workers since
[442]
the 1970s.
[443]
Cities should become fairer
places that, while cities
[445]
are relatively good places
for adults, even for adults
[448]
who don't have fancy
degrees because there are
[450]
these urban service
sectors, they're really not
[452]
great places for poor kids.
[454]
As the likelihood of
recession increases, leaders
[456]
are trying to manage rising
inequality.
[459]
What we are announcing today
is the largest investment in
[463]
the city's history in
support of vulnerable New
[466]
Yorkers experiencing
homelessness on our streets
[470]
and subway.
[471]
I think that that is the
most important thing to
[473]
getting people back here.
[474]
You know, there's a
significant decline in
[477]
ridership on the subway.
[478]
And a large part of that is
if people can avoid taking
[480]
it, they will.
[481]
Transit ridership in New
York remains well below
[483]
pre-pandemic levels.
[485]
If this trend continues, it
could impact the quality of
[488]
service down the line.
[489]
It is absolutely true that
public transit becomes safer
[493]
when there are more people
who are taking it.
[495]
This was Jane Jacobs
fundamental insight that in
[498]
fact, having more people
around makes places safe.
[500]
The available data suggests
New York is still much, much
[503]
safer than it was during
the 1970s.
[504]
They may become slightly
less safe, but there's still
[507]
the best means to get
around New York most of the
[508]
time.
[510]
Urban living today looks
like a long commute to the
[512]
office that may feel
unnecessary.
[514]
Or working remotely from a
cramped and expensive
[517]
apartment. This makes a
return to the city seem like
[520]
a raw deal for many people,
especially if they can do
[523]
their jobs from home.
[524]
What is permanent about the
pandemic?
[527]
And what we thought was
probably permanent was this
[530]
change in the productivity
of remote work.
[534]
There is always a sort of
curve for the adoption of
[538]
new technologies.
[539]
We would have gotten all
these technologies fully
[542]
adopted eventually, but the
pandemic accelerated it.
[547]
The theory of agglomeration
shined in the late 20th
[549]
century when fax machines
and paper dominated offices.
[553]
It'll be tested in an era
of hybrid work.
[556]
Our staff is coming into the
office 1 to 2 days a week.
[560]
What we have seen is that
this creates more
[562]
flexibility. This creates a
more morale within our team
[566]
and more work life balance.
[568]
I really think going
forward, hybrid work is here
[570]
to stay, but so is very
much face to face contact.
[573]
It was exactly in the
industries that were most
[576]
capable of enabling remote
work prior to the pandemic.
[579]
Like information
technology.
[581]
Like Google. They bought a
million and a half square
[584]
feet in downtown Manhattan,
even though if they really
[586]
wanted to enable remote
work, they could have
[588]
enabled remote work.
[590]
So our city's still worth
it.
[593]
If you're 23, 24, 21,
especially, this is the time
[598]
to invest in your career
and you can always come back
[601]
to where you want to live.
You're just going to have
[602]
more options about where
you want to live if you
[605]
invest in your career now
and make yourself a more
[607]
productive employee.
[608]
Cities, especially city like
Manhattan, is 100% still
[612]
worth moving to. And you
see a lot of people come
[614]
here and they they go buy
every penny they have just
[617]
to enjoy, experience living
here for a couple of years.
[620]
And the major banks are
going to pound their chests.
[623]
They say, get back to work,
be here five days a week.
[625]
You will lose talent if you
force people to come in five
[628]
days a week.
[629]
While you've seen kind of
this migration of a lot of
[633]
individuals leaving major
cities into smaller cities.
[637]
Majority of the population
doesn't have the opportunity
[640]
to kind of move.
[642]
And I think during a time
of uncertainty is important
[645]
that we're making not only
strategic investments but
[649]
meaningful investments into
communities that need it
[652]
most.
[652]
Just remember that life is
better spent live.
[655]
Just think about how much
better it was when you were
[658]
around other people.
[659]
That's what cities are
delivering, where people are
[661]
moving up and down all over
the place.
[663]
And you have the
opportunity to learn from
[665]
them, from their mistakes
and from their successes.
[667]
And good luck to you.
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