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Rust belt of tech in America
I have been living in Seattle for the last 7 years. I used to live in the Downtown area, near Amazon HQ (Moved a bit out due to safety issues but still 10 min drive to downtown). Places like Westlake center, Pike Place market area used to be thriving. You could see people walking on sidewalks, all the shops are quite busy on all the 7 days, and small businesses used to flourish.
It all went downhill when Covid hit. Businesses had to close down (temporarily or permanently in some cases), due to not having a sustainable income to pay the same rent. This was understandable and I thought it will all come back when covid is done with. But that did not happen.
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The side effect of covid was remote work. Corporations realized that remote work is the way to go and made them a part of their culture. Now it had an effect on individuals which I discuss here but it also had a very negative effect on small businesses and in general the downtown area. This is what I think is happening:
I can see this in Seattle first hand (shops1, theaters2 , restaurants closing3 etc) but I believe it’s happening in other big cities too, especially where we have tech and remote work is generally more acceptable. Even though small businesses are getting less and less customers, the rent is the same as before. These businesses, as a result, can’t afford to pay rent and are closing or moving somewhere else.
Tech layoffs are also a big contributing factor where people are losing their purchasing power and spending less by staying in and finding a job. This is unfortunate and due to macroeconomic conditions looming around in the global economy. Although this is not something we will discuss in this article, it’s worth mentioning.
Let’s look at it from a historical perspective and build an analogy to see why it’s not good for any of these cities. Recently I’ve been reading a bit about the Rust belt area in the United States. Some of the cities include Detroit, St Louis, Buffalo etc. Why am I comparing this to the current situation? These cities used to be populated and thriving with major contributions to United States GDP. But eventually they started declining.
These regions experienced and, in some cases, are continuing to experience the elimination or outsourcing of manufacturing jobs beginning in the late 20th century. - Wikipedia
Causes include lack of competition in the labor markets due to unionization and lack of competition among firms leading to stagnation. - Wikipedia
Cities struggling with these conditions shared several difficulties, including population loss, lack of education, declining tax revenues, high unemployment and crime, drugs, swelling welfare rolls, deficit spending, and poor municipal credit ratings. - Wikipedia
We can see a steady decline in the population of these cities from 2000 to 2018. I understand the reason for these is less in-house manufacturing jobs (jobs being automated and outsourced) but now we have a culture of remote work which could lead to a similar situation.
Why is it important to understand? Because you can see similar effects happening in cities where jobs are going remote and people are not coming back to downtown. We have seen crime being up in Seattle - homelessness is increasing, lots of drug usage and people are moving out for their own safety as they have no incentive to come downtown. Another side effect of this is people are losing that thread of coming together for social events and gathering. This is also leading to people being less tolerant and more angry in general. This is also affecting a lot of kids who are in their growth stage (but that is a topic for another day).
I am not saying remote work is not good. Of course it gives an opportunity for companies to not to be tied to particular locations and get talent anywhere but this is one of the major reasons the social aspect of cities are in decline. Not only to say that this is the only reason, of course the city government needs to step up and do something different.
I believe setting the right incentives for people is really important. One example for folks living in the Seattle area: Bellevue Square mall gets so much more people than AMC Pacific Place mall. Why? One major reason I can think of is that Bellevue Square has free parking (simple and effective). Generally small businesses are a great incentive and bringing them back and giving them a safe space to operate can get these areas to become more happening and thriving.
I would love to see those days back where people feel safe to walk around downtown and have more incentives to go downtown. I hope we don’t turn cities like Seattle, San Francisco, Portland etc into Rust belt.