Agglomeration: A Defense of the Remote Worker
“Heads of all departments and agencies in the executive branch of Government shall, as soon as practicable, take all necessary steps to terminate remote work arrangements and require employees to return to work in-person at their respective duty stations on a full-time basis, provided that the department and agency heads shall make exemptions they deem necessary.”
(The White House 2025)
The President’s Claim
Amid a wave of executive orders on January 20th, 2025, Donald J. Trump issued this executive memorandum that effectively ended federal remote work. Following years of mandated telecommuting, it seemed as though remote and hybrid work was here to stay, benefiting those limited in commuting ability because of distance, income, or disability. Trump has framed remote work as an aberration to be corrected: to him, remote work is equivalent to laziness, an economic ailment. The economic basis of the president's actions is ultimately flawed, utilizing agglomeration to promote density without taking into consideration how remote work provides a denser environment, measured in interaction frequency, information flow, and network reach. Agglomeration is traditionally defined, based on Alfred Marshall's theory, as the benefits firms and people gain from being located near one another in cities and industrial clusters. While traditional agglomeration emphasizes co-location, digital tools and new work practices have extended agglomeration benefits beyond geographic proximity. Agglomeration should not be limited to the city, but expanded into mass digital networks that allow individuals to work despite time differences and miles of distance. While the economic limitations of remote work should be acknowledged, Marshall’s classic triad of input sharing, labor pooling, and knowledge spillovers, alongside expert insights and recent research, demonstrates that remote and hybrid models harness many of the same forces in modern form. The demand for flexibility from underrepresented groups and evidence of “virtual agglomeration” effects justify making hybrid work a normalized part of the post-pandemic economy. President Trump’s executive order assumes productivity depends solely on benefits from physical proximity; modern forms of virtual agglomeration demonstrate that remote and hybrid work sustains, and often even amplifies, the same economic efficiencies Marshall identified in cities.
Marshall’s Three Forces of Agglomeration Economics
Alfred Marshall’s Principles of Economics (1890) explains how firms and agents benefit from geographic concentration. More specifically, the book analyzes how input sharing, labor market pooling, and knowledge spillovers make clustering economically efficient (Rosenthal and Strange 2020). Input sharing occurs when firms, nearby due to urban concentration, access specialized suppliers and services at a lower cost due to proximity. In digital environments, input sharing occurs not through physical suppliers but through shared digital infrastructure such as cloud platforms. Labor pooling creates a thicker job market in which employers can better match with skilled workers, while employees enjoy more opportunities due to their close proximity to them. Finally, knowledge spillovers capture the informal exchanges of ideas, innovations, and tacit know-how that emerge from face-to-face interactions within the workplace or out-of-office interactions between specialized actors. Can a digital workspace not achieve the same effects? Furthermore, does the heightened proximity and ease of digital communication enhance the productive efficiency of agglomeration?
Marshall’s agglomeration economics demonstrates why industrialization and urbanization strengthened and created a booming American economy. Empirical studies confirm that doubling a city’s employment can raise productivity by roughly 4–8% (UK Department for Transport 2022). This demonstrates the effectiveness of Marshall’s theory. However, distance attenuates these effects. Input sharing extends across regions, labor pooling across metro areas, but knowledge spillovers remain intensely local (Rosenthal and Strange 2020). The idea of closeness in a digital age is rapidly changing. With high-speed internet, cloud computing, and video conferencing, the definition of “closeness” is evolving to change the workforce landscape. These interactions have been coined as “virtually inhabitable cities” that act “as an alternative to future data-driven smart cities,” reenacting the agglomeration benefits of densely populated cities completely online (Bibri and Allam 2022). Earlier urban theorists anticipated this transformation. As early as the late 1990s, Aurigi and Graham (1997) warned that the rise of “virtual cities” could reshape physical urban space and deepen digital divisions between connected and disconnected communities.
Agglomeration in the Digital Era
COVID-19 shocked the economy with a proliferation of digital workplaces, a necessary survival mechanism with unprecedented long-term impacts on how business models exist today. If workers can seamlessly communicate and collaborate online, perhaps some benefits of clustering can occur without co-location, a form of virtual agglomeration. In their comprehensive study, “How Close Is Close?” (2020), Stuart Rosenthal and William Strange conclude that agglomeration effects indeed “attenuate with distance,” with nearby activity exerting the strongest impact on productivity. Proximity matters at every scale, from office buildings all the way to counties. This finding, often cited by policymakers like Trump to justify returning to office spaces, overlooks how the meaning of “proximity” has evolved in the digital age. Productivity gains from knowledge spillovers decay most sharply over very short distances, reinforcing the intuition that informal learning is easiest when people frequently bump into each other. Informal interactions are not likely to happen in formal digital environments with few opportunities for bumping into each other. Empirical research supports this limitation: Emanuel, Harrington, and Pallais (2023) find that in-person proximity still enhances on-the-job learning and short-term productivity, suggesting that hybrid models can better balance training needs with remote flexibility.
Everything is scheduled, online chats are extremely formal in most cases, and moments for human interaction, face-to-face, are all but eliminated. Yet Rosenthal and Strange also acknowledge the role of modern communication: “whilst information technology allows for effective communication with distant partners, these distant interactions are complementary to in-person interactions” (Rosenthal and Strange 2020). Pre-COVID, digital communication was a supplement, not a replacement for real-life workplaces. A video call was a great way to maintain connection with travelling colleagues or distant clients, but not a substitute.
In 2020, with the mandated distancing due to the COVID-19 pandemic, the culture around virtual meetings changed. The scale and use of digital communication rapidly scaled with new technologies and understandings of what a virtual city may look like. Professor Balázs Zélity, an economist at Wesleyan University, notes that the widespread experiment with remote work “effectively widened the potential of knowledge spillovers” by normalizing virtual interaction (Zélity 2025). The “New Normal” is all too memorable a phrase for anyone working during COVID. Tools like always-on messaging, video conferencing, and shared cloud drives mean that ideas can circulate within an industry beyond the confines of a single ZIP code. An aspiring software engineer in rural Connecticut, for instance, in Middletown, can now actively participate in brainstorming sessions with developers in Silicon Valley without ever setting foot in a Bay Area office, effectively tapping into the creative “air” Marshall identified as central to the benefits of agglomeration. Professor Zélity, however, acknowledges that there is a loss: “proximity still matters for the most tacit knowledge exchange,” specifically the casual conversations that occur within formal work locations (Zélity 2025). Despite this, digital connectivity has stretched the radius of collaboration, allowing input sharing and labor pooling to occur on national or global scales and enabling partial knowledge spillovers via virtual means.
Crucially, remote work has enabled a form of labor market pooling across geography, eliminating the barrier that was land and ocean. The evolving virtual city is a never-ending pool of talent for firms to hire from, with the ability to hire the best person, no longer restricted by location. A study of a large business-process outsourcing firm in Turkey found that when the company shifted to fully remote work, its workforce became the most educated it had ever been and experienced, on average, and more diverse, without an increase in wage costs overall (Emanuel and Harrington 2024, 540). Remote work enabled the firm to tap into underrepresented workforce groups like married and pregnant women and non-urban candidates. In essence, the labor pooling benefit of agglomeration (usually confined to big cities) was partly achieved via the internet, meaning input sharing in a remote context can be done through the means of shared digital infrastructure and services.
The Doughnut Effect and Inclusion
The rise of remote work has transformed not only firms but also urban geography. Economists Arjun Ramani and Nicholas Bloom (2024) call this the “doughnut effect,” describing how city centers were hollowed out as professionals relocated to suburban and exurban areas. Between 2020 and 2024, the 12 largest U.S. cities lost roughly 8% of their downtown residents, with most relocating to nearby suburbs (Bloom, Ramani, and Alcedo 2024). As office vacancies rose, businesses closed, and downtown retail declined. Yet this decentralization does not signal the end of agglomeration; rather, it redistributes it. Remote workers still participate in urban economies virtually, forming a web of connected hubs, suburban coworking spaces, satellite offices, and home workstations that extend agglomeration outward. Agglomeration doesn’t necessarily have to depend on real proximity when digital communication has broken down the geography of the workspace. This shift alleviates congestion and spreads opportunity to peripheral regions, though it poses challenges for urban planners managing excess office space and declining transit ridership. Attempts to reverse this shift ignore the economic reorganization already underway, privileging outdated urban cores over emerging distributed networks of productivity.
Equally significant are remote work’s social and inclusion effects. For many underrepresented groups, telework has expanded access to employment. People with disabilities, for example, experienced record employment levels by 2023 due in large part to the normalization of remote work (National Organization on Disability 2023). Remote options removed barriers such as inaccessible commutes or office environments. However, as some firms reversed remote policies, disability employment gains began to decline (NOD, 2023). For workers with disabilities, flexibility is not a perk; it is an accommodation that enables full participation in the labor market. A nationwide rollback of remote work would disproportionately harm these same workers, contradicting the administration’s stated commitment to expanding labor participation.
Furthermore, remote work has changed the job market of those in rural or economically disadvantaged regions. A 2025 study by Generation, a workforce nonprofit, found that 75% of midcareer workers in Appalachia and the rural South were willing to retrain for remote jobs (Generation 2025). In these areas, where local employment opportunities are scarce, remote work functions as an economic lifeline. Companies no longer necessarily need to expand to a region with remote work options available. It allows residents to earn metropolitan-level wages while contributing to their local economies, reducing geographic inequality. Remote flexibility aids caregivers and low-income workers by reducing commuting costs and offering greater control over schedules. These benefits improve labor force participation and job retention, particularly for single parents. During the pandemic, remote-capable jobs buffered many households from unemployment shocks (UK Department for Transport 2022). Maintaining hybrid options can thus promote economic equity and preserve workforce diversity.
The President’s Misconceptions
Mr. President, your directive to “terminate remote work arrangements” overlooks the changing realities of how modern agglomeration economies function. While the traditional model holds that productivity depends on dense physical clusters, recent evidence shows a more complex picture. Research by Sitian Liu and Yichen Su (2022) finds that occupations with high work-from-home adoption saw a significant decline in the urban wage premium, suggesting that the benefits of proximity are shifting, not disappearing. Moreover, the study by Arjun Ramani et al. (2024) argues that while remote work does challenge the traditional concentration of economic activity, it also creates “virtual” agglomeration spaces that extend labor markets and knowledge spillovers beyond downtown offices. Given this evidence, mandating a full return to in-person work would not necessarily restore productivity but may end up constraining it. The President's policy posits a return to the old city model, but in doing so, it risks ignoring the inclusionary, flexible, and hybrid opportunities that remote work offers: expanding access for those constrained by geography, disability, or caregiving demands; reducing congestion and carbon emissions; and dispersing productivity gains outward rather than confining them to megacity cores. To insist on full-time on-site attendance is to treat the remote worker as a deviation instead of recognizing them as a component of the emerging economic geography. The future of agglomeration is neither a full reversion to pre-pandemic norms nor an abandonment of proximity; it is the new hybrid, networked, and inclusive. Mr. President, you are wrong; remote and hybrid work are not the enemy of productivity, they are its next iteration.
Sources:
Aurigi, Alessandro, and Stephen Graham. 1997. “Virtual Cities, Social Polarization, and the Crisis in Urban Public Space.” Journal of Urban Technology 4 (1): 19–52.
Bibri, Simon Elias, and Zaheer Allam. 2022. “The Metaverse as a Virtual Form of Data-Driven Smart Cities: The Ethics of the Hyper-Connectivity, Datafication, Algorithmization, and Platformization of Urban Society.” Computational Urban Science 2 (22). https://doi.org/10.1007/s43762-022-00050-1.
Bloom, Nicholas, Arjun Ramani, and Joel Alcedo. 2024. “How Working from Home Reshapes Cities.” Proceedings of the National Academy of Sciences 121 (45): e2408930121. https://www.pnas.org/doi/10.1073/pnas.2408930121.
Emanuel, Natalia, and Emma Harrington. 2024. “Working Remotely? Selection, Treatment, and the Market for Remote Work.” American Economic Journal: Applied Economics 16 (4): 528–59.
Emanuel, Natalia, Emma Harrington, and Amanda Pallais. 2023. “The Power of Proximity to Coworkers: Training for Tomorrow or Productivity Today?” NBER Working Paper no. 31880. Cambridge, MA: National Bureau of Economic Research. https://www.nber.org/papers/w31880.
Generation. 2025. “New Research Underscores the Importance of Remote Work for U.S. Rural Communities.” Generation Newsroom, July 10, 2025. https://www.generation.org/news/remote-work-rural-communities.
Liu, Sitian, and Yichen Su. 2022. “The Effect of Working from Home on the Agglomeration Economies of Cities: Evidence from Advertised Wages.” Federal Reserve Bank of Dallas Working Paper. https://mpra.ub.uni-muenchen.de/113108/.
National Organization on Disability (NOD). 2023. Disability in the Workplace: 2023 Insights Report. https://nod.org/wp-content/uploads/Disability-in-the-Workplace-2023-Insights-Report.pdf.
Rosenthal, Stuart S., and William C. Strange. 2020. “How Close Is Close? The Spatial Reach of Agglomeration Economies.” Journal of Economic Perspectives 34 (3): 27–49.
The White House. 2025. “Return to In-Person Work.” Presidential Memorandum, January 20, 2025. https://www.whitehouse.gov/presidential-actions/2025/01/return-to-in-person-work/.
UK Department for Transport. 2022. Agglomeration under COVID-19. Government of the United Kingdom.
Zélity, Balázs. 2025. Personal interview, October 15, 2025.