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8DIGITAL NOMADISM: DEFINITION, SUPPORTING FACTORS, MOTIVATIONS AND CHALLENGES. BENEFITS AND ISSUES FOR THE HOST COUNTRIES AND EMPLOYERS
Kim N.
Westminster International University in Tashkent https://doi.org/10.5281/zenodo.11265155
Abstract. A combination of structural and personal factors accelerated the remote work trend. They include COVID-19 pandemics, advancement of digital technology, transportation, greater flexibility and autonomy/freedom from coercive structures of the workplace desired by workers and others. Digital nomadism emerged as a way of work and a type of lifestyle mobility, giving rise to a class of location-independent workers working outside the country of their employer. This conceptual article incorporates classifications and the profile of digital nomads, their motivations and challenges. It proceeds with benefits and obstacles that host countries face while accommodating digital nomads and that employers face while hiring them or providing opportunities for employees to work as digital nomads. Lastly, the discussion part will include the measures to overcome these obstacles and implications for future research and policy.
Keywords: digital nomadism, digital nomads, remote work, motivation, economic benefits, cultural issues, challenges, host countries, employers, policy.
Introduction.
International mobilities since the 1980s has taken various forms including residential tourism, second-home tourism, seasonal and lifestyle migration, global neo-nomadism, flashpacking, bohemian lifestyle migration and digital nomadism (Akerlund, 2013, D'Andrea 2016, Hannonen, 2016, 2018, Korpela, 2019, O'Reily and Benson 2009, Paris, 2012, Reichenberger, 2018, cited in Hannonen, 2020). Digital nomadism is a trend in lifestyle mobility standing 'in-between' tourism and migration (Akerlund, 2013, Hannonen, 2016, Cohen et al., 2015, cited in Hannonen, 2020). Digital nomads emerging as a class of location independent workers relying on technology is on a rise due to the socio-political factors such as globalization, ease of movement, availability and advancement of communication technology, transportation systems, digitalization of real estate, individualization and the desire for autonomy, flexibility associated with location-independent work (Hannonen, 2018, Makimoto and Manners 1997, Muller, 2016, O'Reilly and Benson 2009, Orel 2019, cited in Hannonen 2020). Importantly, 'location independence' implies being "outside the country where their employer is located and/or where they are providing services" (Deloitte Touche Tohmatsu India, 2023). The purpose of the underlying article is to develop an understanding of digital nomadism by identifying current classifications, supporting factors, motivations and challenges faced by digital nomads, benefits and issues for host countries and employers. The article will be concluded with discussion on implications and future research and policy.
Methods
The underlying article applies a conceptual approach to achieve its purpose. Conceptual and empirical academic research articles, international industry reports, global surveys by
consulting companies such as Deloitte, BCG, and MBO Partners and relevant websites have been used to collect, analyze the data, and discuss relevant implications.
Results
1.1 Digital Nomads: Definition, Classification and Profile
Digital nomadism was originally brought into perspective by science fiction writers in the mid-1960s when communication and traveling were expensive and scarce. Arthur Clarke, for instance, anticipated market opportunities resulting from instant communication enabled by digital devices and their networks. In 1964 Marshall McLuhan, a theorist studying the socioeconomic impact of technological advancements introduced the term 'global village' as "a phenomenon emerging from access to different cultures and mindsets through increased electronic connections" (Broek et al., 2023, p. 3).
Makimoto and Manners introduced the term "digital nomad" in 1997 to describe an outcome of technological advancement on people's lives and predicted how mobile and portable technologies, would be applied for work and leisure, producing the new lifestyle in which "people are freed from constraints of time and location" (Makimoto, 2013). The term "digital nomad" describes "a category of mobile professionals who perform their work remotely from anywhere in the world, utilizing digital technologies" (Makimoto, 2013, p.40), while digital nomadism refers to a new way of working and lifestyle developed by these location independent professionals (Hannonen, 2020). Digital nomadism is not only a new lifestyle, but a new way of performing and organizing work with a purposeful engagement in travel (Wang et.al, 2018). In other words, digital nomads are "teleworkers who choose to work from everywhere, living a life of ongoing interleaved work and travel" (Wang et.al 2018). The urge to travel and the ability to do so were mentioned as essential components of digital nomadism (Makimoto and Manners, 1997). Cook (2020) added another overlooked category of those who aspired to work, highly mobile but were not yet working, thus expanding the digital nomad definition to include those attempting to work. Lastly, Richter and Richter (2020) conceptualized digital nomadism as a phenomenon at the intersection of individual preferences, organizational development and technological advances.
There are several typologies extending the definition beyond the initial one. Reichenberger (2018, p. 371) proposed progressive levels of digital nomadism on an ascending scale of mobility starting from Level 0 (i.e. location-independence achieved via working in online environment) to Level 1 (having no fixed workplace), Level 2 (possibility to work and travel simultaneously), Level 3 (no permanent residence). Reichenberger (2017) stated that her sample focused on 'digital nomads on the second or third level' because she studied the 'role of travel and its relation to work'.
Furthermore, the five types of digital nomads identified from the scholarly and industry research by Cook (2023) include 1) digital nomad freelancers - individuals offering skills to other client and businesses (the traditional model) 2) digital nomad business owners/entrepreneurs 3) salaried digital nomads (the fastest growing category) who work and travel in at least three non-family/friend locations and determine the location independently from the employer 4) experimental digital nomads trying out the lifestyle by traveling, learning new skills or setting up businesses, but not yet earning 5) armchair nomads who earn, but not yet travel.
As for professional areas of digital nomads, out of 208,807 early and mid-career people (mostly from commercial industries) surveyed in 190 countries by Boston Consulting Group and the Network in 2020, 9,900 worked in digital fields such digitization, automation, IT, and
technology (Strack, et.al. 2021). Other professional fields of digital nomads include creative services, marketing, sales and PR, education and training, consulting, financial and accounting services. Jobs that can be performed remotely are mostly computer-based, prevalent in the sectors with high degree of digitalization, involve limited physical activity and asynchronous tasks. Remote work is also more feasible in high-income countries (1 of 3 jobs) than low-income countries (only 1 in 26 jobs) (Garrote Sanchez et al., 2020, cited in Hooper & Benton, 2022).
According to another study of 22,000 independent workers in the US by MBO Partners (2020), 71% reported using the technology, 74% were more likely to be early adopters of technology, 68% said their work required specialized training and expertise, 57% had a college degree of higher. The majority reported a high level of work satisfaction (90%) and income satisfaction (76%). The percentage of men (59%) was higher than that of women (41%), which was consistent with 2019 results. By age cohort, the percentage of younger digital nomads increased since 2019 with the following distribution by age: 42% millennials, 22% Gen X and 19% Gen Z (MBO Partners, 2020).
1.2 Digital Nomadism: Supporting Factors
Over the period 2019-2021 the number of US citizens working as digital nomads saw a 112% increase from 7.3 to 15.5 million (Nichols, 2022). Previous research delineated sociopolitical factors behind the rise of the worldwide trend of digital nomad lifestyle since 1980s, including globalization, individualization, increased international experiences and mobility, ease of movement, wireless communication technologies and advancement in transportation systems, digitalization of the real estate, flexibility of working lives and increases in global relative wealth (Hannonen 2018; Makimoto and Manners 1997; Müller 2016; O'Reilly and Benson 2009; Orel
2019). The Covid-19 pandemic has accelerated the interest in remote working, digital transformation of organizations, increasingly implementing hybrid work arrangements. Improvement in digital infrastructures - fiber-optic internet, communication and collaboration software, and immersive technology including augmented and virtual reality enables people to work remotely even from rural areas (Richter & Richter, 2020). Blockchain and Artificial Intelligence are also contributing to decentralization and new forms of organizations (Tayekana,
2020).
2. Motivation and Challenges of Digital Nomads
Recent research suggested that the main motivation behind digital nomadism is the desire for work-life balance, to escape the coercive, disciplining structures of the contemporary workplace, especially 9 to 5 obligations, presenteeism, micromanagement and the daily commute (Reichenberger, 2017, Nash et al. 2018, cited in Broek et al., 2023). Specifically, Reichenberger (2017) highlighted the desire to escape the structures of a traditional location dependent working style as a main motivation for adopting a digital nomad lifestyle. There is also "an increased desire for autonomy and flexibility in balancing professional and private life among employees" (Parker et al., 2020). Müller (2016), Reichenberger (2017) and Thompson (2018) mentioned the desire to gain a symbolic or generalized feeling of freedom, autonomy and self-determination as a digital nomad dream, while Thomson (2019) defined digital nomadism as "the ability for individuals to work remotely from their laptop and use their freedom from an office to travel the world". Similarly, Cook (2020) further framed the term "true freedom" as the ability to frequently change location and as merging boundaries between work and leisure. He also explored how concepts of
freedom, autonomy and self-determination become practised in the everyday lives of digital nomads.
Other researchers framed this motivation as freedom that appeared in a variety of contexts: freedom within paid employment, freedom relating to location independence and freedom to pursue self-development. Specifically, Reichenberger (2017) studied how the lifestyle addresses motivation of digital nomads and explored the three types of freedom that helps digital nomads achieve the "holistic state they are seeking": 1) professional freedom referred to the motivation to select and structure work related tasks in a self-imposed manner 2) spatial freedom, highlighted the motivation to live and work in a variety of places and inextricably connected with freedom to learn and experience 3) personal freedom, beneficial for productivity, creativity, and most importantly self-development. Reichenberger (2017) found that the strong connection between professional and personal freedom contributes to learning, acquisition or advancement of skills, and self-development. Spatial freedom contributed positively to professional freedom "through movement and the stimulation of creativity". Reichenberger (2017) concluded that "if all motivations are fulfilled, digital nomads are able to achieve the holistic state that they are seeking". Another important motivation is the opportunity for 'geographical arbitrage', enabling digital nomads to cut expenses by staying at low-cost locations as Thailand, Vietnam or Costa Rica while earning income at higher-cost locations such as the US (MBO Partners, 2020) or reducing the number of work hours for the same standard of living (Broek, et.al, 2023).
Yet, the digital nomadism lifestyle is not sustainable for a long term with consideration to the following factors and personal challenges. In a "Digital Talent Relocation" survey of 1000 digital technology workers at 11 tech hubs, BCG studied factors that would motivate them to stay longer in their locations (BCG, 2021, cited in Lavian et. al., 2022). About 56% intend to stay in their current location for 5 years or less, 27% intend to stay for 6-10 years and 5% responded with "permanent stay" (BCG, 2021, cited in Lavian et. al., 2022). Lifestyle and family concerns are growing stronger over time: lack of deep personal relationships with family and friends and the sense of belonging are frequently self-reported as a challenge of being constantly "on-the-move" (Miguel et al., 2023, cited in Broek et al., 2023). Other issues identified by Syrbe (2022) are finding accommodation suitable for work, a co-working space, legal issues such as health insurance, risk of double taxation, and cybersecurity. Lastly, immigration process may also pose an obstacle, as remote workers often file and pay for applications, prepare proof documents, and negotiate reimbursement with contractors by themselves.
3. Benefits and Issues of Digital Nomadism for Host Countries and Employers
Digital nomads have become a specific customer segment, facilitating development of new products and services (Hanonnen, 2020). From the economic standpoint a number of emerging businesses are increasingly targeting and are sustained by digital nomads including co-working and co-living spaces, leisure, healthcare, insurances, house rentals, banking, conferences, etc. Consequently, governments may "revitalize economically depressed and rural areas" and diversify local economies by hosting digital nomads to increase income from their consumption (VAT), gain additional revenue from income taxes and social insurance fees (Broek, et al., 2023). Moreover, the presence of digital nomads could also attract more startups and technology companies, be conducive to knowledge and skill transfer and contribute to innovations (Broek et al., 2023). For employers, providing more opportunities to work as digital nomads may increase employee satisfaction (via less commuting time, moving closer to family, staying at low-cost
locations), the talent pool "outside traditional demographics or a geographical area", enhance cultural diversity and reduce office rental, utilities and equipment costs (Hooper & Benton, 2022).
On the other hand, there are a number of challenges that governments and employers need to address. Legal and regulatory complexity with respect to the differences in taxation, employment law, data protection law, social security legislation and working regulations across countries was highlighted in an international survey on remote work of 208,807 people across 190 countries (BCG and the Network, 2021). Cultural integration, adaptation and "fit" at organizational and national level is another obstacle as digital nomads by immersing themselves in local communities for longer periods than tourists, may contribute to changing the cultural landscape, hybridization and individual conflicts (Broek et al., 2023). Furthermore, digital nomad compensation represents an issue for employers, as it is unclear whether the salary and other benefits should reflect the cost of living or be established based on the labor market where the employee lives (Kovacs-Ondrejkovic et al., 2021). Other considerations involve team performance in a virtual environment while working across different time zones and related remote work policies, guidelines, tools, communications and enterprise strategy (Deloitte Touche Tohmatsu India, 2023). In another global remote work survey of business professionals from 45 countries, while over 80% of organizations implemented some form of remote work policy, 46% of respondents highlighted policies and regulations as a major challenge, 43% culture and 38% tax compliance, reflecting that many policy initiatives were 'rushed and reactive' as a result of COVID-19 (Deloitte, 2022).
Discussion
Digital nomadism is a relatively new phenomenon with a limited scope of empirical research to date. While originally it has been defined as a type of mobility and lifestyle combining work and travel by means of digital technology, recently digital nomads have been classified according to the frequency of relocation/level of mobility (from "working online" to "no permanent residence") and type of income (freelancers, business owners, salaried workers, experimental and armchair). Based on the current digital nomad surveys, the majority are early adopters of digital technologies, they are educated and their work requires specialized training and expertise. As for demographics, a relatively larger proportion of male and an increasing proportion of younger workers were identified in a survey of independent workers in the US. While the number of digital nomads in the US is on the rise, this phenomenon has not been reliably quantified in Europe and other regions. The efforts to classify and discern the phenomenon are ongoing, facilitating a better-informed policy making with respect to tax, visa, residency, social and welfare services by governments and institutions.
Secondly, the need for autonomy, flexibility and work-life balance while escaping coercive structures of workplaces, micromanagement, and daily commute were identified as important motivations for digital nomads. They seek professional, spatial and personal types of freedom. They also aim to benefit from geo-arbitrage by living in low-cost locations and earning salary from affluent countries. Interestingly, although the digital nomad lifestyle is frequently romanticized by the media, it is not sustainable for a long term because of personal and structural factors such as lack of deep personal connections, difficulty finding suitable accommodation, co-working space, and legal issues. A clear understanding of digital nomad motivations and challenges would enable local governments to "identify, keep track of and support nomads' adaptation to the community" (Broek et al., 2023, p. 14).
Thirdly, from the economic perspective host countries benefit from digital nomad consumption, tax revenues, and higher innovation potential from knowledge transfer. Employers by providing opportunities to work as digital nomads are positively affected via higher employee satisfaction, cultural diversity, and cutting associated costs.
However, there are legal and cultural issues for host countries and employers that could be addressed by means of policy and regulations. From a legal perspective, differences in the tax, labor, data protection, social security laws and immigration procedures are obstacles to accommodating digital nomads. In response, a number of countries introduced "attractive taxation, visa-free stays, e-residency, and digital nomad visa schemes to welcome more temporary residents and digital nomads" (Hannonnen, 2020). In 2023, 44 countries offered digital nomad visas, including 23 in Latin America, 19 in Europe, Middle East, Africa, and 3 in the Asia-Pacific; 9 digital nomad visas were in the pipeline and 7 countries offered freelancer visas (Deloitte Touche Tohmatsu India, 2023).
In addition to visa and taxes, it is vital to consider cultural integration of digital nomads to support local communities and avoid "gentrification and other forms of exclusion due to the increased cost of living" and culture-related conflicts with local communities (Broek et al., 2023). Addressing digital nomads' wellbeing and integration by employers is challenging, especially for less experienced workers. Special onboarding, induction, mentoring programs and less formal meetings could facilitate organizational teamwork and remote cooperation. Companies can organize "upskilling" projects to facilitate professional networking and skill sharing with local communities. Finally, local governments could support companies in hiring nomads for short periods and establish online platforms for legal and cultural information such as local cultural heritage and traditions (Broek et al., 2023).
In conclusion, most of the results and recommendations are based on the study of digital nomads from the United States, which is a major limitation of the research to date. Burns & O'Regan (2008) stated that participants in previous research were coming from affluent Western countries. Similarly, Reichenberger (2017) while focusing on individuals from Western cultures, highlighted the research limitation as "excluding other potentially different cultural perspectives". Indeed, as Mouratidis (2018) asserts, digital nomads are never really free from their nationality, passport, citizenship and work routines. Hence, the relevance of current knowledge to digital nomads from developing countries is questionable and necessitates further study and empirical evidence. It would be interesting to explore their demographic and professional profiles, motivations and challenges, immigration process, socio-economic and cultural impacts in host countries. This would enable designing relevant digital nomadism policies and measures in response to identified needs and issues. Lastly, with expansive technology-enabled developments of new forms of work and ways of working, it could be examined how AI technology facilitates organization of remote working and cooperation.
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