The pros and cons of returning to the office

Governments face one of their biggest economic dilemmas of recent times: How quickly should they withdraw the support provided to the economy during the Covid-19 crisis in order to minimise the hit to public finances, in the knowledge that this risks derailing the nascent recovery? However there are big question marks as to whether they should even be thinking on such lines in the current climate. Indeed, the French government last week launched a €100bn (4% of GDP) plan to boost investment in green energy and transport and support industrial innovation to help the economy recover from the recession. In recent days, governments in Austria, France and Germany have announced plans to extend their labour market support programmes to prevent a big rise in unemployment as activity levels prove insufficient to support pre-recession levels of employment.

It is against this backdrop that the start of the new school year in the UK has prompted a debate about how to get employees back to their workplaces after more than five months working from home (WFH) or on furlough. A month ago, a survey by Morgan Stanley suggested that UK workers were slower to return to their offices than in other European countries. According to the survey evidence, only 34% of white-collar employees had gone back to work compared to a European average of 68% (in France and Italy these figures were 83% and 76% respectively). More recent evidence suggests that British workers are now returning to the workplace, with the ONS reporting that 50% worked exclusively in the workplace in the last week of August compared with 30% in June.

Nonetheless, the data indicate that British workers lag behind their continental counterparts in this respect. Google mobility trends data (chart) bear out the view that between May and July fewer British workers had returned to their offices than in other European countries (the recent dips in Spain, Italy and France represent a holiday effect rather than a Covid-19 effect). This is sharply highlighted in the residential data where UK home footfall remains higher than elsewhere, implying a greater degree of home working.

The British government is currently advocating that workers return to their offices as it seeks to get the economy on a more solid footing. We should acknowledge that large numbers of workers were unable to work from home in the first place, with essential staff continuing to travel to their place of work throughout the pandemic. But of those who were able to work from home, the bigger question is whether they need to return to their offices. After all, many of us manage quite happily with an internet connection which allows us to do our jobs whilst remaining connected with the outside world. Whilst accepting that it is not to everyone’s taste, since a lot of people require the buzz of interaction with their colleagues, the idea that white collar workers need to be in the office to do their jobs is increasingly anachronistic. That said, there are positive externalities associated with workplace clustering so it is premature to conclude that office working is finished.

Consider the evidence

The demand by the head of the civil service that 80% of civil servants should be back at their desks at least once a week by the end of September needs a stronger economic rationalisation. According to Sir Mark Sedwill (who is technically the outgoing head, as he was effectively sacked by the government in June) “getting more people back into work in a Covid-secure way will improve the public services we deliver.” That is a bland statement which may or may not be true. But the limited evidence available on the benefits of WFH suggests that there are many upsides. 

A reputable study conducted on Chinese travel agency workers in 2014 and published in the Quarterly Journal of Economics (if Nick Bloom has his name attached to it, it’s worth taking seriously) found that “home working led to a 13% performance increase, of which 9% was from working more minutes per shift and 4% from more calls per minute. Home workers also reported improved work satisfaction, and their attrition rate halved.” The study went on to point out that: “The overall impact of WFH was striking. The firm improved total factor productivity by between 20% to 30% and saved about $2,000 a year per employee WFH. About two thirds of this improvement came from the reduction in office space and the rest from improved employee performance and reduced turnover.”

So why the rush to get people back to their offices? On the one hand, those businesses which depend on passing trade in crowded city centres are struggling. The proliferation of sandwich bars, coffee shops and pubs in our city centres rely on the lunchtime or evening crowd for their revenue and nobody wants to see our town centres becoming more hollowed out than they already are. But as Sarah O’Connor recently pointed out in the FT “Britain’s economic geography was under strain even before coronavirus. Good-quality jobs had grown ever more concentrated in London and a few other big cities like Manchester. That didn’t work for the rest of the country, and it didn’t work particularly well for the city dwellers either.” Her argument is that crowded city centres lead to spiralling accommodation costs, which is a particular problem for the low-paid, and those seeking to avoid them move further out and thus face long commutes on overcrowded (and expensive) public transport.

If we accept this view, one consequence of the pandemic will be to allow us to rethink the world of work and how we use our city centres. Assuming that at some point the social distancing measures are relaxed, businesses will need less expensive city centre real estate which will reduce costs. There will be losers, of course: property developers for one, and companies which rely on passing traffic for another. As noted above, however, this does not mean that there is no need for office working. Aside from the social aspects, office working does promote a greater delineation between work and leisure time; it allows the creation of more robust networks via face-to-face interaction; it creates a sense of belonging, which is important to company attempts to create a corporate culture, and it is a more efficient way of passing on experience as staff of different levels of seniority mix together. It is thus possible to imagine a world in which workers will be encouraged to spend some, if not all, of their working time in the office. The era of hot desking may be at hand (though not under current Covid restrictions).

Ultimately, how the world of work develops will depend on the needs of companies and their employees. It is possible to imagine a world in which the Covid crisis has accelerated a move away from the 9 to 5 drudgery although long-term predictions of working practices are fraught with uncertainty. Back in 1930, the economist John Maynard Keynes predicted that technological change and productivity improvements would eventually lead to a 15-hour workweek. Despite significant productivity gains over the past few decades, on average we work more than double (and in some cases treble) that. Nonetheless, if governments are so keen to allow market forces to operate, maybe they should let private sector companies figure out what works best for them and not impose 20^th century working practices on a 21^st century workforce.