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
20th century working practices on a 21st century
workforce.
