Out of the office - Op Ed, Inside Story


Inside Story, October 20 20202

“I’m sitting in a building here that was built for 5000 people… and there are probably six in it today,” National Australia Bank CEO Ross McEwan told me recently during a parliamentary committee hearing. But there’s more: according to the bank’s surveys, four-fifths of staff members don’t want to return to regular working when the pandemic is over.

Despite promises of an economic “snapback,” it’s becoming increasingly clear that the world of work is likely to change significantly as a result of coronavirus. One of the likely shifts will be the rise of teleworking. If Covid-19 has taken us back a decade in terms of globalisation, it’s taken us forward a decade technologically. Large swathes of the workforce are working from home and the trend is likely to endure, with one US study projecting the share of working days spent at home to rise from 5 per cent to 20 per cent after the pandemic passes. Having fewer desks than employees may become the norm for white-collar firms.

One of the valuable changes will be a move away from open-plan offices, which were always more about corporate symbolism than productivity. We know from a bevy of studies that workers are more stressed, more dissatisfied and more resentful when they work in an open-plan setting. Compared with regular offices, employees in open offices experience higher levels of noise and more interruptions. They are less motivated, less creative and more likely to take sick leave.

Yet in their anxiety to save on rents and give the impression of being “collaborative,” firms pushed towards open plan regardless. Like other critics of open-plan offices, I never gave much thought to their potential to allow diseases to spread more quickly, but this may well be the clincher that shifts firms back to regular offices. If the research is to be believed, this is likely to be good for productivity.

For others, home will be the new office. People used to joke that there were three problems with working from home: the bed, the fridge and the television. But as the evidence rolls in, most of us appear less distractible than we might have feared. Certainly, working from home requires good technology (wouldn’t it be terrific if everyone already had fibre broadband, rather than trying to retrofit it?). It also helps if you’re not trying to juggle work and children. But once those conditions are met, an hour of working from home can be at least as productive as an hour in the office. In one randomised trial, employees in a Chinese firm were 13 per cent more productive working from home. During the pandemic, two-thirds of American GDP has been produced from people’s houses, and the stress levels of American workers has fallen by 10 per cent.

But remote work isn’t without its challenges. One is management quality. Great managers judge people based on their outputs and treat everyone equally. Lousy managers focus on inputs and favour their friends. This means that a major constraint on teleworking will be the quality of managers. Firms may quickly find that managers whose approach was “good enough” in 2019 won’t cut it in 2021. Organisations will struggle if they lack fair benchmarks for performance and good training systems for managers.

It doesn’t help that management training can be faddish, differing considerably across institutions and over time. If firms don’t have consistent performance appraisal systems, workers are more likely to feel that working from home is too much of a career risk. As the Economist recently put it, “the emotion that is most likely to lure workers back to the office is paranoia.”

Remote work is fine for knowledge workers, but if you’re a cleaner or a cashier it’s clearly not an option. According to a study by Harvard PhD student James Stratton, 41 per cent of Australian employees have the kind of job that lets them telework. Yet, as he notes, this simple average masks huge differences. Among low-wage employees, less than one-fifth can telework; among high-wage employees, it’s more than three-fifths. Most of those who have jobs in education or science can readily telework; hardly anyone employed in agriculture or hospitality can.

The consequences for inequality could be profound. In a recent report, MIT economists David Autor and Elisabeth Reynolds note that a rise in working from home could markedly reduce demand for cleaners, security workers, building maintenance workers, hotel workers, restaurant employees, taxi drivers and ride-sharing drivers. The pair predict that the decades-long shift towards urban densification is likely to slow or even reverse, reducing the demand for city workers.

Autor and Reynolds anticipate that a wave of mergers will cause employment to become increasingly concentrated in large firms, which tend to spend a smaller share of their earnings on workers and a larger share on managers and owners. And they forecast an increase in “automation forcing,” as Covid-related restrictions cause companies to adopt labour-saving technologies. When the pandemic is over, the economists point out, firms won’t unlearn these ideas. Retailers, cafe owners, car dealerships and meat packers will need fewer staff after the downturn than they did before.

What can government do? The starting point must be that the labour market of 2019 is not coming back. While it’s hard to forecast specific occupations, we can be sure that the demand for skilled workers will be stronger than ever. This makes it critical to ensure that disadvantaged students get the schooling they deserve. The Grattan Institute has called for intensive small-group tutoring to help a million vulnerable young people catch up to their more advantaged peers. It’s also crucial to ensure that underprivileged teens don’t drop out of school, potentially locking in a lifetime of disadvantage.

With overseas student enrolments falling for the first time in decades, Australia could expand opportunities for domestic students. Just as the early-1990s recession saw a surge in school completion, this recession is a chance to increase the university attendance rate. Why wouldn’t we create a university place for a talented young person who might otherwise be unemployed? Expanding education keeps young people engaged today, and makes them more productive tomorrow.

Crises can lead to astonishing changes. The Black Death helped usher in the Renaissance. The collapse of Chinese dynasties massively reduced inequality. The second world war paved the way for a huge expansion in Australian home ownership. The challenge today is to recognise how the recession will change the world of work, and how we can secure prosperity and equality for Australians in the decades to come.

Andrew Leigh is the Shadow Assistant Minister for Treasury and Charities, and author (with Joshua Gans) of Innovation + Equality: How to Create a Future That Is More Star Trek than Terminator.


Authorised by Paul Erickson, ALP, Canberra

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.