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The shift to remote working helped save the world economy from what could have been an even deeper collapse during the height of the Covid-19 pandemic. Now the question turns to whether it can be the driving force behind a global economic recovery.
In other words, will the cost savings from remote work make the overall global economy more efficient?
The answer, as is often the case with economists, is that the jury is still out.
“We just don’t have any long-term, in-depth studies on the productivity of remote working,” said Christopher Dembik, a senior economist at Berenberg Bank in London. “There’s no question that for some people and for some jobs, it’s more productive. But there are two things to keep in mind: Not everyone can work remotely, and even for those who can, you have to get the dosage right.”
What’s not in doubt is the role that remote working played last year in preventing much worse economic damage, as country after country shut down to prevent the spread of the coronavirus.
Human-resource monitoring company Hubstaff surveyed 400 business owners last August and 66 percent said remote working helped them avoided layoffs. Paris-based think tank Institut Sapiens said in a March 2020 report that remote working saved as much as 230 billion euros ($275 billion) of output last year in France, or about 10 percent of France’s economy.
‘Same amount of output without commuting’
With vaccination programs finally underway across most of the industrialized world, economies are expected to rebound strongly later this year and next, partially because of pent-up savings. U.S. consumers have an additional $1.6 trillion in savings since the start of the pandemic, according to Robert Gordon, an economics professor at Northwestern University.
According to the International Monetary Fund, the U.S. economy shrank 3.4 percent in 2020 but will bounce back 5.1 percent in 2021 and 2.5 percent in 2022. The euro zone shrank 7.2 percent in 2020 and will gain 4.2 percent this year and 3.6 percent in 2022.
At the same time, the International Labor Organization says there are signs that jobs in finance, communications and digital services are already recovering, while jobs in retail and food services remain depressed.
At its simplest, economic growth is the increase in the amount of goods and services produced per head of the population over a period of time. Could remote working play the role that computers and the internet played in boosting productivity around the turn of the millennium?
After growing a healthy 2.5 percent to 3 percent a year in the U.S. from 1995 to 2005 as computers and better communications became commonplace, productivity gains petered out, gaining just 0.6 percent a year over the last decade. Smartphones and social networks are great for consumers, but they didn’t really change how we work, experts say.
“This shift to remote working has got to improve productivity because we’re getting the same amount of output without commuting, without office buildings, and without all the goods and services associated with that,” said Northwestern’s Gordon in a UCLA Anderson forecast interview in February 2021. “We can produce output at home and transmit it to the rest of the economy electronically.”
That view is shared by the Conference Board business association, a New York-based nonprofit business membership and research group organization.
“The pandemic forced U.S. households and businesses to adopt new technologies and modes of operating, including online shopping and telework, at a much more rapid pace than would have otherwise been the case,” it said in a November 2020 report. “The end result, we believe, will be TFP (Total Factor Productivity) growth akin to what was seen in the United States in the 2000s — a period of rapid digital transformation.”
There is anecdotal evidence that remote working is more efficient. According to the U.S. Census Bureau, before the pandemic, the average American spent 53 minutes a day commuting, or almost 90 minutes if they lived in the Washington D.C. area. If you think it’s better in Europe, think again. The average commute in London is 74 minutes and in Paris it’s 92 minutes.
Freelance platform Upwork estimates that Americans who worked from home in 2020 saved on average nine full days and $4,350 because they weren’t commuting.
As for being more productive, employees and their employers concur to differing degrees. According to Hubstaff, 77 percent of U.S. employees say they are more productive working from a distance. Some may be flattering themselves; still, in the same survey, a substantial 45 percent of employers agree that remote working will increase productivity and about 44 percent say it will improve profits.
Karen Fichuk, the chief executive officer of North American operations for Dutch temp agency Randstad, said in a Jan. 18, 2021, briefing that 55 percent of U.S. executives say their workforce is as or more productive working remotely as they were before the pandemic.
For the moment, these sorts of unscientific surveys are all we have to judge the productivity benefits of remote working. Few economists took much interest in remote work until last year when the proportion of telecommuters in most countries jumped from under 5 percent to about 50 percent.
“There is no clear consensus on important questions such as whether telecommuting makes workers more productive,” the World Economic Forum (WEF) concluded in a February 2021 report.
Remote work could exacerbate inequality
The WEF study found that the best outcome for the global economy would probably be for 20 to 40 percent of work to be done remotely. That’s because some in-person time is necessary, it said.
The finding is in line with other studies at the company level that suggest that two to three days a week in the office is the optimal mix because some face-to-face time is necessary for developing talent and maintaining company culture.
Dembik, the Berenberg economist, says one risk of remote working is that it could exacerbate already troubling inequality levels because it’s best suited to a college-educated workforce and isn’t ideal for low-paid service jobs — many of which will disappear once fewer office workers are commuting to city centers.
The consultancy firm McKinsey & Company estimates that the U.S. will lose 4.3 million jobs in customer and food service in the next decade. A Brookings Institution study concluded that 32 to 42 percent of Covid-induced layoffs will be permanent.
Dembik warns that too much remote work may eventually start to put downward pressure on even white-collar jobs.
“If everyone is going off to live in the French or American countryside and [work] from there, at a certain point employers will say why not go all the way and just hire someone in Poland or India instead,” he said.
Several experts say that even after the pandemic is over, governments will have roles to play in aiding the transition to the new global economy.
A Stanford University study last year showed that even in the U.S., 35 percent of the population doesn’t have adequate access to internet services to effectively telecommute. In order to make up for the inequalities between those who can work remotely and those who can’t, governments might consider paying for people’s commutes, says Dominique Calmels, co-founder of French think tank Institut Sapiens.
“We have to avoid turning remote working into something that divides us into winners and losers,” Calmels said. “We have enough fractures in our society. We don’t need more.”
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