As early as the 19th century, workers began to fret about the stresses of office life.
“You do not know how tiring it is to breathe the air of four barred walls without relief day after day,” wrote the British essayist Charles Lamb in a letter to the poet William Wordsworth in 1822, railing against his work in the East Indies Leadenhall Street, London.
For the past 17 months, however, Lamb’s modern successors have mostly worked from home, free from what he called “official custody”. Today’s employees are experiencing a radical change in the way they work, one economist says they are already beginning to drive economic productivity and accelerate innovation.
The pandemic has weakened the attraction of city centers, and new forces are now reshaping the knowledge economy. Public transport trips to cities are declining, as are coffee shop sales, while demand for real estate in leafy suburbs is increasing. Americans spent more time doing leisure and household activities in 2020, replacing commuting life with real life.
While a more permanent transformation of working life will have painful consequences for many inner-city businesses, economists see a realignment underway that can reinvigorate smaller cities and suburbs. New digital tools mean that retail and gastronomy – as well as knowledge-intensive industries – are already experiencing a profound change.
Working from home one day a week will increase productivity by 4.8% as the post-COVID economy takes shape, according to a recent study of more than 30,000 U.S. employees by José María Barrero co-authored by the Instituto Tecnológico Autónomo de México and others. Much of this one-off increase is expected to be due to reduced commute times, a factor that economists typically miss.
The transformation will bring lasting benefits, said Steven J. Davis of the University of Chicago, who studies the evolving world of work and was one of the authors of the productivity study. The “positive consequences will be there indefinitely,” said Davis.
In his remarks on Aug. 17, Federal Reserve Chairman Jerome Powell pointed to a fundamental shift: “I think we know we are not just going back to the economy we had before the pandemic, but it is time need to see exactly what the changes will be. “
“It seems almost certain that there will be a lot more remote work going on in the future. So that’s going to change the way work is done and the way work is done, ”Powell said.
The clues were there before COVID-19 struck. In 2013, a landmark study by Stanford University’s Nicholas Bloom found that working from home increased productivity by 13%. A 2019 Oxford University research paper found that happy employees made more sales.
Countries with stagnating productivity records will pay attention. According to Bloomberg Economics, the UK fell 15% below its pre-crisis trend in total factor productivity in 2019. It’s been an unparalleled slump since Charles Lamb’s time, exacerbated by Brexit, an aging population and the pandemic. European competitors struggled while the US struggled to break away from the crowd.
For all the optimism surrounding these tectonic shifts, however, some economists have advised caution. While recent research by the Federal Reserve Bank of San Francisco recognizes that sweeping changes in the way people do business could increase efficiency, they caution against interpreting recent productivity gains as the result of more homework, citing data biases .
Even the Bank of England admits that hybrid meetings “can be more challenging”. A majority of managers are concerned about the impact of working from home on collaboration, corporate culture and wellbeing, according to the OECD, which also cited employers’ concerns about their decreased ability to observe workers at work.
A study conducted by Michael Gibbs of the University of Chicago found that workers worked longer at home to complete the same task, as concentrated time was interrupted by domestic distractions such as childcare and online meetings. The report also found that people who work from home may exaggerate their productivity in surveys to encourage adoption of the practice.
Former British government adviser Giles Wilkes is more optimistic. “The ability to deliver products in different locations, use property more efficiently, etc., is innovation that drives productivity,” said Wilkes, who recently published a report on the UK’s productivity problems.
“Hybrid work is a change in the demand and supply patterns that drives the economy.”
Break out of the mill
Yuri Suzuki doesn’t skip his 70-minute rides twice a day. Suzuki, a partner in the international design firm Pentagram, used to ride the “toxic” Central Line, an underground line that bisects London.
“After getting home I just felt exhausted – I couldn’t really think or create anything,” Suzuki said on a Zoom call from his home in the coastal town of Margate, Kent, where he has lived since the pandemic began.
Relieved of the stress of travel, Suzuki finds that he can “invest” time in creative thinking long after the formal working hours. This has increased productivity as his team is taking on twice as many projects as it was before the pandemic. To get in touch with his team, Suzuki plans to return to the office about once a week.
At this point, where the Delta variant is rapidly spreading around the world, many plans to return to the office are being put on hold. But evidence from nearly 18 months of the pandemic is helping the C-suite make decisions.
Many businesses, new and old, want to combine the benefits of working remotely with the efficiency of face-to-face meetings. Google lets employees spend two days “where they work best”. Lazard Ltd., a 171 year old financial advisory company, is following suit for some employees. The wealth manager State Street Corp. will close its two Manhattan offices, it said on August 16. Even banking giants will allow some flexibility: Morgan Stanley’s Chief Executive Officer James Gorman sees office hours as “not 100%, but not 0%”. of total hours.
“Both workers and managers say that two to three days a week from home are ideal,” says Chiara Criscuolo, who does productivity research for the OECD. Communication and professional relationships can suffer afterwards, she says.
While hybrid work is catching on with educated, well-paid employees, less than half of the workforce has this option, according to the McKinsey Global Institute. In the UK, only 36% of people were working from home in 2020, even during the lockdown.
However, as more work takes place outside of the traditional office, workers will bring their wealth and business knowledge to a wider range of communities and distribute economic gains more equitably, said Abigail Adams-Prassl, an economist at Oxford University.
A painful postponement, but “broadly beneficial”
That will have painful consequences. Downtown cafes, shops and hairdressers aimed at professionals are the most exposed. Bloom, Davis, and Barrero believe that a shift to partial work from home will hurt annual spending in major U.S. city centers compared to pre-pandemic levels. Manhattan alone would see a 13% decline, they forecast.
Wilkes admits that “a lot of people” are hurt by the change process. Even so, he says that “the changes we have been forced to make will, by and large, be beneficial”.
Hybrid work also has the potential to bring a wider range of people into the workforce, Davis believes, and alleviates long-standing productivity problems “by harnessing the skills of people who otherwise did not work or did very little.” This includes mothers and people who live outside of big cities. The flexibility to work from home could also encourage older workers to stay longer in the labor force, said the UK’s national statistics office. This is a priority for economies facing aging populations.
US consulting arm PricewaterhouseCoopers began stepping up some aspects of hybrid work back in 2017 – including flexibility of where and when to work and training on remote work technologies, says Chief People Officer Michael Fenlon. In 2018, the University of Southern California found teams were doing better and bonding was improving. The focus has sharpened since COVID-19.
“Before the pandemic, we learned that a culture of trust is essential for well-being and flexibility. Teams that have adopted this reported stronger relationships, stronger collaboration, better teamwork, and stronger relationships with customers, ”said Fenlon. “We used the pandemic to become even more targeted and explicit.”
Employers around the world are now grappling with this change as they try to balance productivity growth with employee creativity and satisfaction.
It is a mystery that is 199 years late for Charles Lamb. “My theory is to enjoy life, but my practice opposes it,” he wrote to Wordsworth in 1822, lamenting his years in smoky offices.
Lamb’s desk successors – and their managers – will soon find out if they can put their own theories into practice.
Marc Daniel Davies and Jeff Green of Bloomberg contributed to this report.