An economics professor at Stanford University says working from home could be part of the solution to the meagre productivity growth facing New Zealand and many other countries.
Prime Minister Christopher Luxon’s overarching policy goal is to transform NZ into a highly productive economy, which can support higher living standards and better public services.
But the Treasury has warned that global productivity growth has been slow in recent years and is only expected to get slower. It published a long list of possible culprits in May.
Despite the Coalition Government’s scepticism of working-from-home arrangements, Stanford economist Nicholas Bloom argues it could be part of the productivity puzzle.
“In my lifetime as an economist I have never seen a change that is so broadly beneficial,” he wrote in an article for the IMF.
“The 2020 surge in working from home has helped offset the pre-pandemic productivity slowdown overall and is boosting present and future growth.”
Bloom believes working from home will improve productivity by creating a more inclusive labour market and freeing up capital to be reinvested in more impactful places.
Labour boon
His theory is that remote and hybrid working has brought millions of people into the global workforce who previously felt it wasn’t worth having a job.
This includes people who have childcare responsibilities, physical disabilities, or who live in rural areas. It may also include semi-retired workers who still want to contribute in some way.
Bloom’s example was that two million people with disabilities entered the workforce in the United States following the pandemic. These people are capable of being productive workers but struggle with long commutes and may need a customised work environment.
Having a work-from-home policy may mean being able to hire a top-tier candidate with a physical disability, instead of a mediocre candidate who is comfortable on the rush-hour bus.
New Zealand had 82,500 people receiving Jobseeker Support due to having a health condition or disability in June this year. WFH could help some find manageable jobs.
Another example Bloom offers are prime working-age women, who often drop out of the labour force to do the heavy lifting on childcare. Flexible working arrangements makes it much easier for productive parents to share childcare responsibilities and both re-enter the workforce sooner.
Increasing the number of the people in the workforce would grow the economy but not necessarily productivity — which is measured per hour worked.
Bloom says the productivity boost would come from the ability for employers to better match workers with jobs. Flexible work allows the best candidate to take a role regardless of their location, physical abilities, or competing responsibilities.
Capital allocation
The other possible productivity booster may be more efficient use of capital. New Zealanders have huge amounts of their capital buried in residential homes which sit empty half the day.
If employees were based at these homes a couple of days a week, society would need less office space and expensive transport infrastructure.
“More intensive use of our home capital—the space and equipment in our houses and apartments—can allow society to save on the use of transportation and office capital, which can be redeployed to other uses,” Bloom wrote.
Cheaper commercial space may make some new kinds of businesses more viable, and generate new activities. It may also reduce the cost of housing by freeing up space in urban centres, and creating opportunities in rural areas which were previously too far to commute.
All these savings could mean higher productivity if businesses and governments choose to reinvest the spare capital in technology and equipment, or higher wages and lower taxes.
“Collectively, these capital contributions could also raise output a few percent over the coming decades,” Bloom said.
Pros and cons
Of course, workers clocking in from their homes in the suburbs has caused a shift away from consumption in central business districts. Those businesses are losers in the short-term, although this should eventually be offset by more affordable housing replacing city offices.
Bloom pointed out that many essential in-person workers—such as firefighters, teachers, and bus drivers—had been priced out of cities by office workers who could be located elsewhere.
“Cutting the amount of space for office use in city centres and converting it to residential use would make housing more affordable for these essential workers,” he wrote.
Working-from-home has been a hot topic lately due to the Coalition Government’s direction for the public service to cut back on its flexibility.
But Bloom’s analysis was not specific to public sector work. It took a view of employment across entire economies without distinguishing between public and private.
He also didn’t claim WFH had any productivity benefits for individuals. Early research suggests any benefit of a quiet work environment was offset by less contact with teammates.
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49 Comments
We have a productivity deficit in this country because:
1. We refuse to invest in the things that make us productive (people/plant/machines/startups/R&D/Universities)
2. We refuse to reform our tax system to encourage productive work (its geared towards property investment, not building businesses or doing R&D)
3. We have an ingrained culture of lazyness combined with tall poppy syndrome
Change all those things, suddenly our productivity will sky rocket. Claiming WFH is a problem for productivity or will fix it, is laughably incoherent.
My understanding is that we're not good at "applying ourselves enough" when studying or working. Generally, we are not slackers but also not ones to push ourselves hard to get more out of the time and opportunities we have in hand.
I even heard a roundtable of NZ academics agree that even their bright Kiwi students underachieve by international comparison because they are often laid back.
I think part of this is due to the lack of pressure. In my experience people (all over the world) respond to having a sense of competition or urgency, which is really missing in many aspects of life in NZ. For better or worse, I don't know. I remember the point at university when, halfway through a finance degree, I learned that recruiters were more interested in "fit" and "personality" than grades. This extended even to the point that students with all A's on their transcripts were judged for being 'one dimensional' and 'too academic.'
This same attitude carries into the workplace and ultimately gets passed on through generations.
You are conflating work ethic and pressure. I did too but learnt the difference while living and working in Austria and Denmark several years ago as an engineering grad.
Good design, innovation and craftsmanship require a strong work ethic. They also have more generous welfare programmes that ours, so no real pressure or sense of urgency among locals.
What is wrong with achieving the “3 Bs” and not wanting more? On average most who reach this milestone would be very much upper income earners.
I guess by your standards I’m not ambitious as I retired at 58 to spend my remaining years training, reading, having quality time with family, and taking extended overseas breaks in the NZ winter. Disclaimer, I have a crap car and no bach or boat.
Universities are a problem alright blob, but not from an under investment perspective. They should have courses that provide no value defunded and excised. Too many these days are more interested in sexuality, race, diversity and equity. Until that nonsense is riven from them and destroyed, our Universities should have their funding progressively cut.
I don't think these things are actually taught at our main universities or if they are, not as big a problem as you are suggesting.
The biggest problem you are right though is we encourage people into courses that have little real world use. How many bloody bachelor of arts grads are needed, the numbers are something like double the number of engineering students, which is frankly, idiotic.
Arts grad (early 2000s) here!
And though I did get quite a lot out of it, I would have been better off doing something else.
There is a misinformation problem around university; a lot of, essentially, salesmanship about how employers value arts graduates because they've 'learned how to think' and so on, and that while there may not be a clear path as in the professions or trades, there are many opportunities for arts graduates.
It's bunkum, based on the experiences of those who graduated in the 70s and kept alive by wishful thinking and University marketing departments. In the 70s, you still needed to be smarter than average and academically inclined to do an arts degree. When you were there, the courses required large volumes of challenging readings and minimally-supervised study. All of that has been whittled away by neo-liberalism (have to cram in as many inadequately prepared students as possible to fund the institution!) and progressive educational dogma (students can't fail, they can only be failed by the system!) It was never about what students learn in an arts degree, more a guarantee of a high level of literacy and motivation.
Now, the only people interested in hiring arts graduates are those running the less interesting Ministries. And there are only so many policy analyst jobs to go around.
(I believe that universities as we know them are in deep crisis. It'll be resolved somehow, but there will be creative destruction...)
Productivity is work, work is done by expending (accurately: transforming) energy.
Human labour isn't even noise, compared to fossil energy.
But energy is subject to the Laws of Thermodynamics - which is why 'productivity' was ALWAYS going to plateau.
Which makes this article sort-of correct, but for the wrong reasons. By not travelling, the energy may instead produce something real. But it's still just a zero-sum swap under a sinking lid - which I doubt the good Prof is even aware of.
"But Bloom’s analysis..."
When I saw "analysis" I assumed this would be some sort of research review. But Bloom's merely penned a media article for the IMF in which he opines:
“In my lifetime as an economist I have never seen a change that is so broadly beneficial"
He does mention a few studies, but they do NOT conclude that productivity is increased by WFH:
"In summary, the impact of fully remote work is perhaps neutral, because firms tend to adopt it only when such work arrangements match the work activity—often tasks such as coding or IT support, carried out by trained employees in a managed environment. But while the micro productivity impacts on any individual firm may be neutral, the huge power of labor market inclusion means that the aggregate macro impact is likely to be positive."
So despite the research, he offers his opinion that the impact "is likely to be positive". Hmmm.
I have no data to argue against him, but I imagine that it depends not only on the type of role, but very much on the individual. Good employees are highly self-disciplined and may benefit from some time away from the office. Most employees are ho-hum - and some are useless and do SFA when they're at home without supervision.
Would be nice to have some decent research on this before singing the praises of WFH based on opinion and conjecture.
I think that is part and parcel of the "inequality" dogma. Successful people should be dis-enabled in order to enable the fringe dwellers. So those who aspire to career progression should be shut up at home away from their colleagues so that the one legged, obese, blind person can work a few hours from home.
Attaching yourself to a profitable oligopoly, government department, public institution (university) or organisation funded by government will give you cloud cover for faffing about at home a few days a week and getting paid. You don't need to worry about being accountable to your direct report because they have the same faffing rights that they want to preserve. As does their direct report and so on and so on up the chain. It is only when the shareholders or government paymasters start going short of cash that the message goes back down the chain to pull out thy finger and get back to the office.
Human happiness revolves around our connections with one another ... did we not learn the lesson from the Covid19 lockdowns the depressive nature of being isolated from important friends , family & work colleagues ...
... WFH is not the answer to our poor productivity
Encouraging innovation & competition is the solution ... encouraging small business start ups ... weaning Kiwis off their obsession with houses ... embracing change and being at the cutting edge of technological advances ...
... I'm not anti-WFH per se , a hybrid new work model may be fine in certain circumstances ... but I don't see it powering increased economic growth & productivity as the author of the article asserts ...
The ways & means to power NZ's poor productivity growth lie firmly in increased competition , and away from our current monopolistic approach to industry & healthcare ...
Other research shows that WFH is the new "mummy track" - out of sight means out of mind, and those that have not built personal relationships with their superiors are last in the queue for promotion and pay rises. Its not about whether you can do your current job from home, but whether you are going to learn the skills and develop the networks that will enable you to get your next job. And that usually requires interacting with actual humans not a computer screen.
How old is that research? Out of sight is not out of mind these days, because teams are in constant contact with each other through multiple online paths.
I've attended 4 meetings today via Teams, and engaged in quite a number of conversations, both with individuals and larger groups. I've taken phone calls, held a couple of video calls, answered innumerable emails, and so on. Two years ago I secured a very healthy pay rise and promotion from managers I'd never met face to face, and I turned another promotion down this year because it was a role I wasn't interested in. My income has grown markedly over the 16 years I've been working remotely. In that time I've been an integral part of major IT projects and learned new systems from scratch to become a SME in those new systems. I haven't set foot in the office since well before Covid.
Unproductive workers are unproductive no matter where they are. Spending one's day holding a chair to the ground in an office isn't a guarantee of a fast track to the C-suite.
What a life to look forward to. Locked in your house 24 hours a day with only your partner/kids for company. No ability to meet or make new friends. No human to human interaction with colleagues, just screen time. This is the Left's blueprint for 15 minute cities. No more CBD's with nice restaurants, bars and shops, because you wont be there to utilise them so they'll all go bust. They'll just become ghost towns filled with the homeless drug addicts. Much like Queen St in Auckland, and most of central Wellington now.
You are only working from home - you still have a life outside of work. You also have more money and time to pursue your non-work life without the lost cost and time of commuting. So while you may spend 8 hours a day at a desk, the rest of the time you can be out socialising, exercising, eating, drinking, shopping. Those "work friends" won't care for you once you move on to a new workplace. The friends you keep up with outside of work are the ones that stick around.
My best friends over the course of my adult life have been people I've met through work. Some of the best nights out of my life have been with work people. I'm about to head off to Australia to meet up with one that I met at work almost 20 years ago and we still keep in touch despite living in different countries. Work people have been my friends, my flatmates, and my partners. My life would be so much poorer for never having interacted with them on a social level.
I am getting close to a workmate at the moment, we are starting to become quite close friends, so much so we have visited each others houses and are starting to hang out quite a bit. We both work from home full time. I also have a couple of very close friends who I have met via the internet and never new their faces for the first couple of years of our relationship as it blossomed over the internet. Same with ex partners.
Don't pretend that WFH is a stopper for any of the things you suggest. The world has moved on from in person relationships being the only possible way to form friendships.
What doesn't work for you will work for others. I barely leave home most working weeks, except for the gym at night, locked in my house with my partner and kid. It's certainly far from as abhorrent as you make it out to be. I don't dislike my colleagues, but the workplace is probably the last place I'd be seeking out new friends.
The bars/cafes in the Wellington CBD don't get my money, it's spent in the bars/cafes down the road from my house PLUS what I don't spend on my commute (which would be $500 per month).
Agreed. Im lucky enough to be able to drive or cycle to work (same time for the commute) in 15min, and WFH 2 days per week as i prefer to be in more than out. I have a friend in Oregon who has been permanent WFH for 3 years and collaborates with others all over the USA digitally. He now lives in a motorhome by the beach with starlink, and loves it. Who wouldn’t love to have that option, and imagine the opportunities it opens up for those living rurally.
*Walks outside and surveys expansive lawn leading out to paddocks. Looks up at a few clouds in the sky. Listens to traffic waaay off in the distance. *
Poor me. :(
We have no need for CBDs. We entertain friends at home, sitting on a warm, private terrace, with no last calls or closing time, watching the stock quietly graze, or the birds flying past, or the kids playing.
There is no office flash enough or large enough to voluntarily draw me back.
I was struggling to concentrate briefly this morning due to the Tui (plural) singing in the large Oak tree out the front of my house. If I were in the office, I'd have to deal with a mix of juvenile cackling from inside sales staff down the corridor and the incessant beeping of forklifts and trucks.
Here's a novel way to increase our nation's productivity : No more " jobs for the boys ! " ...
... appoint people to high powered positions based on talent & ability , not on who's connected to who ... get the ex politicians , accountants & lawyers out of the boardrooms of our companies , and replace them with industry experts , tradies , engineers , tech experts ...
... I'm happier to see greater diversity in our parliament ... it reflects our society ... and highlights the boon to our culture of immigration ...
Not happy to see a non academic such as Grant Robertson appointed as vice chancellor of Otago Uni ... paracheuted in ahead of more worthy candidates ... " Jobs for the Boys " ... sadly ...
Yes, and did you see the other day where Bruce(?) Hassall, the resigned chairman of FBU, had tried for a job on the Vector board until some Vector shareholders expressed their concerns to the board. The board must have said something to Hassall who then pulled out of the candidacy and Vector announced this to the NZX the other day.
(Google NZX Main Board and scroll down to Vector (VCT) then click on announcements.)
How many sluggards are still on the Fletcher Board? And shouldn't the Vector board have picked this up before having to be told by shareholders?
How many public companies have been mis-directed by members of the "directors club"; is that "club" just a haven for distributing sinecures to incompetents or incompetents to sinecures.. The most successful companies I have observed still have members of the family who started the company on the board. Once that family connection is broken the company often goes into a slow but sure decline. Directors may be able to interpret (and finesse) the numbers but they can't have that motivation, drive, and shrewd instinct that the original owner had otherwise they would be working on their own company; Fletchers, of course, are the prime example.
I remember going to an annual meeting of Turner's Auctions some years ago where the shareholders were going to elect a couple of new board members out of three or four candidates. The bloke sitting next to warned me that one of the candidates--a youngish guy--had a lot of 'baggage' as a previous director of another company, which I wasn't aware of, but everyone else must have known because he got virtually no votes.
Lots of nonsense in this article, including all the nonsense about converting office blocks to apartments. This simply does not work for the majority of office buildings, as the floor plates are too large.
I get tired of economists making nonsensical and ill informed comments about urban development. It happens a lot. They need to stick to their swimming lane
Looking at the list of culprits in the report, it would be helpful to refine education more: while we may be generating a lit of university graduates, what are the degrees in?
We desperately need engineers, medical people of every type, applied sciences - in fact pretty well anything applied that points you at doing something practical and productive.
Yet more graduates in sociology, political science and the like, where your ultimate fate is academia to reproduce the discipline; likely not so much.
Great to be having this conversation but it usually amounts nothing as another property buying spree takes hold.
Christopher Luxon should put his money where his mouth is and lesson his concentration on property if he really wants to improve our productive output.
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