Australia has a major productivity problem. As the government’s recent intergenerational report says, achieving the report’s assumption of 1.5% annual growth “will require an improvement over recent performance. Productivity growth averaged 1.2% annually over the last complete productivity cycle in the 2010s. Government policies can assist in lifting productivity, including by helping individuals and businesses take advantage of new innovations and technologies”.
The Business Council of Australia, responding to the report, said “our growth prospects are weak unless we can substantially lift productivity growth from recent low rates”.
So, logic would suggest we pursue every opportunity for productivity improvements in the workplace.
What if there was a reform that could deliver a massive boost to productivity in many sectors? Say, more than 10%. Or even bigger — 20% or 30%? Should we be investigating it? Presumably. Or should we be ignoring it so a sub-section of business that depends on less productive forms of work can continue to make money?
Working from home (WFH), which has necessarily exploded over the last 18 months, could be one such productivity reform. Or, it could be the single biggest blow to productivity in decades. Or somewhere in between — we don’t know.
There’s been a huge number of studies of the productivity impacts of WFH in recent months, on top of some research from before the pandemic and the evidence is very mixed. Some survey-based studies suggest employees, and some employers, believe they’re more productive — much more productive. Workplace-output studies suggest big increases in productivity.
But other performance metrics suggest employees just work longer to produce the same, or less, outputs. Some big tech companies, who have led the way on WFH and have in many cases made it permanent, have reported increases in innovation — despite the argument that true innovation only happens when bumping into a colleague on the way to the office kitchen. A Japanese study revealed large falls in productivity from WFH. A McKinsey report found increases in WFH productivity over time.
So, the productivity impact could be anywhere from 50% up to 50% down in those industries where large-scale WFH is possible.
WFH also supports something advocated for by the Nationals for a long time — economic decentralisation. Remember Barnaby Joyce moving an agency within his portfolio to his own electorate and insisting it was a wonderful thing? WFH enables that across many industries, freeing people to move out of capital cities to regional centres, which gain economic benefits as well as impacts from locals displaced from regional property markets and services.
Employer views are also mixed. Facebook is now letting all employees work from home if they can. But some employers thinking WFH is a scam. The head of Goldman Sachs called it an “aberration” that hurt productivity. Others are somewhere in between, like Google, which is preparing to have 20% of its staff permanently work from home. They, at least, are in a position to assess the impact on their businesses.
Others, however, aren’t interested in the productivity benefits or disbenefits. They oppose WFH because they make money from workers in offices. The mayor of Melbourne, the Victorian Liberals and employer groups want the government to force public servants back to the office because “we need them back to make Melbourne thrive again”.
The head of the Victorian Chamber of Commerce and Industry wants all workers back “for a minimum of three days a week” because it “will make a huge difference to the many businesses that rely on foot traffic: shops, cafes, hairdressers, dry cleaners, beauty salons and many others”.
And commercial property owners and workspace ticketclippers have long been given a free platform by the AFR to argue against companies abandoning their valuable office leases — claiming WFH led to lower productivity, that workers hated it, or that people bludge when they work from home.
These companies that directly benefit from people working in offices, or those who indirectly benefit through siting their businesses close to offices, could be saving us from a huge productivity fall. Or they could be akin to the horse and buggy industry warning against adoption of the dangerous and productivity-damaging motor car. And what does society owe to the shops, cafes, hairdressers, dry cleaners and beauty salons that face structural change like this?
WFH comes loaded with social impacts, some potentially massive. Many of our most menial and most important jobs can’t be done remotely. What social stratification results from splitting the workforce into those who can work from home and those who have to go to a construction site, an aged care facility, an infrastructure project, a school?
Should those who can’t work from home demand a premium for the inconvenience of commuting? What further burdens does it place on women, expected to magically combine work and childcare, particularly with higher female participation and ever-larger mortgages pushing families to require two full-time earners?
A smart government would be throwing a lot of resources into answering some of these questions and developing policies to accommodate the answers. If we had one.
WFH increasing the burden on mothers??
WFH has the potential to REDUCE the burden on mothers, as their partners are about the home more and able to share parenting. Fathers having less late nights in the office, being able to mind the kids while mum has a nap, exercise or catchup. Laundry can easily be done between meetings, fathers get to see their young children more. This is amazing for young families – kids and both parents!
Thats the clear finding across those my very large organisation.
Unfortunately, this is yet another example of Crikeys gendered nonsense creeping into its otherwise good journalism.
That would require the sort of new man whom the Germ proposed in the final chapter of her magnum opus, half a century ago.
Hasn’t yet happened, prospects no better than then.
Evolution?
Hate to say it but having him at home all day is worse than the kids being there. Between school drop off and pick up there is only about 47 mins (or so it appears) but he always wants to talk about his work, have breaks, music on and follows around the house salivating over any food I make so feel compelled to make his. Uses all the printer ink running colour calibration tests and complains about workload while your sighs of impatience to get back to work go straight over his head. Who wants to be at home 24/7 with the family? Honestly this was a mistake. I want to dress up nicely, see other people, go to a real cafe, even a city train sounds glamorous to me after 18 months on the coast. I’m done here. And the dogs! My lord, the barking dogs!!!
I have a mixed experience with WFH insofar that our small company had already planned to move to that model prior to the pandemic. Indeed we had already given notice. Initially I loved it, with the convenience of working in my home office and minus the considerable cost of commuting. But I noticed a shift in my boss and her attitude towards me when I started to more sharply delineate my work life balance and started to finish my work day when I was supposed to. This became more annoying to her once Jobkeeper finished in September and she had to foot the bill for my wages again. I then had my hours cut by one third in April with no reduction in my duties reflected in my new job description! I gave my notice and finished up at the end of May. My belief is that because she couldn’t see me doing the work, I was slacking off and therefore I was micromanaged out. Typical small business person with no idea of the time required for administrative work.
The myth of presenteeism, that people at their desks are working productively, and of absenteeism, that if the boss can’t see you, you mustn’t be working. It’s an immature mindset, the sort of people who should never become managers in the first place.
You make a good point about delineating home and office life. I started knocking off at 5.30 after working more than my contracted hours so that I could get some exercise in. It was good for me in that I worked less unpaid overtime and I also got more exercise, as after a day at home you have to get out.
Well said. So we have as many immature mindsets as mature?
I am one of those whose observations would be that it increases productivity but accept that is anecdotal, ie. more research needed. Hybrid models look most likely anyway, not so good for driving true decentralisation. But the screaming that public servants be forced back into the city is being made for the worst reasons. The usual self-interested suspects, loose with the truth and happy to demand their profitability be guaranteed, while hypocritically spouting free market myths at every other turn Mostly the same people who lobbied against lockdown to “save the economy”, actually just them and damn the dead and sick.
Apart from any benefits the public might get from more productive public servants, and saved taxpayer costs on office space, we all benefit from less commuter congestion, including those who can’t WFH.That in itself is a productivity improvement that needs factoring in.
I was advocating WFH as a means of reducing traffic congestion back in early 2000s. The old style managers are the ones who suffer most, it’s a mindset that requires them to rethink what being a manager is.
It’s taken a pandemic for it to be embraced, and without doubt some companies will see productivity benefits and will stay with it. Some companies will save serious dollars not having to rent out expensive commercial office space. The losers will be the commercial office owners, and retail outlets around them, but I’m not sure an economy should be run just for the benefit of commercial office building owners.
It’s interesting I supervise a small team, and some of them are ultra-productive at home – all good. But then there are those who do not seem to be able to work from home effectively. Not being critical, its just that some people self manage better than others – also the creativity that happens spontaneously in the office seems to happen less right now. No absolute opinion – just observations…
A few questions/comments:
(1) NEW RECRUITS: What about the ability of new recruits to be able to train up and to learn about how the company/organisation and its people? WFH may work for those already established in a workplace and who have established workplace relationships, but it may be harder for new people to break into and to use effectively.
(2) CYBERSECURITY: Query whether we have thought enough about the cybersecurity elements of home-based working.
(3) LEGAL UNCERTAINTIES: I suspect other legal questions (eg maintenance of confidentiality, the boundaries of employer duty of care re home environments etc) are still being worked through. If so, reliable guidance on these issues might be scant.
(4) APPLES AND ORANGES: WFH may work differently in different countries and cultures. So WFH productivity studies from other countries may not be directly comparable to ones from Aus. Take for example Japan. I’m no expert, but a “back of the envelope” analysis would suggest to me that, in Japan, office work and being at the office are viewed in a different way to how they are viewed in Australia. Also, Japanese houses may have less square footage per person on average than Australian houses. Query whether such factors could affect the findings quoted re productivity of WFH arrangements.
Good points Rob, have you considered working for the Productivity Commission, they likely need some fixing as well.
It is a little known aspect of the Japanese economic successes of the last century that vast quantities of input, especially of small fiddling parts & pieces, were supplied to the zaibatsu – a social compact from the Meiji era.
Even gran & pop could contribute, even if as sweated labour.
One major problem is that WFH means What Fn Home to many people.