I can understand why the government is launching a campaign to encourage people to go back to work. Its own dire warnings about the importance of staying at home had contributed to a climate of fear that perhaps only the government itself can now undo. But there is also a danger that attempts to replicate the patterns of employment that existed before the pandemic could actually hamper the recovery.
It would be helpful to have a clearer idea of exactly what the problem is here – and how government intervention could help. There are doubtless some people who are still irrationally afraid of returning to their offices, and some businesses who are reluctant to welcome them back.
According to the regular Opinions and Lifestyle Survey run by the Office for National Statistics (ONS), the most common reasons why people are still working from home are that they have been asked to do so by their employer, or that they are ‘following government advice’. This might be where better information and more consistent messaging could have a crucial role to play.
Nonetheless, this may not be as big a brake on the economy as some think. The same survey also shows that people are already becoming increasingly comfortable about leaving home, for example to eat in a restaurant, and only one in ten are still worried about going back to work.
In the meantime, it is not obvious that home working itself is holding back the recovery. For example, despite images of empty streets in the City of London, the output of the financial and insurance sector in June was only a few percentage points below its pre-Covid level. (It may well be higher now.)
This also illustrates a broader point: those people who are working from home are typically employed in activities where it is relatively easy to do their normal job without significantly reducing their output.
Indeed, a report by academics at Cardiff and Southampton universities found that the majority of people working from home are just as productive, if not more so. This conclusion is based on self reporting, but it would also be surprising if so many employers allowed home working if it were as bad for productivity as some suggest.
Consistent with this, a survey for The Times has found that three quarters of the UK’s biggest employers are looking at a permanent shift to flexible working. This is surely a ‘good thing’ both for these businesses and for the people they employ.
For many businesses, home working can create some valuable cost savings, especially if the alternative is expensive adjustments to offices to allow for social distancing and health precautions.
I’d also be relatively sanguine about evidence that UK workers have been slower to return to their offices than many in the rest of Europe. The UK figures appear to be distorted by the dominance of London (people are slower to return in big cities), a larger financial services sector (where it is easier to work from home), and a later exit from lockdown. But the UK does also have a relatively flexible labour market – and much lower unemployment than the euro average.
Less positively, an earlier return to the office in some other European countries might also help to explain signs of a renewed pick-up in coronavirus cases – threatening the economic recoveries there. Indeed, the rebound in the euro area already appears to be losing some momentum, even as that in the UK gathers pace.
Of course, home working may not be sustainable for everybody. There are valid concerns that home working can undermine teamwork, and make it harder to train and develop staff. It is also possible that employees who are less visible in the office are more likely to be made redundant. But these are individual risks that workers and employers can judge and respond to themselves, without being told what is best by the government.
Others will be more qualified than me to comment on the impact of working from home on mental health. Perhaps meeting and socialising with colleagues is better in person. However, it is also possible to develop new social networks in your local community.
What’s more, the same academic study found that almost 90% of people would like to continue working from home in some capacity, with almost half wanting to work at home often or all of the time. This does not suggest home working is bad for your wellbeing.
Again, the sort of people whose jobs allow them work from home are less likely to have the financial worries that are a major cause of the increase in depression during the pandemic. At the very least, they might be more able to afford to put in more time at the gym, or their neighbourhood cafe, or other forms of spending locally or online. Few will be missing the misery of the daily commute.
This leaves the fear of city centres becoming permanent ‘ghost towns’, as flagged by the CBI’s Carolyn Fairbairn. Yes, companies that depend on serving office workers are suffering from increased home working. But the purpose of economic activity is – or should be – to improve the welfare of consumers, not to support particular businesses or protect particular jobs.
It would certainly be ridiculous to suggest that someone should have to travel two hours a day just to make sure they buy their lunch from Pret, or to prop up the value of commercial office space. Businesses should focus on providing the type of goods and services that consumers want – when and where they want them. And if we need fewer offices, let’s convert them to housing instead.
We mustn’t forget the reason we are here in the first place: the pandemic. The logic of asking people to work from home was to protect lives, including those of others (a textbook example of an ‘externality’ that would justify government intervention). But there is no such argument against homeworking. If anything, we should be thankful that people can work from home and avoid adding to the crowds on public transport and in offices themselves.
Finally, it is important for the government to put its own house in order too. I’m not thinking here of appeals to civil servants to return to their offices for the greater good. They (and the departments or agencies employing them) should be free to make decisions on the same basis as the rest of us.
Instead, this is a point about the large falls in the outputs of the state education and health sectors as a result of school closures and the diversion of NHS resources to the treatment of Covid patients. In particular, getting the vast majority of kids back to class in September would provide a further boost to the economy – both directly (the fall in the output of the education sector is estimated to have knocked about 2% off GDP in the second quarter) and indirectly (not least by allowing more parents to return to work).
I’m optimistic that the economy can complete the ‘V-shaped’ recovery that began in May. But that depends on markets being free to adapt – including by embracing new ways of working.
This is an extended version of an article first published online by the Daily Telegraph
Plain-speaking Economics 