The long-term consequences of Covid-19 on the workforce: who – and how many – will work from home?

 Crises are transformational.

The second world war was a crisis that transformed the world.  Out of the ruins of a militaristic, fascist state, Germany emerged as the exemplar of liberal democracy. It led to the unification of Europe after centuries of conflict. And it transformed technology, precipitating a revolution in the communications and computing which drives today’s economies. 

More recently, the oil crises of the 1970s drove the search for alternative sources of hydrocarbons, boosted ongoing investment in alternative energy , and fueled the geo-political fire in the Middle East. Another: the terrorist challenges of the 21^st century, highlighted by the 2001 bombing of the Twin Towers, escalated Middle Eastern conflict, promoted advances global in surveillance technology and information exchange, and initiated the undermining of US hegemony in world affairs.

 And now, Covid-19

The 2020/21 pandemic has boosted research into the virus and its mutations, has seen massive investment in vaccine development (and now global distribution ), and stretched emergency medical facilities.  It will lead to lasting gains in public health practice. It has invigorated debt-led state spending, altered the trajectory of the world’s economies, and tested the foundations of liberal democracy.

What are the impacts on employment?

The obvious impacts are on economic structure – which sectors have increased and which have lost jobs and income.  Health and IT, distribution and communication services have made big gains.  In some areas limits on trade have sustained or even increased manufacturing jobs, in others they have reduced them. Travel and hospitality are suffering, and may have changed forever. We may even see the toning down of mass consumption necessary to avert the worst of climate change.

There will be other more immediate changes.  The design of workspaces will change, with attention likely to shift from fitting as many workers as possible into a space to addressing workforce wellbeing. And the rigid timetabling of the production day is likely to fall away as more people work remotely. 

 Working Remotely

The capacity to work from home – or on the road  – has been increasing slowly for three decades building on advances in IT and Cloud-based computing. With Covid’s aggressive contagion, the case for remote working has become compelling.  

The result has been a rapid lift in the capacity, flexibility, and reliability of the necessary technology. With this infrastructure in place, there will be no going back, even in a vaccinated world. Quite apart from diminished risk of illness, people will be reluctant to relinquish the up-side of lock down: flexible work practices, more control over their working (and leisure) lives, and, perhaps, more appealing work environments.

 Who will be affected?

The answer depends on what tasks can be performed effectively outside the disciplines of a set workplace. Back-of-office jobs processing and transferring information are obvious candidates in the historic view that higher order jobs (involving negotiation, personnel management, or specialist expertise) require face-to-face contact. The success of virtual boardrooms, classrooms, offices, courtrooms, and council chambers under lock-down has put the lie to that.

Lock-down has demonstrated that traditional face-to-face tasks do not demand a continuous joint presence. Remote working will mean fewer days at the office, better organised meetings, and fewer social precursors to getting business done.

 The numbers

McKinsey Global Institute analysed jobs and tasks in different sectors across nine nations to identify “work that doesn’t require interpersonal interaction or a physical presence at a specific worksite” [i]. Figure 1, reproduces the results for the United States, showing the shares of jobs in each sector that can be undertaken effectively at a distance. [ii]

It demonstrates substantial potential for remote working in high value-added sectors. For example, 76% of financial services jobs could be undertaken remotely, 68% in business management, 62% in technology, scientific and professional services, and 58% in information technology and communications 58%.

Figure 1: The potential for effective remote working in the United States

Source: McKinsey Global Institute (November 2020) 

Potential is lower in sectors where tasks demand direct contact with materials or customers . Just 8% of tasks in hospitality can be performed remotely without eroding productivity, 7% in agriculture.

The analysis was repeated for eight other countries. The results largely reflect their different economic structures.  UK has the greatest potential for remote working (33% of the total workforce). Germany, Japan, and France had levels similar to the US (29%).  Less developed countries have less potential: Mexico (18%), China (16%) and India (12%).

And in New Zealand?

Applying McKinsey's sector estimates to New Zealand[iii] suggests that here as well 29% of jobs could be undertaken remotely without reducing productivity. The two most “footloose” sectors (professional, scientific, and support services and business management and administration) account jointly for 30% of the potential (Figure 2).  Education and health sectors are also potentially major contributors given numbers they employ.

 Figure 2: The potential for remote working in New Zealand sectors

 

What Next?

The Covid-19 crisis, an event that almost nobody predicted[iv], is driving significant change to economies, migration, geopolitics, and public health.  It is also promoting rapid changes in the way we work.  There can be no expectation of reverting to the old ways. It makes sense to prepare for a  future in which a third of the workforce, more in high-value growth sectors, only occasionally attends a formal workplace.  The consequences for lifestyles and land use, especially in advanced economies, will be far reaching. The next post will consider some of those consequences for New Zealand .

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[i]              McKinsey Global Institute (November 2020) What’s next for remote work: An analysis of 2,000 tasks, 80 jobs, and nine countries[ii]            The McKinsey study also estimated a greater potential for more remote working in each sector, but the marginal increase to a theoretical           maximum came at a cost to productivity. This analysis draws only on the lower, effective figure.

[iii]        Based on Statistics New Zealand Business Demography Tables

[iv]        Bill Gates’ 2015 prediction in a Ted Talk is a noteable exception: - Bill Gates: The next outbreak? We're not ready | TED Talk