Is WFH helping or hindering productivity? We need to find out

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 report reads.

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.

These reports show 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 dis-benefits. 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 ticket clippers 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.

This article was first published by Crikey.