1. Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis write,
Our survey evidence says that 22 percent of all full work days will be supplied from home after the pandemic ends, compared with just 5 percent before. We provide evidence on five mechanisms behind this persistent shift to working from home: diminished stigma, better-than-expected experiences working from home, investments in physical and human capital enabling working from home, reluctance to return to pre-pandemic activities, and innovation supporting working from home. We also examine some implications of a persistent shift in working arrangements: First, high-income workers, especially, will enjoy the perks of working from home. Second, we forecast that the postpandemic shift to working from home will lower worker spending in major city centers by 5 to 10 percent. Third, many workers report being more productive at home than on business premises, so post-pandemic work from home plans offer the potential to raise productivity as much as 2.4 percent.
I would not be optimistic regarding the last point. But I do think that this will really accentuate the class divide. The people who work from home will be able to engage more with their children. They will have more flexibility in general for dealing with everything from medical issues to laundry.
2. I talk with Richard Reinsch about macroeconomics in the age of the virus. I offer the PSST perspective.
on net 10 million people not working. That’s an entrepreneurial opportunity to find something useful for them to do. But that means you have to encourage entrepreneurship. And under the Obama administration, you had discouraging entrepreneurship because they kept piling on regulation. And one of the quiet things that the Trump administration has done is to loosen those regulations so that entrepreneurs could work more quickly. But the current situation is so extreme in terms of the reconfigurations that are needed, that you need just an awful lot of entrepreneurial activity, and it’s going to take a long time for entrepreneurs to figure out how to use these extra 10 million or so people.
Alec Reeves, a pioneer of digital communication, predicted in the mid 1960s that people would tire of traffic jams and prefer to move minds not bodies by 2000.
There is the sound of short clip from a TV programme he made about this in 1965 on
https://youtu.be/F8hqgwQPJ1E
As things worked out, another aspect of digital communication, the pocket “telephone” encouraged people to remain on the move for longer, but 2020 is causing an irreversible change towards working from home.
So the relevant issue is how the demand for different types of housing will change. Maybe the 10 million unemployed can work in housing reconstruction.
PSST.
You can work at home and it can provide a productivity gain. All of the time and resources involved in commuting are gained. Office support resources are minimized. Less meetings, and the availability of far more focused, less interrupted work time is possible. It is easier to fit in more hours.
All of that can be squandered. Managers need to learn to manage differently. Workers can control their distractions, but can hide their distractions too, and that can get away from them. Some will be far more distracted. Flexibility with children, medical issues or laundry is good. Diverting your net work time to your children, medical issues or laundry is bad
Workers will go in both directions. New competitive patterns will emerge. Like any improvement in efficiency, you need the discipline to capture it.
I assume those who report being more productive working from home do not have kids. Before kids I used to work from home at least one day every couple weeks because I was much more productive without coworkers interrupting me. Now that I have 2 kids, I’m probably about 70% as productive at home as I am in the office.
I have kids and have been working from home for something like seven or eight years now. I’m vastly more productive at home, even though I probably work less hours overall (posting here being an obvious example, though often more hours during crunch times as I don’t have to commute or be otherwise inconvenienced when time is short).
I feel that being full time work from home is probably equal to a 50% or more raise in salary.
Which Trump admin efforts do you think have been most effective in making things easier for entrepreneurs? I can see a versus-baseline case that “at least he didn’t add even more burden” but it is not clear to me that there were significant rollbacks of existing regs that reduced the burden on creating new patterns of specialization and trade, vs assisting well connected existing industries.
The Trump Administration took about 800 deregulatory actions, most of which are listed on the Brookings Institution website in a “tracker.” You can see the list and immediately the absurdity of the unfounded conspiracy theory that Trump deregulation efforts benefit only or primarily benefited well-connected businesses becomes readily apparent.
For the record, small businesses greatly benefited from repeal of Obama’s expansion of overtime requirements, net neutrality, small bank regulations under Dodd-Frank, and paperwork maintenance. In addition restrictions on association retirement plans and portable health reimbursement arrangements.
David Henderson, no Trump toady, offers an overview of the total deregulation effort and its widespread benefits here: https://www.hoover.org/research/trumps-deregulatory-successes. Henderson argues in support of the administration’s calculation that “intentional slower growth in new regulation will have increased U.S. real incomes by $3,100 per household per year.”
I read the Hoover link. Thanks. But like NW who you are responding to, I am not sure how you get from generic drug deregulation (helps a lot of established foreign companies) to making it easier for the 10 million unemployed to become entrepreneurs. The big ones from Hoover:
1. Generic drugs
2. Repealing net neutrality (?)
3. Help for small and medium sized banks – compliance with Dodd Frank
4. Payday loan industry (!!!)
His point was “… it is not clear to me that there were significant rollbacks of existing regs that reduced the burden on creating new patterns of specialization and trade, vs assisting well connected existing industries.”
The Hoover list tends to support his argument imo.
I feel that being full time work from home is probably equal to a 50% or more raise in salary.
This is very true. WFH has stripped away everything that was onerous about my job. All I’m required to do now is the work itself, which I love anyway.
The dinginess and publicness of office life is a poverty environment. Even the CEO’s office, splendid as it is, must be, by necessity, impersonal and constrained.
However small and-ill furnished it might be, my little work cabin at home looks out onto my own property, is filled with books and pictures I chose, has a coffee machine I like, and a toilet that is all mine.
Working in an environment of my own making, I feel like a wealthy man.
I bet you have a private office. Open plan offices are terrible for any task that requires concentration
Arnold, you say
“But the current situation is so extreme in terms of the reconfigurations that are needed, that you need just an awful lot of entrepreneurial activity, and it’s going to take a long time for entrepreneurs to figure out how to use these extra 10 million or so people.”
Since the U.S. labor force is any number between 150 and 200 million and the total number of unemployed and under-employed is less than 25 million, I don’t think employment per se it would be a serious problem (compare with the Chinese shock in the 1980s and 1990s which involve hundreds of millions moving from rural to urban centers, or with the Great Depression). Many unemployed people will find jobs but at a salary lower than what they were earning before the pandemic so the relevant issue is how many will move to “high risk” jobs in legal and illegal activities to compensate for the loss. The rotten and corrupt democrats will do whay they know best, that is, to protect their high-income membership (as Obama did in 2009). Their type of income redistribution will benefit little to the old and new poor people. Indeed, through higher taxation, regulation and cancelation, they will increase the relative importance of illegal activities.
Thanks for the comment.
I think you are correct, and I cite the microcosm of university campuses.
Over the past 20 years, the financial protection of older tenured employees in their wages, health care, and pensions, has resulted in fewer and worse jobs for younger entrants.
This is true in places like France and Italy, as well as Democratic strongholds in the USA.
Third, many workers report being more productive at home than on business premises, so post-pandemic work from home plans offer the potential to raise productivity as much as 2.4 percent.
That is self reporting, and in my experience has more to do with self-perception. I manage a small team (less than 10 people), and even though performance varies, the most common timeline was:
– first one or two months (march, april): most people are in “working from home is so cool” mode, make a lot of effort to be productive, and productivity is higher than pre-covid.
– next few months: the boss hasn’t complained, there haven’t been any major screw ups that can be attributed to working from home (avoiding screw ups is a big part of the job), no need to make any exceptional effort. Productivity goes back to pre-covid levels.
– last few months: the decrease in productivity has become “normal”, nobody is complaining because it’s difficult to measure, the little things that lower productivity and that used to be exceptional in the first months (allowing interruptions, timing, etc…) are now accepted as normal. Productivity is now permanently (?) lower than pre-covid.
Not everyone’s productivity has followed the same trajectory, but around half of the team has.
A back of the envelope calculation gives me a 14% increase in productivity for each WFH worker in order to get to that 2.4% for the whole workforce. Based on my experience, I don’t buy it.
I forgot to add, that self-perception of being more productive was real. It’s just the result of those first few months, and not real anymore.
What % of your work from home staff are being forced to care for dependents due to COVID who would otherwise be able to find caregivers for those dependents?
We haven’t been forced to do so, and our productivity is high. But for people I know trying to provide full time work and 12+ hours a day of childcare, its been a slog.
Depends on the criteria used to define “care for dependents”.
If the criteria is: Dependents over 75 years old or under 10 years old, and no other adult who can take care of them, then the answer is 0%.
If the criteria is: Dependents over 75 yo or under 10 yo, and no other non-working adult who can take of those dependents, then it’s still less than 20%.
The podcast conversation, “The economy after Covid-19,” is incisive, wide-ranging, crystal clear. Instructive for experts and laypersons alike. Arnold Kling at his best. And Richard Reinsch ably keeps time, direction, proportion. May the interview have many listeners!
The analysis of government debt (and its history since WWII), in the latter part of the interview, is striking — especially the metaphor of jumping from the 10th floor of a building, and experiencing no harm while in free fall. Until you hit the ground, you might believe that free fall is fine.
Arnold first uses the example of a person in free fall at the 5th floor, then switches to the example of a person in free fall at the 2nd floor. Should the listener conclude that a debt crisis is imminent? But Arnold notes that debt pessimists have been forecasting crisis for 20 years. Debt optimists may say, that’s a helluva long time to be in free fall.
In the spirit of betting on one’s beliefs (Robin Hanson), what are the odds of a debt crisis for the U.S. government, say, before 2023, assuming that the Republican Party will keep the Senate? Admittedly, there is the matter of defining a debt crisis; perhaps in terms of interest rates, inflation, solvency. I leave terms of art to the economists.
#2 – Good interview about your good NA essay
https://www.nationalaffairs.com/publications/detail/economics-after-the-virus
Both essay and interview gave good accounts of your “new paradigm – PSST”. Tho of course your book is more thorough and complete.
However, if you want this to be your main message, it is diluted by your addition of opposition to US Gov’t Federal debt. Again you use the jumping out of the 10 story building – but deficit hawks have been predicting problems of too much debt for more than 20 years. As a “debt optimist” (J. Alcorn above), I note that there is little indication that the $3 tril. more debt from Trump has caused much normal inflation, nor higher interest rates. Yes, Zimbabwe had hyperinflation, tho not in dollarized Victoria Falls; yet Japan with 220% debt has not. The US is more like Japan, and now with over 100% debt and rising.
(Uncle Milty) Friedman said inflation is always a monetary phenomenon, and only from money. How would we know if loose money was necessary but not sufficient? If we divide inflation into “normal” inflation, the CPI of what normal folk buy, and “rich investor assets”, what rich folk buy, we see that Apple shares of stock have gone up in price much faster than the price of bread, milk, clothes, or even new cars.
Maybe “normal” inflation depends on supply constraints, and the 70s inflation most boomer economists went thru was heavily influenced by the rapid increase in the educated labor force, plus a higher percentage of women. This influx caused a 15 year bulge of demand (1968-1982) that was only quantity satisfied with a lag, and during that lag, higher prices reduced the quantity bought for balance.
https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi
Supply of “normal folks” goods is now based on production over capacity running at profitable but lower than maximum rates – so little new world capacity is needed (increasing amounts of maintenance, or not), with fewer new factories built, often based on gov’t incentives more than non-gov’t fundamentals. The lack of expected high ROI investments means there are fewer good projects for the rich people’s high savings.
The gov’t is “printing money”, with bonds to cover the deficit. Where is it going? Into stocks, art & collectibles, and houses in good areas; as invested by the rich. And the minimum to normal workers to avoid “wealth taxes”.
Just as this note diverged into deficit-debt discussion, your half or third focus on it takes over from the PSST message. And the PSST truth doesn’t depend on whether there are 3 more years, or 30 more years, before the debt crash hits.
At least you admit the debt pessimists have been wrong for (at least) 20 years already.
But a strength of PSST is more equity, less debt, and thus less fragility.
If we lived in a society in which every household and business had enough savings to cover six months of expenses, we could endure these kinds of crises (NA essay.)
Arnold, please consider a stronger focus on PSST and be willing to talk about how it’s better whether or not a debt crisis comes in the near or medium term, or not.
On the WFH productivity, I believe more workers will want it more, ask for it more, but take personal breaks to more than absorb any productivity gains so it goes down, maybe 1-3%. Which should also be pushing managers to come up with better metrics for what is good work vs. poor work –and reasonably soon include the employees’ desire or not for WFH to be part of their benefit package. Those who want it and get will be getting a bit less cash thru smaller raises.
Reduced “management by walking around” will be seen as significant in many companies, but not all. Young folk used to communicating more with SMS text might do especially well at digital based comm on projects. Like teams in games.
Tools like Zoom, Discord (! big with gamers, like my kids), MS Teams, Cisco WebEx, Google Meet (ex-Hangout) – they are getting better and more students are getting used to them.
Green proponents should be shaming the UN about having F2F conferences instead of virtual conferences.