Coronavirus: OECD report warns that innovation at risk from working from home ‘experiment’

The working from home revolution could reduce productivity growth because it threatens innovation and worker satisfaction, an OECD report says.

Too much telework could ­decrease worker efficiency and long-term productivity growth because of the reduction of in-person communication for complex tasks and innovation, the OECD report says.

The working from home revolution spurred by the pandemic could reduce productivity growth in the longer term because it threatens innovation and worker satisfaction, according to an OECD paper released on Thursday.

The report — one of the first major analyses of the effects of remote working over the past four months — says the overall impact on productivity remains “ambiguous” but warns against “overdoing” the shift away from the office.

Too much telework could ­decrease worker efficiency and long-term productivity growth because of the reduction of in-person communication for complex tasks and innovation, the report says.

It points to the evidence from clusters such as Silicon Valley to suggest sharing physical space is essential for innovation.

The report acknowledges working from home could improve productivity in the longer run but calls on firms and governments to introduce polices to manage a range of challenges if the large scale “forced experiment” of this year continues post-pandemic.

It warns against the “excessive downscaling” of workplaces, and says that to minimise the risks to innovation and worker wellbeing, policy makers should make sure teleworking remains a choice and is not “overdone”.

Another danger is that companies could seek to shift costs to workers faced with bigger gas and electricity bills.

And while firms could benefit from access to a global pool of talent, the OECD points to potential legal and tax problems, suggesting bilateral tax agreements may be needed to facilitate working across borders.

The report urges governments to promote managerial best practice, self-management and information technology skills, as well as investments in home offices and “fast and reliable broadband”.

Among its recommendations are: the provision of childcare closer to home; promotion of a “right to telework” for at least some hours per week in suitable occupations; and changes to laws and regulations, such as broader acceptance of digital signatures on documents.

The report says “societies have undergone a large scale ‘forced experiment” to maintain production during the crisis but the effects on productivity are unclear. The conditions may have lowered productivity for those at home.

A Japanese survey showed workers reporting lower productivity, while a poll in the US showed managers were more likely to have short-term productivity gains.

The OECD report says the speed with which firms adapted to the pandemic suggested the use of WFH before the crisis was well below what is feasible.

Before the outbreak, telework was most common in knowledge-­intensive services such as professional and information technology sectors, although a comparatively high fraction of people working in agriculture, construction, mining, electricity and water supply used telework.

“Telework can directly lower capital costs by reducing office space and equipment required by the company,” the report says.

“Labour costs can be reduced as telework enlarges the pool of workers firms can choose from, increasing the skill supply and improving the match between jobs and hires.

“Firms offering telework may also attract workers at lower wages than would otherwise be the case, in particular if combined with other measures that improve work-life balance.”