Productivity Commission says working from home is good for employees and the boss

Online video conferencing is part of the shift as we work from home.

Blackmores boss Alastair Symington says that at every CEO roundtable he attends these days, the top-of-the-agenda item is “workplace utilisation”.

Or the lack of it; the reluctance of many workers to return to pre-Covid-19 patterns and spend Monday to Friday in the office being well documented.

But if any CEO was looking to those efficiency gurus at the Productivity Commission to offer evidence of the problems of remote or hybrid world, they would be disappointed by the PC’s blockbuster review released on Friday.

Indeed, in its 1000 page-plus report, the PC says national productivity could be increased by working from home and suggests business might need to see the pandemic-induced exit from the CBD as a positive rather than a problem.

The foreword to the mammoth five-year review sets out starkly how much we must look to the service sector – the knowledge workers – for productivity gains, and it was of course the knowledge workers who went home and stayed home during Covid.

The report underlines that the WFH phenomenon and its potential to build productivity is somewhat accidental. After all, business didn’t decide back in 2020 that we should all go home as part of a broad reorganisation of work practices – an area the report suggests is wide open for innovation.

“For many businesses, working from home was a necessity imposed by lockdowns and other restrictions, rather than a new mindset about how to organise their workforces,” it says.

But “the pandemic illustrated that large shares of the workforce could work from home effectively, giving them flexibility, cutting commuting times and for many, increasing their productivity”.

WFH and its close relation, hybrid work, can have upsides and downsides – they can increase capital expenditure because of the need to provide in-office and home equipment for each worker.

It doesn’t stop at laptops, headphones and software (including for videoconferencing and ­webinars).

Businesses “may also increase their investments in digital infrastructure, its maintenance and training in its use, to enable remote working to continue in tandem with activity at a workplace”.

But the PC has decided that WFH can be good for employees and employers if it is correctly managed. Providing for it in awards allows arrangements to be locked in and give certainty to employees, allowing them to make decisions on equipment and infrastructure without reducing their productivity.

The PC’s thumbs up for WFH recognises the significant parallel development of technology take-up by firms which, pre-Covid-19, had been complacent and content to maintain old ways of doing business.

The report says the “hastened” adoption of digital technologies to allow the economy to continue to function during lockdowns was a “defining characteristic of our Covid-19 times” and “constituted a massive productivity boost, relative to a counterfactual scenario in which such technologies did not exist or were not adopted en masse”.

In so many ways, despite the disruption to work during the past three years, we may well be at the start of the real revolution. The report notes that a proactive approach from firms and workers on WFH will likely boost productivity and wages.

What’s needed is “innovation and learning – via changing technology and business practices” but the pace at which this will happen is uncertain, according to the PC.

“Technological progress could be combined with the lessons from experimenting with different approaches to remote work, which would further reduce the costs of working from home,” it says. “Better ways of facilitating collaboration and creativity could be found … In addition, digital technology could give a broader range of occupations and industries the option of remote work, for all or part of their regular hours worked.

“More firms might move to being fully remote, but considerable momentum would likely come from firms moving from a fully centralised to hybrid model (or increasing the levels of work from home within hybrid ­models).”

Increasingly companies are recognising that time will tell just how many workers will work in a hybrid model permanently.

Many are mandating, but not necessarily enforcing, two or three days in the office, but those edicts are as likely to be based on management convenience than any real evidence of a loss of productivity. Now may be the time for a reset in thinking about the potential of hybrid.

The PC report says the share of people “regularly working from home” in late 2021 was 40 per cent, about 8 percentage points higher than in 2019 and about twice what it was a decade earlier. The share of people working “most of their hours” from home was as high as 30 per cent in 2020 (although this has moderated somewhat since then), more than four times higher than when it was last measured in 2008.

The message from the PC is that we need good ideas about work to emerge alongside better skills and more investment in technology if we want productivity growth.