The country is in the grip of the biggest economic crisis in 300 years, but Jonathan Haskel and his colleagues at the Bank of England haven’t been seen in the office for months.
Their footsteps no longer echo from the Roman mosaic in the front hall. You won’t find them strolling between the mulberry trees in the courtyard. The meeting rooms are mostly empty and the private offices firmly shut.
The work hasn’t stopped — it has just moved to “secret factories” in their spare bedrooms, kitchens and living rooms. Like millions of people in Britain, Professor Haskel, an economist who is a member of the Bank’s monetary policy committee, has been working from home. He isn’t alone when he says: “I just don’t know what the prospects are for going back.”
That doesn’t mean he hasn’t been thinking about it. The pandemic has upended working practices, with almost a third of the workforce operating remotely. Economists, including the Bank’s forecasters, expect this to persist well into the future. Businesses have already started to close their offices and workers are considering new homes away from cramped cities.
It all sounds highly revolutionary, but Professor Haskel isn’t convinced. “Overwhelmingly firms are saying no, we’re not going to have more home working,” he said, pointing to a recent survey by the Office for National Statistics, which found that businesses in most sectors had reported a decline in productivity when workers went home — barring information and communications.
“That’s the only industry where you get a pretty clear read that productivity has gone up. In almost all the other industries, it’s probably gone down a bit. I just wonder when we talk about working from home and productivity whether we are interpolating a bit too much from particular industries.”
Perhaps it is wishful thinking. Economists have long been grappling with a solution to Britain’s woeful productivity performance. Productivity measures how much output businesses are able to produce with their resources. When it rises, businesses are able to raise wages and keep prices low without hurting their profitability. Britain once led the way, but since the financial crisis productivity has barely improved and living standards have stagnated as a result. British workers produce 10 per cent to 15 per cent less than their peers in Germany, France and Sweden. Underinvestment, low skills in the workforce and record low interest rates have been blamed, but, as yet, nobody has found a definitive solution to the problem.
Professor Haskel is unconvinced that greater remote working will help. With a fast internet connection, workers can do many tasks on their laptops. Distance from distracting colleagues and stuffy offices can be beneficial, but remote working makes other tasks more difficult. It is possible to fill in an Excel spreadsheet at home, for example, but asking a colleague to check your work and to give you immediate feedback is more difficult.
“The job is the bundle of tasks,” he said. “My intuition is that it is all going to be much more difficult until you’ve built all those various networks. It’s going to be much harder.” Email, Zoom and Slack can fill in the gaps to varying degrees, but most businesses would agree that they cannot replicate the office environment.
Even in industries where businesses are reporting greater productivity, the picture may be less rosy than it appears. The National Bureau of Economic Research found recently that workers were spending an extra 48.5 minutes at their desk each day during the first lockdown.
Researchers analysed email and calendar data from 3.1 million workers across 16 cities in the United States, Europe and the Middle East. They concluded that the average commute had simply been replaced with more work rather than leisure time. If workers are producing more output because they are working longer hours, that doesn’t mean they are working more productively.
The bank also had found “credible evidence that people are working longer hours”, Professor Haskel said. “The average commuter spent 59 minutes travelling back and forth, so it looks like there were some big savings there. People, I think, will work longer hours.”
The prospects for workers sound bleak when framed in these terms. Britain’s centuries-long fall in the length of the working week stalled in the wake of the financial crisis in 2008. It is a worrying trend that is overlooked too often by policymakers, who devote more energy to the associated collapse in wage growth. Less attention is given to the fact that people’s working hours also stopped getting shorter, on average, while increasing for women. This is, however, another important symptom of the living standards disaster that has been the story of the past decade.
Greater remote working risks making the problem worse, but it does come with a silver lining. Remote working could open up opportunities to people who may not have been able to access them before, allowing employers to attract the best talent, regardless of where it is based. “It would bring in a whole set of possibly extremely good people in a remote area who couldn’t previously participate in the workforce,” Professor Haskel said. “Therefore the matching of firms to workers improves and that would show up as an improvement in productivity.”
Does that mean more competition for jobs? “It would, presumably,” he said. “Of course, those people could potentially be offshore as well . . . We don’t know but that would be an obvious place to take it.”
That would take the government’s promise of “levelling up” the economy beyond its present remit. Jobs that previously went to Londoners could go to people in the northeast of England, but they could just as easily go to India, Brazil or China, where the cost of labour is lower. The Brexit process offers clues to how people in this country would feel about that. “The question would be, ‘Why aren’t businesses doing that already?’ ” Professor Haskel said. “We already have the internet. The answer would have to be that they haven’t quite got the memo yet.”
Vaccine alone is not enough
A coronavirus vaccine on its own will not unlock the levels of business investment required to boost productivity, Jonathan Haskel, the Imperial College Business School economist and member of the Bank of England’s monetary policy committee, warned.
Britain has been hampered by weak levels of business investment since the financial crisis a decade ago. In recent years uncertainty about Brexit and the pandemic have compounded the problem. Economists hope that a vaccine will help businesses, but Professor Haskel said that it would not be enough to overturn “years of pretty miserable investment”.
He said that more fundamental shifts were taking place in the economy and that the financial system was ill-equipped to finance the types of investments that companies increasingly were making. Intangible assets, such as software and branding, were becoming more important than physical assets, such as machinery, he said.
“The world has completely changed,” Professor Haskel said. “My concern is that we’ve got an old-fashioned financial system, which is very good at financing tangible investment because it’s very good at taking actual collateral of an office building, for example, and lending against that. We don’t have a financial system which is all that good at helping with intangible investments.
“Were the issues around Covid to go away, we’re just going to need to bear down again on the suitability of the financial system to fund those intangible assets.”
