Economist cites benefits for remote workforce, capital allocation, urban consumption
Stanford University economist Nicholas Bloom has suggested that remote working could play a significant role in addressing the productivity challenges faced by New Zealand and other nations.
In light of global concerns about slowing productivity, Bloom argues that work-from-home (WFH) arrangements may be a crucial factor in reversing this trend.
"In my lifetime as an economist, I have never seen a change that is so broadly beneficial," he stated in an article for the International Monetary Fund (IMF).
He emphasised that the surge in remote work since the 2020 pandemic has counteracted pre-pandemic productivity slowdowns and is now bolstering both current and future economic growth.
Bloom believes that WFH has the potential to improve productivity by fostering a more inclusive labour market and enabling the reallocation of capital into more productive areas.
Expanding remote workforce
One of Bloom's key arguments is that remote work has allowed millions of people to join the global workforce, many of whom were previously unable or unwilling to work due to various constraints.
These include people with childcare responsibilities, physical disabilities, those living in remote areas, and semi-retired workers who still wish to contribute to the workforce.
"These increases in disability employment have occurred primarily in high-WFH occupations," Bloom said. "Employees with a disability benefit in two ways: first, by avoiding long commutes, and second, by the ability to control their work environment at home."
Bloom also noted that flexible work arrangements are particularly beneficial for prime working-age women, as well as having a positive effect on fertility rates.
"If parents are able to work two or three days a week at home, particularly with flexible schedules that allow them to share parenting responsibilities, this could increase birth rates," he said.
Efficient capital allocation with WFH
Another aspect of Bloom's analysis focused on how WFH could lead to a more efficient use of capital. He highlighted that in many countries, including New Zealand, a significant portion of capital is tied up in residential properties that remain unoccupied for much of the day.
"More intensive use of our home capital—the space and equipment in our houses and apartments—can allow society to save on the use of transportation and office capital, which can be redeployed to other uses," Bloom wrote.
"In major city centres, about half of the land is covered in office space, and, given that office occupancy is now 50% below pre-pandemic levels, there is great potential for office space reduction."
Shifts in urban consumption with empty offices
Bloom's analysis on working from home comes as New Zealand orders its public servants to return to workplaces, which has been hailed for its positive impact on central business districts.
Hospitality businesses in New Zealand have previously reported a "big drop in patronage" during Mondays and Fridays, which are the most common WFH days for public service.
Bloom, in his IMF article, acknowledged that working from home has also caused a shift in consumption patterns, particularly in city centres.
"It's true that retail spending has fallen in city centres, but this activity has relocated to the suburbs, and overall consumption expenditure has resumed its pre-pandemic trend," he said.
He added that there is also the issue of commercial office space, which will see less value amid remote work.
"Although this represents a loss of valuation for investors in the office sector, the release of city centre space for residential use will in the long run make downtown living more affordable," he said.
"Cutting the amount of space for office use in city centres and converting it to residential use would make housing more affordable for these essential workers."
