The impact of the future of work on the economy could stretch beyond the traditional economic metrics and lead to a number of social changes, according to HSBC global economist James Pomeroy.
One impact is the possibility of a faster churn of labour and better jobs matching from the fact that remote working makes it easier to interview for prospective jobs, says Pomeroy in HSBC Global Research’s “The Future of Work” report.
Citing a survey from WFH Research, Pomeroy notes that nearly half of workers find it easier to have interviews working remotely, which means that it could be easier for them to find a role that fits their skillset and life priorities. This may incentivise more businesses to focus on various elements of work that employees value, such as flexibility and hours, in order to hold onto talent.
More flexible working practices both in terms of locations and hours can also help to broaden out the labour pool, as it may allow those with disabilities or care demands easier access to some roles. Pomeroy points out that the rise in disabled worker labour participation had been very encouraging, as the numbers in the US soared through the pandemic to record highs.
Aside from the social changes, new ways of working can also unlock productivity gains as they have in the past. Even prior to the pandemic, economist Nick Bloom found that the productivity levels of 16,000 workers in a call centre rose by 13% from hybrid working, while a paper by the US’s Centre for Economic Performance’s Jose Maria Berrero suggests that shifts towards 20% of workdays being completely remote imply a 5% productivity boost in the post-pandemic recovery.
While broad-based evidence on the impact of four day weeks will be seen in the coming years based on studies ongoing today, previous company-based studies have shown a resounding impact, Pomeroy highlights.
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A summer 2019 trial for all roles at Microsoft in Japan, for example, showed a 40% productivity boost, aided by workers making other changes — such as shorter meetings and fewer people at them. The widely-cited example at Perpetual Guardian in New Zealand saw a 20% gain in employee productivity and a 45% improvement in work-life balance metrics.
Changing labour supply dynamics
According to a World Economic Forum report, over the next five years, 83 million jobs are estimated to be lost due to changes in sectoral labour demand, while 69 million are projected to be created. This translates to a structural labour market churn and a 14 million reduction in employment, says Pomeroy.
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Some jobs, such as clerks and sales people will be most at risk from automation threads. On the other hand, other roles such as jobs involving high-tech services, engineers and data specialists will see more demand from workers. “The drivers of these changes in the labour market are numerous, but many macro trends are expected to mean more jobs,” he adds.
Green transition is one notable example, where most firms expect more jobs to be created. Rejigged supply chains and greater regulation is also expected to add jobs in years to come.
One of the key challenges that will be faced by the developed world in the coming years is a structurally different backdrop in terms of labour supply. Pomeroy highlights that the pandemic years saw sharp shifts in labour availability, partly due to workers being displaced across industries aside from those leaving the workforce to find other forms of income.
“Over the medium term, these labour supply issues could become more challenging in the developed world thanks to the ever-worsening demographic picture. Germany’s working-age population looks set to shrink by nearly 1% per year during this decade and even in economies where the working-age population is growing, such as New Zealand, the US or the UK, the pace of that growth is likely to be much slower than previously,” he adds.
Aside from the demographic challenges, an even bigger hurdle may be having the right people, says Pomeroy. In the UK, the Office for National Statistics surveys suggest that roughly 13% to 15% of firms are experiencing skill shortages — thai is only going to get worse in the evolving labour market, he adds.
“Against that backdrop, it’s striking that only 36% of non-managers who responded to a recent Adecco survey said that their company is investing effectively in developing their skills, compared to 64% of managers. And if that’s the challenge facing those in work, the ability to retrain and upskill for those out of work is even harder in most economies. This means that we’re likely to fall short of the right skills in the labour market in the years to come,” says Pomeroy.
Following this, it is clear that more time and money will need to be invested in retraining workers, either in terms of on-the-job training or for those who need to change careers due to declining employment in their field of work. Education programmes may also need to be rethought to prepare the workers of tomorrow for a very different labour market, Pomeroy highlights. Without investment in these programmes, there may be higher levels of unemployment and lower levels of productivity and output, he adds.
“Greater flexibility and a stronger embedding of remote work seems likely, with impacts for how our urban areas function. For now, cities appear to be thriving still – but for activities not tied to office attendance – and that evolution looks set to continue.
“Attitudes towards work may have been jolted by a once-in-a-generation event, and we cannot put that genie back into the lamp. The world of work already looks very different to before the pandemic and even more changes look likely in the years to come,” he concludes.
