60 second summary

  • Productivity improvements are hard to find in Western economies.
  • Australia has improved worker productivity 10% or so I the last decade.
  • It’s an important variable which is not often discussed in the press.
  • So, it was interesting to see an article (below) from the WEF (World Economic Forum) specifically studying the effect of COVID on productivity.
  • Their analysis shows that the working from home effect associated with COVID has improved productivity 2%.
  • That sounds like a small amount but some of the ramifications of the change could be material.

How has COVID affected productivity?

The question of how COVID has affected workforce productivity is one of the more important and less reported economic variables around. I looking for months for some data on the subject. I specifically Googled exactly that question a number of times. Then, out of nowhere, as is often the case, the WEF (World Economic Forum) released some high quality data which nails the answer to the question.

The article I’ve linked to there says productivity has risen 2% as a result of people WFH (Working From Home) more often, during the pandemic. In some ways that’s a small productivity increase. On the other hand I heard former prime minister Keating say the other day that productivity rose 10% in the last 10 years in Australia. In that sense, this is a non trivial improvement.

Below : Australian Productivity Levels 2000-2020

Workforce productivity increases are hard to come by. COVID seems to have given us a helpful ‘blip’
Check out the ‘blip’ improvement associated with COVID

Additional Economic and Non Economic Effects Of Working From Home Due COVID

  • Office space will be repurposed:
    I also think that there’s an additional argument to be made – that resources are being used more efficiently with office space being repurposed – although that might take some time to flow through. There will also be some commercial property owners who lose money while that happens.
  • Reduced commuting benefits:
    Time wasted in traffic and environmental impacts of reduced commuting may also be a consideration in the same longer term time frame.
  • Happier people:
    Finally, people are happier with the current Working From Home arrangement, which is a non economic benefit.

Effect on Equities Of Workplace Productivity

Perhaps the biggest benefit is the PE multiplier of this sort of improvement on share prices, which might legitimize some of the upswing we’ve seen in the equities market – especially since with unemployment where it is, I doubt this productivity increase will flow through to wages. Instead, it’s far more likely to be hoarded by companies.

That’s what has happened to the 10% productivity improvements that have happened over the last decade.

Summing up

Weirdly, I feel disappointed that there has not been more improvement in productivity. I work from home myself and, compared to when I worked in an office, I get so much more done.

I also think it’s hard to quantify some of the benefits of the change. Spending more time with family and the kids, doing tasks like laundry and loading the dishwasher during the working day, as well as being more economically productive might create more weekend time for people (although they are unlikely to disclose that to their employer).