Global Trend

The New World of Telework is Upon Us
 

Before the COVID19 crisis, just 5.3 percent of U.S. employees reported telecommuting most of the time. And while 5.3% may seem small, that’s more than the number of Americans who commute via mass transit, according to the Eno Center for Transportation.  Meanwhile, 23.7% said they worked some hours from home on an average day, meaning that about a quarter of the population had at least a little experience with so-called “telework.”

Yet now, with the pandemic shuttering workplaces, that figure has skyrocketed, not just in the U. S., but globally. In effect, the COVID-19 public health crisis has created an unexpected stress-test for many parts of our basic daily routine including:

- commuting to the office,

- face-to-face meetings, and even

- redefining what it means to be a “worker” in the modern economy.

With “social distancing” becoming a medium-term imperative in many places, employers’ transition to telework is poised to remake all of those assumptions, for the current crisis and beyond.

Notably, the nation’s largest employer, the federal government, has issued new guidance on telework. Specifically, the White House’s Office of Management and Budget urged agencies to “maximize telework flexibilities” for workers in the Washington, D.C. region, beginning in late March.  Days before that, Amazon, the nation’s second-largest private employer, asked its Seattle and Bellevue-based headquarters employees to work from home for the remainder of March.

This surge in teleworking raised questions about whether the technologies that enable telework, such as video conferencing and remote desktops, could scale to handle the increased traffic associated with the COVID19 shutdown. It also raised the question, what we can do to ensure as many workers as possible are able to take advantage of telework?  At the same time, the crisis also forced us to reconsider whether there is a loss of value when we don’t work face-to-face.

The prominence of telework in our response to the COVID19 threat is a reminder that technology can help employers manage other risks, as well.  For example, telework can enable firms to reduce the risk of losing productivity to regular or catastrophic traffic disruption. Offering telework as a benefit can help employers afford the cost of hiring high-skill labor, and keep these workers connected to the office and each other no matter where they’re based. Teleworking’s reach also allows employers access to a larger group of potential workers and, in turn, allows workers access to more job options.

Some have criticized telework as a marginal solution that benefits only white-collar workers. But even a simple, small solution can have a meaningful impact on multiple systemic problems. For example, even modest reductions in peak commuting activity can dramatically decrease traffic congestion, which benefits everyone. Furthermore, locating in an in-demand, high-cost urban area is more affordable for an employer when telework allows them to consume fewer square feet per worker, reducing land and energy consumption. Finally, the economy and society enjoy increased stimulus from workers who telecommute from “third places” such as coffee shops and coworking spaces.

As more workers transition to remote work in response to the coronavirus and beyond it, there are structural changes that must be addressed to make it more accessible for everyone. Nearly 10% of working-age adults do not have a home broadband connection, according to American Community Survey data. Nearly a quarter of these broadband nonadopters say that services aren’t available or are too slow where they live. Broadband has long been considered a luxury good, but the transition to mandatory telework due to coronavirus makes it clear that an in-home connection will be vital to the functioning of the 21st-century economy.

Notably, telework does not eliminate the benefits of face-to-face work and social interaction, just as online shopping isn’t the end of brick-and-mortar retail.  Furthermore, at a time that requires social distancing, the same technologies that enable remote workers to stay productive can be leveraged to maintain social ties and connections. The coronavirus disruption is demonstrating that digital connectivity, including telework, is a valuable tool that makes places stronger and more resilient.

Given this trend, we offer the following forecasts for your consideration.

First, in the U.S., the big shift to telework will be concentrated within the top income quartile of the population.

New data from the U.S. Bureau of Labor Statistics indicates that roughly 60% of Americans in the top income quartile are, or could be, working from home during the shutdown. Meanwhile, roughly 95% of the people in the bottom income quartile can’t stay at home and earn a living.
 

Second, companies will shed office space as more employees become teleworkers.

Shedding office space will be a high priority for most CEOs once things “get back to normal” and the economic impact could be significant. Major commercial real estate brokers were already projecting modest growth for office space in 2020. Technology companies and professional services firms comprise a significant portion of that growth. And these are the types of companies that are most likely to be able to take advantage of smaller office footprints via telework. The typical employee takes up between 125 and 225 usable square feet of space in an office. If we assume that roughly 20% of total employees, or about 30 million people, work in offices today in the United States, that translates into about 4 billion square feet. Just imagine the impact on the economy if 20 percent of those workers started working from home and their companies shed their office space; that means 800 million square feet of space would become vacant. Office costs vary greatly across the United States, but if we assume that the highest cost offices would be the first to be downsized, it would be reasonable to use a rental cost of $30 per square foot per year. That translates into $24 billion in lower office rents in the U.S. on an annual basis. If half the office workers went virtual, it would come to $60 billion in lost rents per year. What would happen to that space, most of it would likely become residential? This would be great for those who can’t now afford urban housing in New York, Chicago, Los Angeles, and many other big cities.

Third, the rise of telework means less commuting time and costs.

Imagine fewer cars per capita, and less fuel consumption per car even before we factor in the impact of driverless vehicles by the mid-2020s. The mobile society we’ve known since the 1920s will be replaced by one in which we increasingly access the world from home.  Today, a big part of the proposed infrastructure stimulus involves highways and commuter rail.  Yet, except for maintaining and upgrading existing systems, that money would be better spent on water projects, energy pipelines, airports, and transmission systems for electricity. Most importantly, teleworking requires higher-speed broadband with 100% penetration; 5G is the likely solution.

Fourth, optimized telework will create a means of effectively harnessing less expensive talent outside of densely packed, overpriced locations like Silicon Valley.

Astronomical living costs and commute times mean that densely packed tech hubs like Silicon Valley must pay exorbitant wages and stock options in order to attract talent.  A cultural shift toward embracing telework will enable those firms to attract the talent they need at a lower cost.  And, with increased restrictions on immigration, a high-tech workforce dispersed across the country and around the world will become more important.

Fifth, increased telework will make work-life balance a bigger challenge.

In the world of 24/7 text messages, emails, and phone calls, it’s hard enough for managers and professionals to find uninterrupted time for their personal lives. Now, imagine a situation where everyone has access to their full suite of vocational resources, 24/7. Suddenly staff and client meetings can happen anytime and anywhere. Ambitious people will increasingly feel that anytime they aren’t working is being “wasted.”  At the same time, people will wonder why they “don’t’ have a life.”

Sixth, cybersecurity issues will become even more pressing as people work from a wider range of locations.

Ironically, the same crisis that’s pushing telework to the forefront is increasing the threat of cybercrime and cyberwarfare as we hinted in trend #1, this month. This means that trusted companies in the cybersecurity business will become more indispensable.  However, the primary source of vulnerability will remain “human error.”  This includes everything from failure to properly use cybersecurity tools, to falling for “phishing scams,” to using easily guessed password.   Therefore, it will become crucial for every company to sensitize its employees regarding the proper handling of mission-critical data. And,

Seventh, long-term adoption of telework will require a new set of behaviors and tools.

The make-shift home offices used for the current crisis will have to become more robust if they are to maximize productivity, long-term.  Importantly, teleconferencing services ranging from Skype to Zoom to Webex are poised to become big winners as lots of people use them for the first time. Telework alone provides the rationale for a rapid build-out of 5G in North America, Europe, South Korea, and Japan.

References
1. March 15, 2018.  Dan Kopf.  Slowly but surely, working at home is becoming more common. 

https://qz.com/work/1392302/more-than-5-of-americans-now-work-from-home-new-statistics-show/

2. May 31, 2018.  David C. Smith.  Top Trends and Metrics to Watch in Office Space. 

http://blog.naiop.org/2018/05/top-trends-and-metrics-to-watch-in-u-s-office-space/

3. HBS: Working Knowledge. March 30, 2020.  Kristen Senz.   How Companies Benefit When Employees Work Remotely. 

https://hbswk.hbs.edu/item/how-companies-benefit-when-employees-work-remotely

4. The Boston Herald. August 10, 2019.  Alexi Cohan.  Impact of telecommuting tax credit to ease Boston traffic debated.  

https://www.bostonherald.com/2019/08/10/impact-of-telecommuting-tax-credit-to-ease-boston-traffic-debated/

5. com December 24, 2019. Tracy Hadden Loh and Jennifer S. Vey.  Retail isnt dead. Its just changing. 

https://edition.cnn.com/2019/12/24/perspectives/retail-2020/index.html

6. com. 04/08/2020.  Charlie Stephens.  COVID-19: A CALL TO CONNECT. 

https://www.newgeography.com/content/006590-covid-19-a-call-to-connect

 
7. com. 04/24/2020.  Prakash Loungani.  A LOOK AT DEMOGRAPHIAS LATEST HOUSING AFFORDABILITY SURVEY.

https://www.newgeography.com/content/006590-covid-19-a-call-to-connect

8. HBS: Working Knowledge. March 30, 2020.  Dina Gerdeman.  The New Rules for Remote Work: Pandemic Edition. 

https://hbswk.hbs.edu/item/the-new-rules-for-remote-work-pandemic-edition

 
9. com. 04/01/2020.  Marshall Toplansky.   THE FUTURE OF OFFICE SPACE REAL ESTATE MARKET. 

https://www.newgeography.com/content/006597-the-future-office-space-real-estate-market

10. The Brookings Institution. March 17, 2020. Tracy Hadden Loh and Lara Fishbane. COVID-19 makes the benefits of telework obvious.

https://www.brookings.edu/blog/the-avenue/2020/03/17/covid-19-makes-the-benefits-of-telework-obvious/

11. com. April 11, 2020. Andreas Kluth. This Pandemic Will Lead to Social Revolutions. 

https://www.bloomberg.com/opinion/articles/2020-04-11/coronavirus-this-pandemic-will-lead-to-social-revolutions