Covid-19 impact: Pandemic has been ‘creative’ insofar as it has fundamentally changed many employers’ mindset

November 20, 2020 5:20 AM

Should such destruction brought about by the pandemic really be considered “creative”? The answer is, it depends.

Hard though it is to swallow, viewed in a workplace context, the pandemic has been “creative” insofar as it has fundamentally changed many employers’ mindset. (Representational image: Bloomberg)

By Daniel S Hamermesh

Some economists welcome sharp economic downturns because of the “cleansing effects of recessions.” They often refer to the concept of “creative destruction,” developed by the Austrian-born economist Joseph Schumpeter in the 1950s. Schumpeter himself saw it as a “process of industrial mutation that continuously revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

The current global pandemic has brought about plenty of economic destruction. Massive layoffs are one clear indication of this, as are the near-complete income losses of day labourers worldwide. Even though the world is still in the early throes of the second wave of Covid-19, the economic contraction has reached levels not seen since the Great Depression.

But should such destruction brought about by the pandemic really be considered “creative”? The answer is, it depends.

While it is too early to argue with certainty whether it has historically altered the ways in which economies function, some long-term effects are already becoming evident. And they indeed point to a significantly changed way of life.

The largely positive changes that will stay with us predominantly concern the vast group of employees in metropolitan areas that have traditionally been called “white collar” workers, i.e., mostly professionals and managers. Their place of work and their daily work travel has changed in ways that were almost unimaginable before March 2020.

Initially, many of these workers were forced to abandon their offices. By now, even before the onset of the “second wave”, staying away from offices has increasingly become a matter of choice, or at least preference, by both employees and their employers.

Employers, aside from being concerned about the health risks for their employees, also see the vast potential savings by shedding high-priced real estate as work-spaces.

Employees, for their part, save on wasteful commuting time, especially in metropolitan areas. According to IZA research “one out of five workers in Europe spends more than 90 minutes commuting each day”. This has a clear negative effect on work-life balance.

The Covid crisis has also taught all of us that many short in-person meetings, which had long seemed essential to a properly functioning office environment, can usually be done virtually just as well.

Work-related travel—all those conference events—will also decline. This will not be good for airlines and hospitality industries, but it represents a big cost-saving for many businesses and is a major time-saver for employees. Foregoing such conference travel might even increase productivity. How does no travel time, no jet lag, no endless hours unproductively spent in often only marginally important sessions sound to you

Environmental advocates, to be sure, would be in favour of both a reduction in daily commuting as well as non-essential air travel. In their view, the benefits to our planet would be material.

Hard though it is to swallow, viewed in a workplace context, the pandemic has been “creative” insofar as it has fundamentally changed many employers’ mindset. Their thinking had long been governed by a very traditional, almost Fordian mindset to require all their staff to be present every single day at headquarters or their assigned workplace. Observing the relative ease with which teleworking is now executed, both control-freak bosses and “non-digital minded” employees have become more open to working from a home office.

This bright new world does have its downside. For example, families living in urban areas, often have to work and live in cramped apartments while presumably home-schooling their kids. This is already causing more and more families to reconsider the benefits of their often-costly, small living quarters in the heart of cities.

Another downside is the fact that the environmental benefits from the increase in home office work are, in part, offset by a lack of trust in using public transportation. That may linger for some years. Those who still have to commute will more likely use their cars, a phenomenon already visible on New York City streets and bridges.

But the major evolutionary step is that important mental barriers have been broken. Just consider that the daily production of newspapers, long viewed as dependent on quick interactions in a very busy and crowded newsroom, moved to remote production in the journalists’ home offices basically from one day to the next. To readers, it all seemed seamless. Many journalists, never mind their bosses, would not have considered the successful daily creation of such a complex “symphony” possible even a short while ago.

There is a bigger lesson in that. The “Zoom economy” will persist, with more people working from home. How much room for expansion there is, is made evident by these numbers: Before 2020, only 4% of workers in the United States worked entirely from home. In the EU, approximately 5.4% of employees worked from home in 2019, a number that had held steady over the previous 10 years, according to Eurostat.

According to some estimates, teleworking in the EU shot up sharply during the pandemic to about 40% of workers. While this number is bound to decline eventually, it is unlikely to fall to anywhere near pre-pandemic levels.

The structural changes described above all seem real and long-lasting. To be truly beneficial, most countries must first quickly undertake catch-up measures to improve their technological infrastructure in order to allow for a much bigger role that IT plays in the workplace now.

Second, most countries must also strengthen the basic digital skills of their workforces. Absent that, teleworkers will have to be brought back to the office and/or the economy in question will be considerably less productive.

Third, we also must make sure that the increase in internet traffic for work-related purposes is protected from cyber-attacks and hacking. This is a huge challenge, because most countries have not really done much in this space during pre-pandemic times.

Finally, we must make sure that employees’ gains from less commuting are not undermined by constant tele-dependency that forces employees to be connected to their place of work 24 hours a day.

If we implement the necessary measures to make tele-working well, the destruction of our pre-pandemic work-concept will result in the creation of more productive, more sustainable and perhaps even more equal national economies.

The author is Global Research Network Director, IZA Institute of Labor Economics, Germany, and Distinguished Scholar in Economics at Barnard College, New York City

 

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