We proved we can work from home during a global pandemic. Now, footloose workers, funky offices and an ever-growing female workforce mean working remotely is the way forward. Kiwibank economist Mary Jo Vergara breaks it down.
This content was created in paid partnership with Kiwibank.
Enticed by the promise of work, workers during the Industrial Revolution were required by factories to be in the same location to utilise the machinery. From this, the modern office was born; offices were organised into desks overseen by the big boss, mimicking production lines. Fast forward 200 years and the basic function of the office has stood the test of time – despite the rise of the internet. Communication has since been digitally transformed, now driven by electronic means like email and online documents. But it was still convention for workers to be within sight – that is until the pandemic hit.
It’s March 26, 2020, and machines are powered down, stovetops are turned off and storefronts are boarded up. New Zealand is in alert level four lockdown and 40% of its workforce take part in a global experiment. The hypothesis? People can work from home. After 50 days and a contraction in economic activity far smaller than initially feared, we proved it. The pandemic has broken convention and unlocked the possibility of working from anywhere. The rise in the use of Zoom, Microsoft Teams, Skype and Google Hangouts has mobilised the office entirely. New Zealand’s workforce has become even more digitally connected.
Not only can we work from home, but we want to. Covid lockdowns aside, many are choosing to work from home more regularly than before the pandemic began. What was born out of necessity has become a preference. With the expectation of more time spent working from home, more and more people are investing in their home office set-up. Trends in recent consumer spending describe as much – not only have New Zealanders bought more pools, pets and pizza ovens but also office chairs, desks and electronics. Before the latest lockdown, Kiwibank card spend on office equipment was up 1.4% on 2019 levels. And with endless online meetings, there’s demand for the premium experience – spending on online services spiked during 2020 and remains elevated.
The success of working from home has prompted many companies to incorporate flexible working, and greater flexibility in work location and hours can significantly improve the labour market outcomes for working mothers, who make up 30% of New Zealand’s workforce. Their participation rates typically drop in the prime parenting group of 25-49-year-olds, as they withdraw from the labour market to care for dependent children. That dip has shallowed over time largely due to delayed motherhood and a greater proportion of women aged 55 years and over remaining active in the labour force later in life. The dip may become even less pronounced with the change in working patterns because flexible working should support women returning earlier to the labour market after having children. It should also result in better retention among older workers – both men and women – and further lift participation rates.
Flexibility in working patterns has indeed become a must-have in employee value propositions. And in this day and age, the ability to provide better employee benefits is especially crucial because companies are competing for scarce workers. New Zealand’s labour market has never been tighter – the unemployment rate has plunged to a record low of 3.2%, despite the participation rate rising to an all-time high of 71.2%. Basically, if you want a job, there’s one for you (within reason). Leading indicators suggest the demand for labour remains robust as hiring intentions have intensified, job vacancies are well above pre-Covid levels and expected labour turnover has hit a 50-year high. However, with the border closed, the pool of available workers is limited to homegrown talent – and it’s quickly evaporating. Employers are having to either pay up or beef up employee benefits to attract and keep workers. Higher labour turnover suggests employees are leveraging their improved bargaining power to switch jobs for greener pastures.
The ability to work from home has made working from anywhere possible – the office, the home and even the bach. Migration data across the pandemic reveals that many people have headed for the regions, albeit the trend was already in motion well before the pandemic. Between June 2020 and June 2021, a net 13,500 Aucklanders left the big smoke, trading in the traffic for a more laid-back lifestyle (and cheaper house prices). Other parts of the country welcomed a net 1,200 Wellingtonians searching for warmer weather (and cheaper house prices). And a net 1,600 people exited the gates of the Garden City, retreating to higher ground (and cheaper house prices). The rise of the footloose worker could boost the regional economy because city slickers leave with the same paychecks in their pockets. And when these so-called “knowledge jobs” relocate, there’s a chance to create a new ecosystem of jobs. Like the Pied Piper, urban services will follow the move – regions may see more coffee shops and (goat) yoga studios pop up.
Naturally, the need for offices and the future of commercial property is called into question. Companies may view the shift in working patterns as an opportunity to downsize, reduce operating costs and instead invest more in digital infrastructure. Remote working certainly works well for solitary, finish-a-report-in-a-day-type jobs but it does not work so well when trying to collaborate and exchange ideas with colleagues. Spontaneous hallway chats and coffee catch-ups are even harder to replicate online and hidden behind the benefit of flexible working is a heavy social and mental toll that accompanies long-lasting remote working. By its very nature, remote working is isolating. With online meetings, people can feel disconnected and stuck in Groundhog Day. And for those early in their careers, there’s likely a greater desire to be in the office with other people for the experience and the social life that comes with it. Fostering soft skills online is hard. Given the eventual virtual fatigue, there’s a longing to retain aspects of “office life”.
To justify its existence, the office will have to become a destination with a purpose, rich with amenities. The pandemic has clearly prompted a structural change in office demand. Companies are searching for more modern, collaborative and sustainable office space rather than a featureless building. A “flight to quality” is at play, leaving parts of the commercial property sector vulnerable. The Reserve Bank’s latest financial stability report flagged similar risks. Rents among lower-quality office space have declined over 2020, reflecting softening demand. Companies may instead be looking to sign long leases on high-quality office space in downtown centres. So long as the office can meet the greater demand for nap pods and pot plants, remote working need not be its undoing.
So what’s in store for the future of work? One word: flexibility. Like all things in life, striking a balance is key – some days in the home office, other days in office HQ. I’m writing this note at home (not in lockdown) but you can bet that the next RBNZ day, I’ll be in the office. Those days are just not as fun by myself.