The future of post-pandemic work
29 January 2021
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Markets and Morality
26 January 2021
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3 February 2021
Economic Theory
25 June 2024
This week I gave a talk to an online conference which had asked me to speak about the future of post-pandemic work. These are some of the things I said.
The pandemic and consequent lockdowns are going on far longer than many of us anticipated, and it would be optimistic to expect an end to this strange new world any time soon. Nobody knows what the future will bring, but nevertheless it is useful to think about likely changes to employment patterns when Covid-19 is no longer raging so fiercely and many current restrictions can be relaxed.
There are sectors where something like the old level of activity and employment will resume pretty quickly. I’d put in this category hairdressing and beauty, gyms and professional sport. Of course, some businesses will inevitably have fallen by the wayside. Even in normal conditions there is considerable “churn”: not all pre-pandemic hairdressers and fitness trainers, or the businesses they work in, will return – but new ones will probably take their place.
There are other sectors which have grown in importance during the pandemic and are likely to continue to grow as lifestyles and tastes are permanently changed. Among these I’d include, fairly obviously, online retailing, delivery services, home improvements, streamed entertainment and UK-based holidays.
Other trends are more speculative, but I’d expect self-employment (which has been badly hit by lockdown (see my recent paper “Being Your Own Boss”)) to recover and grow as many people working from home will have discovered the potential of online business and have acquired new skills.
I also think it likely that gig economy arrangements will continue to grow as firms will be reluctant to add to permanent full-time staffing while so much uncertainty remains.
It may be that the combination of Brexit and Covid-led disruptions, together with a lower exchange rate, may encourage the return of some manufacturing and associated supply chains, as some commentators hope.
Turning to gloomier prospects, there are sectors where a return to pre-pandemic levels of activity and employment seems most unlikely. One is conferences and similar events. In the past, people would regularly travel from all over the country, and indeed from other countries, to stay in hotels and conference centres for two or three days to discuss the state of the world, or their businesses, or their research. But lockdown has shown that these gatherings can be carried out online just as effectively and considerably more cheaply.
For similar reasons we are likely to see far fewer business trips; there is no point in spending a day travelling up to Manchester from London to meet somebody for a half-hour meeting when Zoom can produce much the same result. This, and the decline in commuting as people switch to more home working, means that the railways (which had been experiencing an unprecedented growth in traffic until very recently) will be in serious difficulty. Plans for expanding the system – and particularly the notorious HS2 programme – must now be in doubt.
The travel industry generally, even without the new restrictions on travel abroad, seems likely to decline dramatically. Given the likely increase in cost and vastly increased hassle, it will no longer be worth taking short romantic breaks in Paris or Stag party trips to Iceland, while families may cut back on summer holidays in Spain or Portugal as costs escalate.
In the opposite direction, tourism into the UK will probably take many years to revive. The hotel sector and related businesses such as restaurants will suffer. Nor will live entertainment easily recover; crowded West End theatres will no longer be acceptable to many of their older clientele even if formal distancing requirements are lifted. And mainstream multiplex cinema will surely not come back, given the growth in streaming and the way in which even top Hollywood production companies are releasing big movies to home screens before they have had a theatrical release.
It is odds-on that many high street shops, sandwich bars, smaller pubs and restaurants will never come back. At the moment over half of the five million or so workers on furlough under the Coronavirus Job Retention Scheme are in Arts, Entertainment, Recreation, Hotels and Food Services (and they are disproportionately young people). It is sadly only too likely that many will lose their jobs when the government finally pulls the plug.
Many of these jobs will have been concentrated in the centre of large cities, most notably London. For the first time in decades, I expect employment in the capital to shrink significantly. One reason for this is the growth in homeworking. Although its attractiveness both for workers and employers has, I think, been exaggerated, it seems clear that there will be less commuting as more people work at home for at least part of the week.
This increase in homeworking will give rise to what Gianni de Fraja and fellow researchers have termed “Zoomshock”. They point out that commuters spend a lot of money on “locally consumed services” near their place of work: coffee, sandwiches, after-work drinks and meals, hairdressing, gyms, retailing and so forth. But if, say, 50% of commuters to an area switch to homeworking two days a week, this means a 20% fall in potential demand for locally consumed services. De Fraja and colleagues point out that over 75% of jobs in the City of London and about half of jobs in Westminster, for example, could be done at home.
Of course, this may mean that people spend a bit more in outlets near their home, but this is unlikely to offset job losses in the centre of cities.
Declining economic activity in the centre of London has already meant that large numbers of foreign workers have returned home – possibly around 700,000 (of which 500,000 were from the EU), according to Michael O’Connor and Jonathan Portes.
So, there are likely to be big changes in patterns of employment as the UK economy emerges from hibernation. Some economists, including my colleague Julian Jessop, are optimistic that the much-vaunted “flexibility” of the UK labour market, which before the pandemic had been performing very well, with low unemployment and continually-rising numbers of jobs, will mean that overall employment will quickly recover.
I am not so sure. I think that successive governments have been loading employers with more and more regulations and costly employment mandates, and that the shock of the pandemic may make employers rethink their use of employees and be more reluctant to take people on than in the recent past – particularly if taxes rise to pay for all the pandemic expenditure.
I have been arguing that to speed recovery the government needs to deregulate, to make it easier for business to repurpose redundant buildings, to build more housing and to take on workers without substantial payroll and other costs. It also needs to reform minimum wages, and make it easier for workers to retrain and to enter fields which currently require unnecessary qualifications and government licensing. But that’s a story for another day.
The pandemic and consequent lockdowns are going on far longer than many of us anticipated, and it would be optimistic to expect an end to this strange new world any time soon. Nobody knows what the future will bring, but nevertheless it is useful to think about likely changes to employment patterns when Covid-19 is no longer raging so fiercely and many current restrictions can be relaxed.
There are sectors where something like the old level of activity and employment will resume pretty quickly. I’d put in this category hairdressing and beauty, gyms and professional sport. Of course, some businesses will inevitably have fallen by the wayside. Even in normal conditions there is considerable “churn”: not all pre-pandemic hairdressers and fitness trainers, or the businesses they work in, will return – but new ones will probably take their place.
There are other sectors which have grown in importance during the pandemic and are likely to continue to grow as lifestyles and tastes are permanently changed. Among these I’d include, fairly obviously, online retailing, delivery services, home improvements, streamed entertainment and UK-based holidays.
Other trends are more speculative, but I’d expect self-employment (which has been badly hit by lockdown (see my recent paper “Being Your Own Boss”)) to recover and grow as many people working from home will have discovered the potential of online business and have acquired new skills.
I also think it likely that gig economy arrangements will continue to grow as firms will be reluctant to add to permanent full-time staffing while so much uncertainty remains.
It may be that the combination of Brexit and Covid-led disruptions, together with a lower exchange rate, may encourage the return of some manufacturing and associated supply chains, as some commentators hope.
Turning to gloomier prospects, there are sectors where a return to pre-pandemic levels of activity and employment seems most unlikely. One is conferences and similar events. In the past, people would regularly travel from all over the country, and indeed from other countries, to stay in hotels and conference centres for two or three days to discuss the state of the world, or their businesses, or their research. But lockdown has shown that these gatherings can be carried out online just as effectively and considerably more cheaply.
For similar reasons we are likely to see far fewer business trips; there is no point in spending a day travelling up to Manchester from London to meet somebody for a half-hour meeting when Zoom can produce much the same result. This, and the decline in commuting as people switch to more home working, means that the railways (which had been experiencing an unprecedented growth in traffic until very recently) will be in serious difficulty. Plans for expanding the system – and particularly the notorious HS2 programme – must now be in doubt.
The travel industry generally, even without the new restrictions on travel abroad, seems likely to decline dramatically. Given the likely increase in cost and vastly increased hassle, it will no longer be worth taking short romantic breaks in Paris or Stag party trips to Iceland, while families may cut back on summer holidays in Spain or Portugal as costs escalate.
In the opposite direction, tourism into the UK will probably take many years to revive. The hotel sector and related businesses such as restaurants will suffer. Nor will live entertainment easily recover; crowded West End theatres will no longer be acceptable to many of their older clientele even if formal distancing requirements are lifted. And mainstream multiplex cinema will surely not come back, given the growth in streaming and the way in which even top Hollywood production companies are releasing big movies to home screens before they have had a theatrical release.
It is odds-on that many high street shops, sandwich bars, smaller pubs and restaurants will never come back. At the moment over half of the five million or so workers on furlough under the Coronavirus Job Retention Scheme are in Arts, Entertainment, Recreation, Hotels and Food Services (and they are disproportionately young people). It is sadly only too likely that many will lose their jobs when the government finally pulls the plug.
Many of these jobs will have been concentrated in the centre of large cities, most notably London. For the first time in decades, I expect employment in the capital to shrink significantly. One reason for this is the growth in homeworking. Although its attractiveness both for workers and employers has, I think, been exaggerated, it seems clear that there will be less commuting as more people work at home for at least part of the week.
This increase in homeworking will give rise to what Gianni de Fraja and fellow researchers have termed “Zoomshock”. They point out that commuters spend a lot of money on “locally consumed services” near their place of work: coffee, sandwiches, after-work drinks and meals, hairdressing, gyms, retailing and so forth. But if, say, 50% of commuters to an area switch to homeworking two days a week, this means a 20% fall in potential demand for locally consumed services. De Fraja and colleagues point out that over 75% of jobs in the City of London and about half of jobs in Westminster, for example, could be done at home.
Of course, this may mean that people spend a bit more in outlets near their home, but this is unlikely to offset job losses in the centre of cities.
Declining economic activity in the centre of London has already meant that large numbers of foreign workers have returned home – possibly around 700,000 (of which 500,000 were from the EU), according to Michael O’Connor and Jonathan Portes.
So, there are likely to be big changes in patterns of employment as the UK economy emerges from hibernation. Some economists, including my colleague Julian Jessop, are optimistic that the much-vaunted “flexibility” of the UK labour market, which before the pandemic had been performing very well, with low unemployment and continually-rising numbers of jobs, will mean that overall employment will quickly recover.
I am not so sure. I think that successive governments have been loading employers with more and more regulations and costly employment mandates, and that the shock of the pandemic may make employers rethink their use of employees and be more reluctant to take people on than in the recent past – particularly if taxes rise to pay for all the pandemic expenditure.
I have been arguing that to speed recovery the government needs to deregulate, to make it easier for business to repurpose redundant buildings, to build more housing and to take on workers without substantial payroll and other costs. It also needs to reform minimum wages, and make it easier for workers to retrain and to enter fields which currently require unnecessary qualifications and government licensing. But that’s a story for another day.
3 thoughts on “The future of post-pandemic work”
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The most important fact in Len Shackleton’s article is the manner in which the ONS persists in producing figures that are simply not fit for purpose. As he says, a lot has happened since the actual date of the ‘official’ unemployment statistics and any policy decisions which use that data as a base will be simply wrong! This and similar issues are at the heart of the Campaign for Better Statistics (see http://www.ukplc.uk.com for further details).
Professor Shackleton is also right to argue against increasing tax on the self employed. Individual enterprise is an absolutely essential ingredient to our prospects for recovery and the treasury thinking that lay behind policy ideas such as increased NIC rates for the self-employed and the rules behind IR35 need to be scrapped. The manner in which the treasury support for employment has missed almost 3 million independent workers, provides further evidence of the poor quality of the ONS data on employment.
Where the Professor goes wrong is in believing that virtual face to face meetings such as those facilitated by ZOOM, Teams etc. will result in the very significant long term behavioural change he predicts. Yes, I agree that such meetings are here to stay, but like electronic books they will not have the long term impact he expects. People will continue to wish to really meet to discuss their personal and business lives when they get the chance!
Ensuring that people who want to work have a good chance of finding work is a vital objective for us all, both as taxpayers and also in terms of general morale – with modern communications, if we don’t achieve this objective, we will end up with anarchy viz. the disruption caused by Extinction Rebellion. The circulation of money from those with tasks needing to be done (eg plumbing, gardening etc) to those able to undertake the tasks is a vital part of achieving this objective. Currently, the gross income which a person wanting a task done needs to generate as a multiple of the net income required by the person undertaking the task is significant – the difference between the two figures is tax paid ie the tax take is inhibiting the amount of work available. One solution to this conundrum could be that if a person pays another person to do work for them, the payment is tax deductible – with modern IT, it would be straightforward for the data input to HMRC by the claimant to also register on HMRC’s records for the recipient.
Professor Shackleton is right about big changes to employment patterns coming. But lets think a little more about one of his proposed solutions – the idea of deregulation to make it easier to repurpose buildings. What regulations is he talking about ? Presumably not those dealing with – say – fire, gas, electricity, water supply, drainage or structural integrity. Hopefully not those dealing with thermal efficiency, waste management, or noise transmission. Or rights to light. He most likely thinking of planning restrictions. But for several years the government has classed the most obvious change – offices to residential – as permitted development. Some of the resulting conversions have produced good quality accommodation. And some haven’t. I refer to the RICS report which said that the policy “allowed extremely poor-quality housing to be developed”. I don’t have first hand experience of this, but I do know those who do. As a result, I am extremely wary of the Professor’s call for deregulation. Be careful about what you ask for: you might well get it.