COVID-19 and Remote Work
While the COVID-19 pandemic did not introduce working from home, it has certainly enhanced and transformed it, pushing the entire Globe into a forced work from home experiment. At present, the perceived costs and benefits of the work from home model have been mixed with some arguing that it reduces work culture while others point to increased efficiency from reduced travelling costs and related expenses which stem from going into the office. Ultimately, what has been clear, despite the many views on remote working, is that the future of work has been altered by the pandemic. Today, we shed some light on the cost and benefits surrounding this global shift in how everyday people work.
Potential Widening Income Gap
In a US survey conducted by the Stanford Institute for Economic Policy Research, only 51% of persons surveyed were able to work from home at an efficiency rate of 80% or more. Of course, those who can do so are mostly managers, professionals and financial workers who, given the nature of their jobs, can easily take work home. Additionally, these jobs typically pay more than those in sectors that require face-to-face interactions and cannot be done remotely such as vendor jobs, hotel workers, airport crews etc,. Consequently, the potential effect is a widening income gap between the typical office workers and “in-person” workers, particularly in this phase of the work from home process whereby many in the face-to- face industries have been displaced while those who can work from home are far less hindered and so, keep moving up the proverbial ladder of success. In Jamaica, while the data is less accessible, we can easily surmise that the same portends, but on a much larger scale given the large number of informal workers in our society.
Now, while this is an element of the work from home economy, socioeconomic outcomes can be hard to predict, and the results can easily present a wide variance to the initial expectation. For example, let’s look at the housing benefit… Essentially, the cost of housing (and living) has become elevated in Kingston, Jamaica; Osaka, Japan; New York, USA; Paris, France and the list goes on. What do these places all have in common? Well, they’re all cities dominated by good (or better)-paying jobs and present significant convenience to employees, particularly as it relates to getting to the office on time. Because of this convenience and higher income levels, house prices in these cities have skyrocketed while the size of living spaces has either remained the same or decreased. Nonetheless, workers desire this convenience and opt to live in the city which results in continued price increases and the ones hurt most are those who are unable to afford it. A remote work society, however, implies a breaking down of this barrier. So, someone could own a home in Hanover where it’s much cheaper but have a job in Kingston or, with the potentially reduced demand for housing in select cities, prices can, in some cases, become more affordable.
The Employer’s View
The benefits also flow to employers and what we’ve seen globally is that many companies have decided to maintain the work from home model to some degree. Some big names supporting this shift include Google, Microsoft, Facebook, Twitter, Morgan Stanley, JP Morgan, Amazon, PayPal and many others. Before the pandemic, companies had a clear location limiter when it came to hiring. Now, the question has become, why just hire the best person for the job in the area? Let’s hire the best person for the job overall and work from home has made this very feasible. Other benefits include varying perspectives and idea origination stemming from broadly different background of employees (someone in Westmoreland may think differently from someone in Kingston), reduce office space expense and quite evidently, increased productivity as employees can remove the time spent travelling and repurpose that time towards more work, and in some cases, more rest time which ultimately means a more focused employee. Barriers to Implementation
As we think about the work from home model in Jamaica specifically, the barriers to fully incorporating such a model are extensive, ranging from unreliable internet connection to the level of informal jobs in our society that simply can’t be done from home. In the segments of the economy that can properly execute work from home, challenges remain, including nurturing an organizational culture and true comradery amongst employees. Notwithstanding, the benefits are clear to both employees and employers who can reduce costs and ultimately repurpose those savings to their ultimate benefit. Moreover, while Jamaican companies have not yet publicly made statements regarding embracing working from home post- pandemic, the lessons from large overseas companies who have decided to maintain some semblance of this have been clear, they accept it. Most have reported an improvement in productivity which lends to the idea that this is only the beginning as continued improvements in technology will be a major tailwind for work from home, not just in developed countries but here in Jamaica. As we move towards this reality, Jamaica is again faced with the challenge, or perhaps the opportunity to improve our ability to accommodate such a shift by building out the infrastructure which ultimately benefits the nation as a whole.
Finally, as it relates to the capital markets, a likely outcome, particularly Internationally, is an outperformance of residential REITS relative to commercial REITS given the expected reduced demand for office space. Additionally, we expect continued performance in some “work from home stocks” as the work from home shift becomes more ingrained, thereby becoming a secular shift. On a whole, the changes underway can have a broad effect on the capital markets and positioning for this long-term shift by buying into specific beneficiaries of the work from home model should benefit investors over the long term.
Written by Awah Muirhead, Senior Investment Strategy Analyst
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