Lena Anayi
Distant working soared in the course of the Covid-19 (Covid) pandemic. Over half of British employees labored from dwelling in the course of the preliminary Covid lockdowns (first panel in Chart 1). And by February this yr, practically a 3rd of employees had been nonetheless doing so at the least a number of the time. However will this final? On this weblog publish, I discover companies’ and employees’ attitudes to distant working, the extent to which these might differ, and elements that may have an effect on negotiations between them on future distant working preparations.
Chart 1: Proportion of employees working from dwelling, full-time or hybrid(a)(b)
Sources: BBC/YouGov, Determination Maker Panel (DMP), Labour Drive Survey, ONS Enterprise Insights and Situations Survey (BICS), ONS Opinion and Life-style Survey, Prolific, and Understanding Society.
(a) BICS outcomes relate to workers solely, and DMP outcomes relate to full-time workers solely.
(b) The second panel presents the vary of outcomes (minimal and most) inside every class.
After all, because the Covid pandemic continues, many employees and companies will nonetheless be determining their long-term distant working preferences. And lack of matched worker-firm information containing data on each units of preferences means researchers might battle to precisely estimate the diploma to which particular person employees’ preferences are misaligned with these of their employers.
Misalignment in employees’ and companies’ preferences round distant working
Nonetheless, varied survey outcomes present that future distant working preferences differ throughout employees and companies. The second panel in Chart 1 exhibits that, post-pandemic, employees want extra distant working than they anticipate shall be obtainable to them, and their expectations are barely larger than these of companies. Many employees might due to this fact favor extra distant working post-pandemic than their particular person employers shall be prepared to accommodate.
It could even be doable to gauge a point of misaligned preferences by investigating the drivers of those. For example, what if employees and companies had been all motivated by the identical factor, corresponding to maximising productiveness? If that’s the case, assuming mutual settlement on how distant working impacts this, there might not be a lot disagreement round future preparations in spite of everything.
Beginning with the drivers of employees’ preferences, I run a probit regression utilizing the Understanding Society family survey micro-data, with a dependent dummy variable for whether or not the employee wishes extra distant working post-pandemic relative to pre-pandemic. As explanatory variables, I embody employee demographics corresponding to gender, age, degree of training, area, family dimension and whether or not they’re a mum or dad of dependent kids. I embody employer trade (A38 group), agency dimension and the agency’s versatile working coverage. I additionally embody job-related traits corresponding to mode of employment (worker versus self-employed), pre-Covid earnings, weekly hours labored throughout Covid (whole, extra time hours, and alter relative to pre-Covid), workplace commuting time, job tenure, occupation (NS-SEC group), and whether or not the person is a ‘key employee‘, in addition to distant working standing pre and through Covid. And I embody employees’ subjective assessments across the affect of distant engaged on their hourly productiveness throughout Covid, pre-Covid work-life steadiness, pre-Covid job satisfaction, and whether or not they skilled emotions of loneliness throughout Covid.
The regression outcomes (with statistically important regressors proven in Chart 2) reveal a number of issues.
First, employees’ distant working preferences are unrelated to employer traits, except their versatile working coverage. This means that employees’ preferences can’t be predicted primarily based on their employers’ traits, implying that employees and companies might typically disagree.
Second, preferences are additionally unrelated to employee demographic traits.
Third, employee preferences are positively related to whether or not the employee had been working from dwelling throughout Covid (with this making them 19% extra prone to favour extra of it post-pandemic, all else equal), and whether or not they discovered it to be productivity-enhancing (with every 10 share level enhance to productiveness making them 4% extra probably). Greater each day commuting time to the workplace additionally raises employees’ propensity to favour extra distant working (with every further hour making employees 4% extra probably), as does dissatisfaction with work-life steadiness (8% extra probably) and common job dissatisfaction (8% extra probably). In the meantime, emotions of loneliness throughout Covid decrease employees’ propensity to favour extra distant working post-pandemic (18% much less probably), as does being a ‘key employee’ (16% much less probably).
Maybe surprisingly, employees that had already been working remotely pre-pandemic are much less prone to favour extra of it post-pandemic, suggesting a doable restrict to how a lot distant working employees in the end want.
Chart 2: Drivers of employee preferences round elevated distant working post-pandemic(a)(b)
Supply: Understanding Society.
(a) Common marginal results are reported because of the non-linearity of the probit hyperlink operate, such that the estimated affect of any regressor varies as its amount will increase.
(b) N = 1,979. MacFadden R-squared = 0.27. Log-likelihood = -879.51.
Turning to the drivers of companies’ preferences, I run an analogous probit regression utilizing the BICS firm-level information. As explanatory variables, I embody agency demographics corresponding to agency age, dimension, area, trade (A38 group) and possession origin (UK/EU/US), and I additionally embody pre-Covid data on (log) productiveness, degree of intangible belongings, and ratio of workplace rental prices to revenues. These data are drawn from companies’ pre-Covid responses to the Annual Enterprise Survey (ABS). Moreover, I embody data on whether or not companies raised distant working ranges throughout Covid, peak distant working throughout Covid (share of employees), and their subjective evaluation of how distant working impacts productiveness (which I interpret as referring to employee effectivity).
The regression outcomes (with statistically important regressors proven in Chart 3) point out that companies discovering distant working to be productiveness enhancing are 44% extra prone to favour extra of it post-pandemic (versus these discovering it to be productiveness impartial), all else equal, whereas these discovering it productiveness lowering are 28% much less probably to take action.
Nevertheless, productiveness isn’t the one consideration for companies. These with larger office-related overhead prices additionally favor extra distant working post-pandemic, with every further share level enhance within the ratio of overhead prices to revenues making a agency 4% extra probably to take action. These companies might want price financial savings by way of reductions in workplace hire, and as renters they could even have extra flexibility to make such changes. Value reductions may contribute in direction of improved agency productiveness by way of larger revenue margins.
Curiously, US-owned companies are 14% much less prone to favour extra distant working post-pandemic (versus UK owned), suggesting that cultural elements is also at play.
Chart 3: Drivers of employer preferences round elevated distant working post-pandemic(a)(b)
Supply: BICS information matched with ABS.
(a) Common marginal results are reported because of the non-linearity of the probit hyperlink operate, such that the estimated affect of any regressor varies as its amount will increase.
(b) N = 2,659. MacFadden R-squared = 0.48. Log-likelihood = -5691.55.
For each employees and companies, due to this fact, productiveness issues are vital. However there are different vital elements too, a few of which companies and employees might overlook. Staff might want work-life steadiness, office camaraderie or shorter commutes, whereas companies might want price financial savings arising by way of decrease workplace rents.
Negotiations between employees and employers: a bargaining energy story?
Competing preferences between employees and companies might create alternatives for negotiation, if employers comply with this. BICS survey respondents had been requested in September 2021 about their ‘foremost consideration when deciding who can return to their regular place of job’. Chart 4 exhibits that round half of companies (52%) indicated a willingness to barter with employees, with round a 3rd (32%) unwilling to take action. Throughout that very same interval, companies who had been prepared to barter over working preparations had double the proportion of employees working remotely (26% versus 13%).
Chart 4: Whether or not the employer or worker determines future working preparations
Supply: BICS (wave 39).
Though the survey query asks particularly concerning the timing of employees’ return to places of work, companies’ decision-making round this can be assumed to correlate intently with their broader distant working preparations for the longer term.
Are companies which are prepared to barter merely extra conscious of worker preferences? Or maybe they’ve comparatively weak bargaining energy? Perhaps they’re higher capable of accommodate worker preferences, as a result of being extra worthwhile?
There are numerous measures of each employer bargaining energy and agency profitability that enable us to check a few of these prospects. I run one other probit regression utilizing the BICS firm-level information (once more matched with pre-Covid ABS responses), this time with propensity to barter because the binary final result of curiosity. Controlling for agency dimension, productiveness and trade, I concurrently embody varied indicators of weaker agency bargaining energy as explanatory variables, every of that are individually positively related to propensity to barter. These embody unionisation at office, reliance on migrant labour, whether or not the agency is presently struggling to rent, dealing with labour shortages or excessive workers turnover, or has just lately raised employees’ wages, and firm-level labour tightness (ratio of vacancies to employment). I additionally embody revenue margins (pre-Covid) and reported Covid affect on earnings as profitability metrics, each of that are individually positively related to propensity to barter. And I embody companies’ reported distant working productiveness impacts, and overhead prices relative to revenues.
I discover that reported productiveness impacts of distant working finest explains companies’ willingness to barter. Neither bargaining energy nor profitability measures matter when all elements are thought of concurrently. Employers are 14% extra prone to negotiate in the event that they deem distant working to be productivity-enhancing (relative to discovering it productivity-neutral). This can be as a result of they understand fewer productiveness dangers round doubtlessly permitting employees to go for continued distant working. In flip, employers are 21% much less prone to negotiate in the event that they discover it to be productivity-diminishing.
Conclusion
Elevated distant working is prone to stay a everlasting characteristic of the post-pandemic British economic system. However the extent of it will depend upon each companies’ and employees’ preferences, and these might not be aligned. Companies might favour decrease overhead prices, whereas employees might search higher work-life steadiness or shorter commutes. And even when they each search to advertise productiveness, they could disagree over the affect of distant engaged on this, for example if employees fail to internalise its results on workforce cohesion or concepts technology, or if companies ignore its affect on employee engagement. When employees’ and companies’ preferences differ, an employer’s willingness to barter with its workers is prone to rely largely by itself evaluation of the productiveness impacts of distant working.
Lena Anayi works within the Financial institution’s Structural Economics Division.
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