The Tharawal People
Associate Professor Alfredo Paloyo
UOW and the Economics Society
It’s a great to be invited to give this year’s economic and social policy lecture.
This is where I went to uni.
It’s special to be invited back all these years later to share my thoughts as a local member and a minister in the new government.
The Government is focused on the shape of our economic recovery.
We want to ensure that we build a society that is fairer and an economy that is stronger.
Through investment in skills and education. Partnerships with the private sector to drive productive investment
And to transform energy generation, distribution and use – in the Illawarra and around the country.
The title of my talk is Zooming Out. It’s about productivity.
Productivity is a pretty simple concept – it’s output over input.
Just a fraction that quantifies ‘working harder’.
But it’s more than just working harder.
It’s about unlocking potential. A potential that I see in front of me here today.
Growing productivity means growing wages, a better standard of living and a more stable and resilient economy.
It’s not an optional extra, we need to do this.
I want to look at the question of productivity through the place of work.
Setting the scene
So, let’s jump back a bit.
Before the 18th century pretty much everyone worked from home.
But over the course of the industrial revolution, that changed.
Farm hands and artisans began to commute to jobs in the swelling number of factories and professional offices.
This radical workplace transformation had an almost incalculable economic and social effect.
Transport moved from horse to rail and then to cars.
Populations urbanised around these new forms of work and movement, towns became cities and cities became mega cities.
Productivity boomed, fertilised by the free exchange of ideas and lubricated by an artistic and cultural renaissance.
We didn’t just do more. Doing more isn’t enough.
What we did is we unlocked potential. We cracked open ideas. We fast tracked our thinking. That’s the power of productivity.
The Productivity Commission tells us that productivity increases account for more than 80 percent of national income growth over the last 30 years.
Back in the 1970s, around 8 per cent of Australians were working in agriculture.
Today, that number is closer to 2 per cent.
That shift unlocked one aspect of productivity – in the services sector – which now makes up the majority of our economy.
I want to talk today about knowledge workers – because of the key role that knowledge workers play in innovation and productivity in post-pandemic Australia.
Because productivity means that more workers are working in in the services sector – thinking big.
Just as they were in the industrial revolution, cities are at the heart of it.
While just 7 percent of the world’s population live in mega cities like New York, London, Tokyo and Shanghai, they produce 40 percent of global GDP.
As economist Matt Ridley puts it, big cities are where ideas go to have sex.
Which leads me to today. Let’s zoom in.
I want us to think about the work from home revolution that we have witnessed over the last three years.
Zooming - In
In March 2019, the world as we knew it changed.
Supermarkets sold out of everything from toilet paper to tinned tomatoes.
There was also a run on office equipment:
Work desks; Cameras and microphones for video conferencing; Green screens for making the loungeroom look like a boardroom.
Australia was zooming in.
Work clothes were consigned to the back of the closet … or at least the half you couldn’t see on a video call.
Office wear became tie and board shorts, even the Prime Minister at the time went for the new look.
YouTube was bombarded with video tutorials about how to zoom and ways to look your best.
The workplace change was unprecedented. The size and speed of our transformation has not been seen at any time in the post war history.
Before 2019 less than 8 percent of workers had formal work from home arrangements.
Typically, it was for just one day a week.
But the potential for that number to grow rapidly was there before the pandemic.
The 2016 census showed about 35 percent of workers had jobs amenable to working from home.
Most of those workers were in desk-based jobs with high education requirements.
When the pandemic hit, the gap between those who could work from home and those who did filled in quickly … and then some.
The Productivity Commission recently estimated about 40 percent of workers did job their job from home over the pandemic.
Some could not.
You can’t stack a shelf from home.
You can’t intubate a hospital patient.
But with lockdowns over, the work from home crowd are being told to get out of their pyjamas and back into the office.
For lots of them, that’s not a problem.
If you endured Melbourne’s 262 days in lockdown, getting out of the house probably still feels like a luxury.
If you live in Western Sydney you’re probably happy just to get to work without running the gauntlet past the military barricades.
But many workers are not so keen to get back into the office.
These are largely knowledge workers: technologically connected, educated and flexible.
The Benefits to workers in working from home
And it’s easy to see why they are resistant to going back to the office full time.
Lets start with the commute.
The Productivity Commission estimates full-time workers in major Australian cities in 2019 spent on average 67 minutes commuting per day.
Foregone earnings for that average commute are around $49, without including vehicle costs.
That number goes up to $57 if you add in the extra time it takes to commute by public transport.
And that doesn’t include the cost of the ticket.
If you are one of the 20,000 workers commuting between Wollongong and Sydney by train – you saved an additional $13 each day in train tickets.
So roughly $100 a week in time and transport costs … that’s a fair bit of coin.
So staying at home actually saves money. A lot of money. And a lot of carbon emissions.
Many workers with families enjoyed the flexibility of work-from-home, allowing them to better manage parenting responsibilities and job obligations.
And that’s been a big goal of this government.
Pulling down barriers for parents to stay in and return to the workforce.
And it’s not just parents.
Many younger workers see it as a path to better work-life balance, while older workers and those with a disability see it as a leveler in the competition for jobs.
Live where you really want to
For many occupations your choice of where you could live is very limited.
For knowledge workers – a high proportion of the work is done in capital cities.
But when the offices where emptied new options arose.
Many took the opportunity during the pandemic to make a sea or tree change.
Sydney workers were now moving back to Wollongong. Back to the regions.
Net quarterly migration away from capital cities increased from about 4,000 before the pandemic, to about 10,000 after.
There were benefits in this for business and the economy as well.
The work from home revolution provided some broader benefits as well.
Gone was the oversharing colleague, the brain drain from the daily commute, the waiting for the conference room to become available, and the interference of working in an open office.
Many reported an increase in output when working from home when these interruptions were removed.
And for business– there was a bigger pool of workers when we weren’t as limited by geography.
And the move to the regions opened up business opportunities that weren’t there before.
The View From the Corner Office
Of course not everyone was enamoured with the work from home revolution.
Many business leaders were keen for a return to the office as soon as possible.
It would be easy to dismiss this as old fashioned concepts around shirking and an outdated reliance on presenteeism. I’m sure there was some of that, but there is much more to it.
The NAB CEO Ross McEwan has made the point that while productivity at the bank initially went up with lockdowns, it later declined.
His employees, he says, missed out on training opportunities that would have made them more efficient.
“I think there’s a lot of stunting of careers,” is how he put it to the Sydney Morning Herald.
He also mentioned the increased cost to the business of coordinating staff work from home arrangements, mostly associated with technology and support.
But most of all he worries about a reduction in serendipitous breakthroughs, innovation through knowledge sharing and chance conversations over the water cooler.
This was, in part, what led to the industrial revolution. The move from home to cities. Of critical masses. It all led to higher productivity.
Of not just doing more. But of unlocking potential.
These are just some of the dis-economies of the work from home revolution.
They are real and they go to the heart of how collaboration around ideas have led to break through innovations – and how so often they happen by accident
The post-it note was invented when a researcher at 3M threw out a failed experiment into a new glue because it wasn’t strong enough.
A chance conversation with a colleague later about bookmarks led to the creation of this now ubiquitous product.
Viagra was originally conceived as a treatment for angina before some lateral thinking ... or more accurately, horizontal thinking.
The humble kitchen microwave converted abandoned world war two tech into radar technology.
The fact is, a lot of the time the formal meeting isn’t the productive bit of a work conversation, it’s the chit chat later.
At conferences it’s the banter around the coffee cart that produces the ah-hah moments, not necessarily the roundtable discussions.
Long before the pandemic – smart businesses had cottoned on to this – they started to design their workplaces in ways that encouraged the serendipitous exchange of ideas.
The coffee shop moved from the foyer to the centre of the building.
Bean bags and break out spaces replaced the endless rows of workstations. WiFi and mobile technology made it all possible.
If teaming offices and bustling cities jammed with enthusiastic knowledge workers are the known key to our productivity challenges then the answer would be simple – lets get everyone back on trains and back into the office.
Not so simple.
The shift to working from home unlocked efficiencies in technologies that weren’t explored before.
Before this lecture I signed off on several briefs with my iPad. My staff can have me make critical decisions from wherever I am.
Before COVID, we were relying on the shuffling of papers to and from offices. And it’s not that the technology wasn’t there. It was the culture. No more.
Employees also have a legitimate response – the improved amenity – the cost savings – these are all worth something, and right now workers have the upper hand.
There are workforce shortages across every occupation – particularly knowledge workers.
Employees are in a stronger position to bargain – and not just for wages – but for conditions like where they work and when.
The ABS Job mobility data tells us that workers are on the move.
1.3 million in the last 12 months.
There is suggestion that this number will grow again this year. It’s not just an Australian thing.
The PC has looked at surveys from the US which suggest that 40% of employees would look for another job if their employer removed their work from home arrangements.
So what is the answer
It’s now pretty clear that a new hybrid form of work will become the norm among knowledge workers. Blending work from home with two or three days a week in the office.
Firms will have to factor this in.
This will not obviate the need to invent new modes of collaboration.
In part this will come down to between management and work design.
Technology will also play a part – better use of existing technology or and the emergence of new ones to encourage better collaboration from disparate locations. The firms that nail this will leap ahead.
This does not resolve the issue of spontaneous collaboration. If offices do not play the same role as meeting places new forms will have to emerge.
I see a real role for universities, professional associations and local governments in this space.
Universities have a natural advantage – they are already a gathering place of thinkers and researchers and innovators. This can be taken to a new level.
Professional associations also have a role – exchange of ideas in formal and informal settings.
The Local Government and Regional Development Piece
There are also a great opportunities for innovative local governments. New ways to think about economic development for towns like ours.
Instead of going to businesses and offering all manner of ineffective concessions to businesses to relocate – we should be going directly to the workforce. Pitch straight to the worker.
If it is knowledge workers we are after – and we should be – what is going to be attractive about our region compared to any others.
The urban renewal guru Richard Florida calls it the three t’s – tolerance, technology and talent.
Thinkers and collaborators thrive in an atmosphere of full and free expression.
Ideas multiply when knowledge workers and the creative class are connected, virtually and in person.
Fast broadband, free Wi-Fi and start-up hubs are one way to attract talent and share ideas.
Another is the physical environment: bike paths, parks and other social amenities that encourage movement and interaction.
Local government needs to re-imagine and integrate economic policy with cultural policy and revisit the drivers of productivity growth.
Florida describes the end goal as: “a teeming blend of cafes, sidewalk musicians, and small galleries and bistros where it is hard to draw the line between participant and observer, or between creativity and its creators.”
A calendar of events from innovation conferences and festivals of idea to hackathons for local programmers is the special sauce to attract creative thinkers and spread ideas and innovation.
It’s not so much an alternative to zooming in but an adjunct to it.
All of this requires us to think about innovation and productivity in a different way. It’s not just about doing more of the same.
We need to look beyond the traditional fights over industrial relations and look directly at how we educate, train, attract and retain the workers who will be the engine room of economic growth for the 21st century.
And how we create places for people to come together – to unlock potential and crack open ideas – in workplaces and beyond.