Remote working, bargaining power and productivity – Bank Underground

Lena Anayi

Distant working soared throughout the Covid-19 (Covid) pandemic. Over half of British staff labored from residence throughout the initial Covid lockdowns (first panel in Chart 1). And by February this yr, nearly a third of workers had been nonetheless doing so a minimum of a number of the time. However will this final? On this weblog put up, I discover companies’ and staff’ attitudes to distant working, the extent to which these might differ, and components that may have an effect on negotiations between them on future distant working preparations.

Chart 1: Proportion of staff working from residence, full-time or hybrid^(a)(b)

Sources: BBC/YouGov, Choice Maker Panel (DMP), Labour Pressure Survey, ONS Enterprise Insights and Circumstances Survey (BICS), ONS Opinion and Way of life 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 staff and companies will nonetheless be determining their long-term distant working preferences. And lack of matched worker-firm knowledge containing info on each units of preferences means researchers might wrestle to precisely estimate the diploma to which particular person staff’ preferences are misaligned with these of their employers.

Misalignment in staff’ and companies’ preferences round distant working

Nonetheless, numerous survey outcomes present that future distant working preferences differ throughout staff and companies. The second panel in Chart 1 reveals that, post-pandemic, staff need extra distant working than they count on will likely be out there to them, and their expectations are barely greater than these of companies. Many staff might due to this fact favor extra distant working post-pandemic than their particular person employers will likely be prepared to accommodate.

It might even be doable to gauge a point of misaligned preferences by investigating the drivers of those. For example, what if staff and companies had been all motivated by the identical factor, similar to maximising productiveness? In that case, assuming mutual settlement on how distant working impacts this, there will not be a lot disagreement round future preparations in any case.

Beginning with the drivers of staff’ preferences, I run a probit regression utilizing the Understanding Society household 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 embrace employee demographics similar to gender, age, degree of schooling, area, family measurement and whether or not they’re a dad or mum of dependent kids. I embrace employer trade (A38 group), agency measurement and the agency’s versatile working coverage. I additionally embrace job-related traits similar to mode of employment (worker versus self-employed), pre-Covid earnings, weekly hours labored throughout Covid (complete, 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 worker‘, in addition to distant working standing pre and through Covid. And I embrace staff’ subjective assessments across the impression 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, staff’ distant working preferences are unrelated to employer traits, aside from their versatile working coverage. This means that staff’ preferences can’t be predicted based mostly on their employers’ traits, implying that staff 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 residence 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 possible). Larger day by day commuting time to the workplace additionally raises staff’ propensity to favour extra distant working (with every extra hour making staff 4% extra possible), as does dissatisfaction with work-life steadiness (8% extra possible) and normal job dissatisfaction (8% extra possible). In the meantime, emotions of loneliness throughout Covid decrease staff’ propensity to favour extra distant working post-pandemic (18% much less possible), as does being a ‘key employee’ (16% much less possible).

Maybe surprisingly, staff 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 staff finally need.

Chart 2: Drivers of employee preferences round elevated distant working post-pandemic^(a)(b)

Supply: Understanding Society.

(a) Common marginal results are reported as a result of non-linearity of the probit link function, such that the estimated impression 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 the same probit regression utilizing the BICS firm-level data. As explanatory variables, I embrace agency demographics similar to agency age, measurement, area, trade (A38 group) and possession origin (UK/EU/US), and I additionally embrace pre-Covid info on (log) productiveness, degree of intangible property, and ratio of workplace rental prices to revenues. These info are drawn from companies’ pre-Covid responses to the Annual Business Survey (ABS). Moreover, I embrace info on whether or not companies raised distant working ranges throughout Covid, peak distant working throughout Covid (share of staff), 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 decreasing are 28% much less possible to take action.

Nonetheless, productiveness isn’t the one consideration for companies. These with greater office-related overhead prices additionally favor extra distant working post-pandemic, with every extra share level enhance within the ratio of overhead prices to revenues making a agency 4% extra possible to take action. These companies might need price financial savings by means of reductions in workplace lease, and as renters they could even have extra flexibility to make such changes. Price reductions also can contribute in direction of improved agency productiveness by means of greater revenue margins.

Apparently, US-owned companies are 14% much less prone to favour extra distant working post-pandemic (versus UK owned), suggesting that cultural components may be at play.

Chart 3: Drivers of employer preferences round elevated distant working post-pandemic^(a)(b)

Supply: BICS knowledge matched with ABS.

(a) Common marginal results are reported as a result of non-linearity of the probit link function, such that the estimated impression of any regressor varies as its amount will increase.
(b) N = 2,659. MacFadden R-squared = 0.48. Log-likelihood = -5691.55.

For each staff and companies, due to this fact, productiveness concerns are essential. However there are different essential components too, a few of which companies and staff might overlook. Employees might need work-life steadiness, office camaraderie or shorter commutes, whereas companies might need price financial savings arising by means of decrease workplace rents.

Negotiations between staff and employers: a bargaining energy story?

Competing preferences between staff and companies might create alternatives for negotiation, if employers comply with this. BICS survey respondents had been asked in September 2021 about their ‘principal consideration when deciding who can return to their regular place of business’. Chart 4 reveals that round half of companies (52%) indicated a willingness to barter with staff, 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 staff 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 staff’ return to places of work, companies’ decision-making round this can be assumed to correlate carefully with their broader distant working preparations for the longer term.

Are companies which are prepared to barter merely extra aware of worker preferences? Or maybe they’ve comparatively weak bargaining energy? Possibly they’re higher capable of accommodate worker preferences, as a consequence 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 knowledge (once more matched with pre-Covid ABS responses), this time with propensity to barter because the binary consequence of curiosity. Controlling for agency measurement, productiveness and trade, I concurrently embrace numerous indicators of weaker agency bargaining energy as explanatory variables, every of that are individually positively related to propensity to barter. These embrace unionisation at office, reliance on migrant labour, whether or not the agency is at present struggling to rent, going through labour shortages or excessive workers turnover, or has lately raised staff’ wages, and firm-level labour tightness (ratio of vacancies to employment). I additionally embrace revenue margins (pre-Covid) and reported Covid impression on income as profitability metrics, each of that are individually positively related to propensity to barter. And I embrace 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 components 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 probably permitting staff 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 this may rely on each companies’ and staff’ preferences, and these will not be aligned. Companies might favour decrease overhead prices, whereas staff might search higher work-life steadiness or shorter commutes. And even when they each search to advertise productiveness, they could disagree over the impression of distant engaged on this, for example if staff fail to internalise its results on staff cohesion or concepts technology, or if companies ignore its impression on employee engagement. When staff’ 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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