The Economy Is About to Have a Work from Home Reality Check
Unquestionably, the ability for myriad American companies to transition rapidly to remote operations helped significantly mitigate the consequences of the COVID-19 pandemic. However, the brutal reality is that unless a full return to the office materializes, the broader economy could incur long-term damages. Given the forces of free market capitalism, though, employers will likely win this brewing debate, potentially providing actionable opportunities for investors.
With fears of COVID-19 gradually fading, the catalyst for maintaining remote operations likewise wanes. No pandemic, no need to phone it in. But as CNN Business argued last year, work from home was becoming a big problem for the economy. Senior writer Anneken Tappe noted that empty offices translates to major disruptions for local businesses.
Love it or hate it, commuting is good for the economy. You pay train conductors' salaries with your subway fare. The dry cleaner by the office and the coffee shop around the corner all count on workers who have been largely absent for nearly a year and a half.
While Tappe acknowledges that many workers prefer remote operations, “staying home is likely to delay the recovery of the vital office-adjacent economy.”
Fundamentally, the issue centers on lack of productivity and the unnatural competition and economic dynamics that work-from-home protocols impose on free markets. Unless these circumstances are addressed (via a full return to the office), Tappe may be correct: the U.S. is unnecessarily delaying its full recovery.
Work From Home Involves Suspension of Disbelief
On surface level, studies suggest that work from home may be the superior approach to business efficiencies. After all, article after article indicates that people are more productive from home. However, drilling into some of these reports, observers will find that these datapoints are self-reported.
This is akin to competitive athletes self-reporting their height or other physical metrics. One needs independent, unbiased data sourcing to even begin to make a firm conclusion. Unfortunately, the hard data that is available suggests workers are not as productive as they claim.
Primarily, multiple studies demonstrate that employees find often clever ways to steal time from their employer. Back in 2019, the American Management Association reported that “the average worker admitted to ‘frittering away 2.09 hours per day, not counting lunch. Over the course of a year (and even after accounting for time employers expect to be wasted), that adds up to $759 billion in salaries for which companies receive no apparent benefit.’”
So, if employees working in the office managed to waste $759 billion, how much more will they waste at home without supervision and oversight? Indeed, if work from home was so productive as worker bees claim, then why are mouse movers – devices or programs that mimic mouse movements to trick supervisors -- rising in demand?
But it’s not just employers getting the raw end of the deal with work from home. Telecommuting privileges have allowed people to move into rural areas, dramatically upsetting local economies by spiking housing and rental prices. Further, such actions impose incredible hardships on affected regional workers, who can’t possibly compete against major metropolitan salaries.
In addition, a less-discussed narrative is that remote employees unfairly compete with gig economy workers. While gig workers often do work from home, they must constantly fend for themselves in a free market arena. However, corporate employees don’t suffer the same pressures – they get to work from home while earning a salary and often robust benefits.
To right the ship, the business world must force their workers into making a choice: either be employees and do what the company asks or branch out on their own and absorb the associated risks of independence. Workers can’t have it both ways.
The Coming Pivot for Remote Operations
Critics of the return-to-the-office movement may point to Airbnb (ABNB). Earlier this year, “Airbnb will allow its employees to live and work almost anywhere around the world, fully embracing a remote work policy to attract staff and ensure flexibility,” per the Associated Press.
Although it sounds like a blueprint for the next-generation economy, here’s the reality check. Back when the COVID-19 pandemic disrupted society, Airbnb let go of nearly 1,900 employees. In other words, the company will be for the people – until they’re not for the people.
Sure enough, another disruption is coming our way and this time, it might not just be Airbnb that may be forced to lay off a significant portion of its workforce. With Federal Reserve chair Jerome Powell acknowledging in his annual policy speech at Jackson Hole, Wyoming that attacking inflation could bring “pain” to the economy, this talking point represents a major pivot.
No longer will the Fed support a dovish, accommodative monetary policy, which would be naturally inflationary and thus spark investments due to the associated erosion of the dollar. No, from now on until inflation gets under control, the Fed will implement hawkish policies, which theoretically should drive the dollar higher.
Such a measure will likely hurt business activities because entities simply need to sit on their dollars to achieve a positive return in real terms. Therefore, any business or investment opportunity must be so compelling that it’s worth taking a market risk – as opposed to enjoying “free money” by simply doing nothing but not spending excessively.
This is a massive paradigm shift that apparently few investors have acknowledged.
Stocks That May Perform Well Longer Term
One of the stocks that may benefit longer term from the above trends is Robert Half (RHI). As one of the top staffing services, its phones could start ringing as desperation starts to build in the workforce. Moreover, investors should keep an eye out for Kelly Services (KELYA). Also specializing in staffing, the company brings greater diversity of job opportunities, including in the manufacturing and warehousing industries.
Again, when people need to put food on the table, they’ll take whatever they can get.
Finally, investors may want to consider companies tied to the gig economy, such as digital payments processor and business management provider PayPal (PYPL). While shares have been ugly this year – they’re down about 53% at time of writing – the underlying company could benefit as corporate employees who had a taste of the gig life decide to make the transition fulltime.
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Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.
