Working from home and understanding what matters

The US economy has experienced a marked recovery from the COVID-induced recession of 2020. The much-anticipated lasting effects of the pandemic have never materialized: employment, labor force participation, and GDP are once again in line with predictions from before the health crisis. We’re still waiting to see if House Republicans lose this feat by plunging America into a completely arbitrary debt crisis. But today I thought I’d take a break from the stress and talk about something very important where the US economy is doing better than the usual numbers. One positive aspect of the coronavirus crisis has been a major change in the way Americans work: We now spend less time and resources commuting to and from work.

A few days ago, my colleague Fahrad Manju was writing an article about the benefits of traveling less which inspired me to delve deeper. While it has its drawbacks, the move to remote and hybrid working is, overall, a very good thing, even if Elon Musk hates it (or maybe especially if he hates it).

Switching to Telecom is also a very instructive moment, at least in two ways. First, it provides a practical lesson in the fact that taking advantage of new technological possibilities often requires major changes to how companies operate. Second, it reminds us that economic statistics like GDP, while useful, can sometimes be misleading indicators of what really matters in life.

First things first: reducing travel time is serious business. Before the pandemic, the average American adult spent about 0.28 hours a day, or more than 100 hours a year, on work-related commutes. (Since not all adults work, the number of those who do was significantly higher.) By 2021, that time was cut by about a quarter.

Attributing a dollar value to the benefits of this cut is complicated. Multiplying the time saved by the average salary is not enough, as it is likely that people do not consider the time spent on the road (yes, most people drive to work) to be completely wasted. On the other hand, there are many other expenses ranging from fuel to vehicle wear and tear and the psychological stress associated with commuting to work. And a third consideration: The option of teleworking or hybrid work is usually within reach of workers with higher levels of education, who earn higher-than-average wages and, therefore, have a higher value attached to their time.

However, it is not difficult to argue that the global benefits of not having to travel every day are equivalent to gains in national income of at least one percentage point, and probably many more. That’s a lot: there are very few proposals for measures capable of generating benefits of this magnitude. And yes, the benefits are real. CEOs can rail against lazy or (according to Musk) “unethical” workers who don’t want to go back to their cubicles, but the purpose of the economy isn’t to make bosses happy.

Interestingly, this change in the way many Americans work has not been driven by new technologies. This would not have been possible if many people did not have a fast internet connection, but home broadband saw a major increase between 2000 and 2010, then was curtailed. Companies only learned to take advantage of the technological potential of teleworking under the pressure of the pandemic.

The point is, while the post-pandemic economy is behind us, the change in the way things are done appears to be permanent. Overall, telecommuting seems like a classic example of a new industry: uncompetitive at first, then gets a temporary boost (usually provided by tariffs or subsidies, but in this case a virus), learns by doing, and Keeps going The excitement goes away.

If the rise of telecommuting lasts indefinitely, it will have profound economic ramifications, with few losers (such as commercial real estate and the tax base of many cities) but many winners. However, what it will not do is appear as an increase in nominal GDP; The time Americans spend in traffic is not subtracted from national income, and the time spent with their families is not added.

I am not one of those critics of GDP who say that it is a useless number; This is an informational statistic and is not easy to replace. But it can be confusing when societies choose something different. Anyone who does international comparisons knows that the United States has a GDP per person higher than in European countries, but a large part of the difference does not reflect higher productivity; This reflects the fact that Europeans have a lot of holidays, while we are a “country without holidays”. So are we better off? Are you sure?

Currently we see a lot of benefits in households that are not reflected in GDP. It is true that these benefits go mainly to high-income workers, which is reprehensible. However, there have also been significant wage increases at the lower levels, and this mitigates the injustice somewhat. One implication is that if we look at what an economy is for—that is, to meet human needs, not generate favorable statistics—the United States’ recovery from the pandemic has been much more impressive than you might imagine.

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