Work-From-Home at a Massive Level Might Reduce Productivity, Early Evidence Suggests

The massive shift to work-at-home caused by policies related to the Covid-19 pandemic have inadvertently provided a remote-work statistical base we will be analyzing for years, especially regarding the productivity impact of massive work-from-home changes. 

Most past studies of work-at-home productivity arguably involved smaller sets of workers in functions that arguably are best suited to remote work (sales, coding, marketing, accounting, legal work and so forth). 

What the global pandemic stay-at-home orders have done is push the bulk of enterprise workforces to either work at home or not work. The early data from the change is not encouraging for productivity impact, suggesting that the tools we have are not so much the problem as human ability to adjust to remote work environments and use the tools fully. 

If it is the case that only a third of jobs can be done remotely, forcing everyone to do so will not be universally productive. say professors  Jonathan Dingel and Brent Neiman of the University of Chicago Booth School of Business, who conducted a recent study on the subject.

The study suggests 34 percent of U.S. jobs can plausibly be performed at home. Assuming all occupations involve the same hours of work, these jobs account for 44 percent of all wages. The converse is that 66 percent of jobs cannot plausibly be shifted to “at home” mode. 

As you might guess, some jobs and some areas are more amenable to remote work. The top five U.S. metro areas feature many jobs in government or technology that could be done from home. On the other hand, some areas involve manufacturing, agriculture, raw materials extraction of other major industries that are not amenable to remote work. 

source: Dingel and Neiman

“More than 40 percent of jobs in San Francisco, San Jose, and Washington, DC could be performed at home, whereas this is the case for fewer than 30 percent of jobs in Fort Myers, Grand Rapids, or Las Vegas,” they say. 

Professional, scientific and technical services, management jobs, education, finance, insurance and information jobs are easiest to shift to remote work. Transportation, warehouse operations, construction, retail, agriculture, food services and lodging are among the hardest to shift to remote work. 

The new conventional wisdom is that more remote work is coming, as a permanent change after all the stay-at-home rules put into place to deal with the Covid-19 pandemic. But there is some debate about whether remote work is less productive or not. And if remote work turns out to be less productive or more productive than face-to-face work, there will be consequences for its extension and use. 

Looking only at the impact of the massive stay-at-home orders to counter the Covid-19 pandemic, there is at least some evidence that productivity has suffered, in some countries, because of remote work from home. 

Aternity, for example,  has aggregated from millions of employee devices from over 500 Global 2000 companies, reveals that the United States has become less productive due to remote work because of the pandemic. The metric is hours of work, captured because Aternity hosts a cloud-based analytics application that captures work-related application usage. 

At the end of March, 77 percent of work has been moved to be performed remotely in North America, the largest amount of any continent. The North America trends were bifurcated. U.S. enterprise worker productivity actually dropped 7.2 percent, Aternity reports, though Canadian productivity increased about 23 percent. 

“Overall productivity (as measured by hours of work computing time) in Europe declined by 8.2 percent,” according to Aternity. 

source: Aternity

Another study of worker attitudes suggests that about half of workers 18 to 24 believe their productivity is lower when working from home, according to a study by National Research Group. Half also believe they are distracted at home. That does not necessarily mean productivity is lower, but the workers feel their productivity is lower. 

Some believe remote work, in some cases, is wildly less productive. A study by Scikey MindMatch that estimates only 0.2 percent of the Indian IT workforce actually is capable of working from home at high levels of productivity.

That finding might run counter to what many observers would expect for remote work productivity, but Scikey describes itself as a firm supporting firm efforts to attract personnel that drive “high-performing teams.” 

Since talent, skills, intelligence and ability to perform work at a high level remotely  are bell-shaped curves (a normal distribution), people who might be described as “high performing” would be expected to be a minority of all workers. 

The Scikey study seems to be operating out at three standard deviations, which would represent 0.3 percent of people. 

source: Researchgate

Reports about the study indicate that  99.8 percent of the workforce in the information technology sector is incapable of working from home, at least with very-high productivity arguably matching what happens at the workplace, the study claims. 

The reason so many are “incapable” of working from home is that they lack at least one quality deemed essential for success, including resistance to learning and exploring (95 percent), lack in practical communication skills (65 percent) and lack in planning and execution (71 percent).

Some 17 percent of the employees are instruction-driven and therefore they need clear and direct instructions to work their best. about 12.7 percent of the employees are very much dependent on their social interactions, and working from home comes as a real challenge for them. Work is not difficult for them, but social interactions are necessary for them to function, Scikey suggests. 

What the study likely indicates is simply that the human characteristics Mind Match associates with the highest-performing individuals in a remote work setting are three standards deviations from the mean. 

You can make your own assessment of whether that is a functionally valid test of worker suitability for remote work. 

Are 99.8% of Indian IT Workers Really Unable to Work from Home at a High Level?

Skepticism is likely called for whenever any survey, on any subject, produces highly-unusual conclusions. That probably is the case for a study by Scikey MindMatch that estimates only 0.2 percent of the Indian IT workforce actually is capable of working from home at high levels of productivity.

That finding might run counter to what many observers would expect for remote work productivity, but Scikey describes itself as a firm supporting firm efforts to attract personnel that drive “high-performing teams.” 

Since talent, skills, intelligence and ability to perform work at a high level remotely  are bell-shaped curves (a normal distribution), people who might be described as “high performing” would be expected to be a minority of all workers. 

The Scikey study seems to be operating out at three standard deviations, which would represent 0.3 percent of people. 

source: Researchgate

Reports about the study indicate that  99.8 percent of the workforce in the information technology sector is incapable of working from home, at least with very-high productivity arguably matching what happens at the workplace, the study claims. 

The reason so many are “incapable” of working from home is that they lack at least one quality deemed essential for success, including resistance to learning and exploring (95 percent), lack in practical communication skills (65 percent) and lack in planning and execution (71 percent).

Some 17 percent of the employees are instruction-driven and therefore they need clear and direct instructions to work their best. about 12.7 percent of the employees are very much dependent on their social interactions, and working from home comes as a real challenge for them. Work is not difficult for them, but social interactions are necessary for them to function, Scikey suggests. 

What the study likely indicates is simply that the human characteristics Mind Match associates with the highest-performing individuals in a remote work setting are three standards deviations from the mean. 

You can make your own assessment of whether that is a functionally valid test of worker suitability for remote work.

Gatekeeper Role Diminishes

Barriers to customer switching are considerably lower now than in the past, reducing the power gatekeepers have over their customers, and shifting the ways some control still can be exercised.

Set-top box interoperability is one way to reduce the power of video service vendor lock-in and make switching providers easier. In the past, control of the conditional access function provided by such set-tops was perceived to be a source of business advantage by cable operators.

All that has started to change with the advent of over-the-top video subscriptions, though, which require no dedicated set-top box, only use of an application which itself supplies the conditional access functions, and then an internet-connected TV or streaming stick.

As the number of global linear video subscriptions grows, shipments of set-top boxes set-top boxes are growing, though. But those boxes are less costly.

Moore’s Law and competition have helped reduce prices for set-top boxes. Service provider profit pressure requires them to get operating costs down, and that includes the cost of customer premises equipment. But it also is the case that set-tops play a smaller role in driving revenue than once was the case.

Set Top Box Price Forecast


source: Technology Futures

These days, revenue growth and profit margins are driven by internet access services, not subscription video or voice. So the value of the set-top also is diminished. That is not to say the box has little value. In fact, Comcast’s X1 boxes supply many functions that add value to the user experience, beyond allowing access to the programming.



source: Technology Futures

Not only have telcos, cable companies, internet service providers and satellite firms become less essential “gatekeepers,” but their roles in the ecosystem as distributors likewise wanes. In an internet ecosystem, once the internet access is in place, each app provider can function without a distributor in the value chain.

And that has business implications for former distributors as well as all app suppliers.

Over time, some distributors will become app providers, altering their roles in the value chain. Moves by Comcast, AT&T and others to become content producers and copyright owners provides a clear example. The role of Peacock owner (Comcast) or HBO Max (AT&T) comes not from the distributor role but from the app provider role.

Functionally, even traditional linear TV subscriptions have become apps. They might be owned by the firm that supplies the internet access, but since that product already can be purchased separately from the internet access, even linear video is functionally an application.

Note the change in distribution once a service evolves from linear to internet delivered: where the service footprint was bound by the franchise areas where a cable company, telco or ISP has access networks, the internet apps can be purchased by anyone with internet access in any country where the app is lawful.

HBO Max, in other words, can be purchased by customers who do not buy AT&T internet access or voice services or mobility services. One of the defining attributes of an internet app is that it can be sold or used anywhere internet access is available, and where the app is lawful.

So one obvious implication of any connectivity provider becoming an app provider is that the former geographic bonds are slipped. Voice and video providers using fixed networks need government permission to operate in specific areas, and are not allowed to operate outside those areas.

Over the top services and mobile operators can, in principle, operate nationwide, or internationally, if other governments permit it. In traditional parlance, that means operating outside the franchise area, not just inside the territory where permission to operate is granted.

To be sure, device interoperability is helpful in reducing switching behavior by customers. But other trends--especially the shift to internet delivery--are reducing barriers to switching behavior, in any case.

The New Normal Will Not Last; in 2 to 4 Years, Normal Will Reassert Itself

One hears talk of post-Covid-19 new normal that results in permanent changes in business and consumer behavior. 

But we heard the same analysis in the wake of the 2008 great recession. Permanent slow growth was supposed to be the new normal.  It did not last. 

source: Statista

source: Statista

Some confidently predicted that U.S. firms would never again make as much use of leverage as they had going into 2018.  In fact, trends in use of leverage in financial markets suggest there is nothing permanent about new business attitudes towards financial leverage.  Use of leverage soared, post-great recession, to new levels. 

source: Seeking Alpha

Likewise, many analysts suggested consumer behavior had fundamentally changed as a result of the 2008 recession. Consumers would remain wary of debt, it was suggested. That also proved to be incorrect. To be sure, consumers were more cautious for half a decade, but eventually returned to their old ways. 

source: Marquette Associates

Consumer saving rates grew in the wake of the great recession, but only for perhaps four years. 

source: Federal Reserve Bank

The cruise industry saw price declines in the wake of past recent recessions or event shocks as well, and most expect a slow recovery for cruise line activity in the wake of the pandemic. But other shocks--the internet bubble collapse, the SARS epidemic, the 2008 recession and Costa Concordia disaster of 2012 all led to price weakness. It took about five years for prices to recover. 

source: Market Insider

After the 2008 recession, consumer spending was back up to pre-recession levels. 

source: Bureau of Economic Analysis

To be sure, the recession of 2008 likely accelerated trends that already were happening, but also lead to at least a temporary emphasis on simplicity, thrift and fickle changes in preferences. Green and ethical consumerism would wane, some predicted. None of those trends lasted. 

So despite all the talk of the new normal, we are likely to see a reversion to the mean after a few years. Linear extrapolations from current behavior are likely to be wrong, as they have been wrong in the past. The new normal will not likely last very long. Eventually, we will return mostly to the original normal, with the caveat that all underlying fundamental trends are likely to remain intact. 

Will Canada Telecom Revenue Drop 1% in 2020 Because of Covid?

It might be rational to expect connectivity provider revenue to dip in the wake of the economic shutdowns imposed to combat the Covid-19 pandemic. That might not prove to be the case. 

A better assumption is that markets growing before the pandemic will see reduced growth, but not a dip in growth. Markets that were flat will probably simply remain flat. Markets that were contracting before will contract afterwards. 

That might make sense two years after 2020, some might argue, but will not apply to 2020. After all, the economic impact of efforts to defeat the pandemic will lead to major dips in economic activity and employment. There will be significant numbers of business bankruptcies. All that should reduce aggregate demand for communications services. 

That appears to drive analyst thinking at IDC Canada. Analysts expect that the telecom services market will contract by almost C$2 billion with the overall revenue expected to fall to C$47.9 billion – a negative -0.8 percent decline from a year earlier. 

“As recently as December 2019, we had projected positive 3.2 per cent annual growth for the sector in 2020,” they say. By comparison, IT spending in Canada is expected to decline by negative five percent in 2020, according to IDC Canada's most recent forecast estimate.

The greatest adverse impact on telecom spending forecasts is the projected number of business failures, IDC predicts. The contrary argument would be that communications spending, overall, did not seem to dip in the wake of the great recession of 2008, but only flattened. 

source: IDC 

A dip in revenue might seem the obvious call, as consumption and consumer spending fell virtually across the board in the great recession of 2008, and the virtual shutdown of large parts of the economy in response to the Covid-19 pandemic would seem likely to produce something similar, if not worse. 

But that does not directly translate into consumer, small business and enterprise spending on communication services and products. According to TeleGeography Research, revenue growth  slipped from about seven percent annually to one percent in 2009, returning to about three percent globally in 2011. The recession affected revenue growth, but there was no dip in total revenues, overall. 

Underlying revenue trends will persist, in other words, within a couple of years after the event. Markets that were growing before will continue to grow. Markets that were contracting will continue to contract. Markets with slightly-positive growth will continue to grow slowly. 

Looking at cash flow earned by Canadian communications firms, total cash flow has been dropping since 2015, according to the Canadian Radio-television and Telecommunications Commission. In terms of revenue, mobile and internet access revenues (not profits, necessarily) have been growing since about 2014, while all other revenue sources have shrunk. 

source: CRTC

One important input for the mobility business that drives overall revenue is the role played by device sales, with a 43 percent compound annual growth rate between 2014 and 2018, while voice and messaging revenues actually had negative rates of growth, with data services, roaming and other sources were up less than six percent. 

Component	2014	2015	2016	2017	2018	Growth (%) 2017-2018	CAGR (%) 2014-2018
Basic voice	8,665.5	8,689.0	8,834.3	9,219.7	7,747.3	-16.0	-2.8
Long-distance	880.4	656.1	547.0	481.9	417.4	-13.4	-17.0
Paging	17.3	12.6	11.1	8.9	9.0	1.1	-15.1
Terminal equipment (including handheld devices)	1,673.7	2,129.8	1,911.1	1,896.1	6,961.9	267.2	42.8
Data	8,672.6	10,034.9	10,980.5	11,832.4	10,857.0	-8.2	5.8
Roaming and other	1,035.7	1,001.9	960.0	1,047.2	1,125.0	7.4	2.1
Data, roaming, and other – subtotal	9,708.3	11,036.8	11,940.4	12,879.6	11,982.0	-7.0	5.4
Total	20,945.2	22,524.3	23,243.9	24,486.2	27,117.7	10.7	6.7

source: CRTC

In other words, perhaps Canada is a market where revenues and profits had been dropping before the impact of Covid-19. A dip in 2020 revenues, as a temporary impact, ignores the preceding trend, which was downward. Again, the point is that the underlying preexisting trend prevails, after the temporary Covid-19 effect in 2020. 

Telecom service provider revenues did not change much in the wake of the great recession of 2008. In fact, according to some studies, U.S. consumer spending on communications actually grew, overall, in the wake of the Great Recession, for example. 

Some surveys found that device purchases slowed during the recession. But some surveys also found consumers willing to make other tradeoffs to keep their broadband, mobile and video subscription services. There was, in other words, less willingness to cut high speed access than other services, for example.

The point is that service provider revenues might not fall, though growth might be reduced to zero. In fact, some studies show that global revenue continued to grow even during the recession of 2008. 

 

IDC Canada says the fixed network voice, which has been a shrinking market, remains the worst-performing segment under all scenarios because of continued mobile and internet substitution, IDC says. However, long-distance revenue gains might be “major” gains from use of toll-free long-distance conferencing.

Wide area networking services could be affected by business failures, while internet access “will be one of the most insulated markets.” 

Mobile services, which account for almost half of telecom revenue in Canada, remain essential, and likely might see some roaming revenue loss, but not much other downward pressure, the analysts believe.