The national shift to working from home is not to blame for the sharp drop in productivity in the wake of the pandemic, the Productivity Commission says.
A new report by the PC examines causes for the brief productivity “bubble” during the height of the Covid-19 health crisis and its subsequent collapse, finding that the whiplash was driven in large part by the sharp drop in working hours through the lockdowns, followed by a surge in hours worked as the economy roared back to life.
Alex Robson, the PC’s deputy chair, said the “pandemic was a rollercoaster for productivity, but we are now back to the stagnant status quo”.
The PC report finds that Covid-19 did not fundamentally alter the country’s productivity, including one of the lasting societal shifts: the big lift in Australians working from home.
Before the pandemic, 11% of working age Australians reported they worked from home at least once a week, and a similar proportion said they worked from home on all or most days of the week.
During lockdowns in September, a lower 9% worked from home at least once a week, but the share working most or all days at home had jumped to 31%.
By April 2022, most restrictions had been lifted, leaving a higher 18% working at least one day at home, and 27% most or all days.
And in August last year, an Australian Bureau of Statistics survey showed 36% of employed Australians reported they usually worked from home.
Despite fears that workers would slack off at home, the PC report said the research suggested hybrid working had not dragged on productivity, although “studies suggest that fully remote work during the pandemic was likely to be detrimental to productivity”.
“Workers do not need to be in the office full-time to experience the benefits of in-person interactions. As a result, hybrid work (working some days remotely and some days in the office) tends to be beneficial to productivity, or at least, is not detrimental to productivity,” the report said.
Studies show working from home lifts job satisfaction, and that employees were willing to sacrifice 7-8% of their pay in return for the additional flexibility and to avoid long commutes, the PC said.
“Remote work also reduces breaks and sick-days, and results in less distractions, all of which are typically found to be beneficial for productivity.”
Less experienced workers, however, could lose out by not having in-person access to more skilled colleagues, the report said.
Reinvigorating the economy’s flagging dynamism is a priority for the newly reelected Albanese government, after Labor’s first three years back in power were dominated by a once-in-a-generation surge in consumer prices.
In a speech to the Australian Business Economists on Wednesday, Treasury secretary Steven Kennedy said “finding ways to improve productivity growth has proved elusive over the past two decades”.
“Australia’s 20-year average productivity growth has declined from 1.8% to 0.8% over that period,” Kennedy said.
Kennedy said the government’s competition reforms, including a $900m federal fund to incentivise states and territories to undertake pro-competition reforms, and removing state-based licensing requirements for skilled workers such as electricians were steps in the right direction.
“Pursuing a least-cost approach to reducing emissions will be a key productivity challenge for Australia,” he said, as he backed expanding the safeguard mechanism, which sets baseline carbon emissions targets for the country’s biggest emitters.
