Sunday, April 26, 2020

The future of work in a post COVID19 world

We are all caught up in the immediate impacts on our lives as a result of the COVID19 pandemic.

The basics and the mundane:
Do we have enough food/water?
When can I get a haircut?
Can we protect others by wearing a mask if we do go out?
How do I stay mentally/physicall fit in 2 months of isolation?

And then there are some much more meaningful questions:
Will I have a job after the pandemic?
What does it mean for pensions/retirement?
What does the US Debt to GDP soaring to 18% mean?
Can the economy recover?
Is work from home a permanent part of our future?

I want to take some time to focus on that last question - working from home.

It is clear that working from home is not a perfect solution and many people can't wait to get back to the office full-time.  However, when listening to Governor Cuomo's press conference today, going back to "normal" is not likely to resemble the workplace of February 2020.  Going back to work, if you can at all, is going to require safe social distancing.  For some businesses, this can be accomplished through measures like extending an assembly line or eliminating communal eating areas (see this photo from a Chinese auto assembly plant's cafeteria).

For some Chinese businesses, no going back to pre-coronavirus ways

However, how does a bar or restaurant enforce these new rules? How can a million people safely commute into New York City every day while staying 6 feet away from EVERYONE? The simple answer is that you can not, so the traditional model of work that we new 2 months ago is unlikely to return. 

As part of the next wave of impacts from the pandemic, I expect a fairly large round of corporate right-sizing/downsizing/layoffs of white collar positions.
One of the things that corporations (and employees) have realized is that there are a lot of hours in the work day that are wasted.  While corporations have to walk a fine line to avoid appearing callous, it's clear that they could be more efficient and many will take this opportunity to achieve that efficiency.

On the flip side there is a strain on employees who can never disconnect from work.  Finding a long-term healthy work-life balance, when all work is done in your home, is a serious challenge.

Not every job is eligible for WFH - emergency hospital staff, physical therapists  - but many positions previously thought to be "office jobs" may never return to an office.  Consider some of the fastest growing jobs categories - Finance/Accounting, software engineering, operations or market research, marketing, data analysis, etc., many of these can largely be done from home. 

However, the pure work from home model is flawed because it lacks the office experience, the feeling of belonging to an organization and the accountability that comes from arriving at an office.

Prediction #1: Demand for Commercial Real Estate tumbles
The failure of WeWork might actually pave the way to a new type of hybrid Work From Home/Office model. I've seen this model work first hand but I think it will spread across various industries and cities around the US.  In the past if you had a company of 200 employees, you budgeted a floor plan for 230 people to allow for growth. That will no longer be the case - maybe you plan for 30% of your staff to be in the office full-time, 20% work from home and 50% floaters who come in on alternating weeks (similar to the WeWork model where you don't have an "office" but a randomly assigned desk). This means your total space needs go from 230 people at 150 sq ft/person or 34,500 sq feet to - 60 permanent staff + 50 floaters + 15% excess = roughly 19,000 sq feet.

So who does this impact? Obviously, Commercial Office Space in the US.  All of those sprawling corporate parks around the country and gleaming office towers in cities? Yeah, some will become ghost towns. Coupled with the accelerated retail apocalypse and a restaurant glut in the US commercial real estate could be in for a very, very rough patch.  The commercial real estate market is tied to the banking industry as most large scale real estate projects are significantly leveraged.  So, the next bank bailout might be triggered by more people working from home.

If you're in the market for a used car, the next 3 - 6 months might be your sweet spot.  Staggering job losses will spark a return of jingle mail (when people just mail the keys back to their lenders) and a spike in work from home employees will drastically reduce the number of cars needed in each household.

If prices come down a bit more I might even taking some trading profits and upgrade my vehicle to one of these (just checking to see if my better half is still reading).

Prediction 2: Lower Employment in the US in the long-run
In the 1990's, companies adopted a model of outsourcing their customer service to a variety of call centers around the US.  By the beginning of the 21st Century the companies providing these services realized that all of their employees were either sitting at home or commuting to old department stores in North Dakota.  Since there was no physical need for the call center to be in the US, once tax breaks had been fully utilized, these companies aggressively began moving this work to lower cost parts of the world. 

Yeah, but that's low-end work, right? Yes, but here is the question I want everyone to think about - if you've done your job over the last month as a work from home employee, imagine a world where corporations get another 5 years to perfect this model.  Now, they might go one of two ways - take full-time jobs to part-time (further reducing wages/healthcare costs because do you really need 40 hours to do your job?) and/or moving these jobs to lower parts of the world.  Need a graphic designer?? Maybe you don't pay $52,000 to a new college graduate in the US, instead you hire someone in Poland for $14,000 and 5 years of experience.

Prediction 3: Reduced demand housing in suburbia
If predictions 1 & 2 play out, think about the way the US is built.  Cities to work in and suburban areas for us to sleep in.  However, how many people really want to live on postage stamp lots, so they can sit in traffic for 38 minutes to go 4 miles to Costco (okay, people in New Jersey do, but they don't even pump their own gas)?

We have dramatically over built housing in suburbs around NY, Boston, DC, Atlanta, Dallas, Chicago, Seattle, etc, etc.  A long-term trend of the WFH movement could be significantly reduced demand for housing near cities.  Bailout number 4 for the banks might be tied to the 2028 housing collapse :)

Daily Dose of Humor:

via @Mommaunfiltered
It’s 11 o’clock I should eat a can of Pringles.

via @WilliamAder
I continue to mow my lawn just like the band continued to play on the Titanic.

via @lmegordon
Happy hour starts at 4 now and nobody is ever happy.
Biggest obstacle to brushing my teeth right now is finding a solid hour when I don't plan on eating.


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