What Has the China Virus Done to Productivity?

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  • Source: UncoverDC
  • 09/19/2023

Whether out of a desire to support the 2020 lockdowns or because of initially misleading scholarship, the early story of the China Virus was that it would increase productivity worldwide. In December 2020, Forbes said that despite massive losses (in Australia, $47 billion to the economy), and despite the historical maxim that remote working was accompanied by a decline in productivity, in fact, productivity has remained stable. Based on a Wharton school paper, Forbes claimed that productivity is “even increasing in many companies." Of course, this came at a cost to innovation, which almost all researchers have admitted, fell during the pandemic. It seems that remote employees do not collaborate as well as people do when working cubicle-to-cubicle.

Microsoft and the Boston Consulting Group, looking at 9,000 employees from 15 European countries, claimed that remote working “has made [employees] more productive because they’re better able to craft an environment that works for them,” including having their pets around and choosing their attire. This worked best for—wait for it—those without children. (Why be bothered with those smelly little booger-poppers, right?) In the same month, Harvard Business Review fretted that “the Pandemic is Widening a Corporate Productivity Gap.” How productive have companies been, HBR asked? Their answer was, “It depends on the company,” while some have maintained, “Most . . . are less productive now than they were 12 months ago. The key difference between the best and the rest is how successful they were at managing the scarce time, talent, and energy of their workforce's before Covid-19.” Those that were at the top before the China Virus surged to be 40% more productive after it. According to the Harvard Business School study, this came largely because people actually worked longer at home. The average workday increased for the stay-at-homies by 48.5 minutes.

Except, that really isn’t productivity growth, which is more output per hour, not simply more hours. Looking at emails from some 21,500 companies in North America, Europe, and the Middle East, the Harvard team concluded that “there is a general sense that we never stop being in front of Zoom or interacting.” More people were working after normal business hours, attending more meetings, and with more people. Indeed, one could read the Harvard Business School paper and conclude that employees were so distracted by being at home that they sent multiple emails when just one email would do.

Not to be outdone, though, in claiming benefits from the China Virus, The Economist in December 2020, citing a study by the Brookings Institution, likened the pandemic to a boom in productivity made possible by “new technologies” that were “able to do more than has generally been asked of them.” But while more employees planned to adopt advanced technologies related to remove work, it is still in question whether these adoptions are actually increasing anything. The Brookings Institution actually suggested something dear to my heart, namely that the price/productivity measurements may simply be off, understating real growth. The whole process demonstrates considerable fluctuation, according to a paper in the American Economic Review. Well, duh. All new technology and all chaotic situations demonstrate considerable fluctuation. That doesn’t necessarily mean that productivity—in this case—is undervalued but that it might be overvalued. We don’t know yet. The fact that it might be the latter is raised in another paper in the American Economic Review that found that recent innovator companies have developed technologies just good enough than a human worker but not good enough to free up additional capital to add workers.

These were all from the perspective of 2020. But what do we know now?

A new study by the Becker Friedman Institute found “total hours worked [after the work from home, or WFH period started] increased by 30%.” But average output did not significantly change. Again, those employees with children suffered a “bigger decline in productivity than those without children.” Specifically, time spent on coordination activities and meetings increased, but uninterrupted work hours fell. This is due to the inability to transmit ideas clearly and succinctly through electronic means—email, phones, zoom meetings—whereas in person, more often than not, a boss can make his intentions perfectly clear face to face. A March 2021 study by the Fed concurred that “the level of potential output is likely to be subdued post-COVID” relative to pre-China Virus levels. Moreover, in the long run, “labor scarring” was likely to lead to lower employment levels.

My take is that we are only just beginning to see the damage done to the U.S. economy by the lockdowns. A Deloitte study found that almost 40% of employees said the lockdown had a negative impact on their well-being, but 55% thought their colleagues were as productive as before lockdowns (despite the data above, suggesting employees conflate more hours with more productivity). Probably the worst finding was that 61% of desk-based workers would prefer to work from home more often. This was confirmed in an Austrian study that showed perceived productivity at work increased 12.7% but actually decreased in 30.2%. Similarly, while the quality of life improved for 17% of the Austrian population, it declined for 20.7%.

It seems that most big corporations have increased their investment in tech and capital replacements for labor. This historically in America, at least, has been a good thing, for only the highly skilled could handle the newer machinery, and they received higher wages. But that is not happening now. Wage growth appears stagnant; unemployment—after a rapid decline under President Donald Trump—is back to its sticky Obama-era muck status. This will only get worse, given that the education system is collapsing even faster than pre-China Virus, although I’m sure some liberal will make a good case for kiddies to have lost one to two years from their already questionable education. In short, an economy-wide unexpected benefit of the China Virus has yet to materialize in the short term, while in the longer term, it appears to have exacerbated the problems.

Folks, this is why it’s called “work” and not play.

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