Transformation in the worldwide distribution of labour

Remote work has become increasingly popular across various industries and has played a significant role in this transformative process due to the significant change in the global distribution of labour, driven by technological advancements and shifts in socio-economic dynamics. It refers to work tasks that are carried out from various remote locations, which allows workers to separate from the traditional physical workspace and sometimes work from the comfort of their homes. The rise of remote working started during the COVID-19 pandemic, forcing millions globally to transition from traditional office settings to remote work arrangements virtually overnight. Even with the gradual relaxation of lockdown measures, the pandemic has sparked a shift in work culture, leading employees to demand more flexibility in their work environment and schedules.

The ability to work remotely varies enormously across different industries and occupations. This disparity is influenced by regional specialization in economic activities. For instance, managerial and professional roles exhibit a high remote work capacity, around 70%, whereas skilled agricultural, forestry, and fishery workers, as well as craft and related tradespeople, have a much lower capacity, less than 10%. Generally, occupations with higher wages and educational attainment are more conducive to remote work. Additionally, the remote work potential of industries is contingent upon the occupational composition of their workforce. For example, the information and communication sector boasts a high remote work potential, with 75% of workers able to work from home, while industries like construction, agriculture, and accommodation and food services activities have a much lower capacity, with less than 20% of workers able to do so. Nonetheless, a survey conducted by the CSO in November 2021 revealed that 88% of respondents capable of remote work expressed a desire to continue doing so post-crisis. 

Considering the insights from the OECD (2020), it appears that remote work can impact productivity in two primary ways. One of these is the efficiency channel, which relies on elements such as workforce motivation and the sharing of knowledge. The other is the cost-reduction channel, which suggests that remote work can create opportunities to allocate freed-up resources towards innovations aimed at enhancing productivity. The efficiency of workers can be influenced by factors such as employee satisfaction, teamwork, and proper supervision. Remote workers tend to spend more time on tasks and have fewer absences, resulting in increased efficiency.

Economics and environmental potential impact

Market failure, as stated by the OECD, refers to instances where market results do not achieve Pareto efficiency, such as when markets fail to provide adequate quantities of goods or services. However, remote work potentially generates positive externalities throughout the economy, such as environmental benefits and reduced congestion. Consequently, without government intervention, remote work might not be sufficiently adopted if individuals and employers overlook the broader economic advantages. 

The impact of remote work on household expenses is twofold. Firstly, remote work may lead to higher household expenses such as heating and electricity. However, it can reduce commuting expenses, dining out, and other related costs (Green, 2023). If the increase in household expenses becomes a hindrance to the adoption of remote work, government intervention may be needed. This intervention might take the form of tax incentives or other measures to realign individual incentives with societal goals, thus enabling society to fully capitalize on the advantages of remote work. 

The decrease in consumer spending can lead to detrimental impacts on industries like transportation, hospitality, and retail, which rely heavily on in-person interactions and foot traffic. Individuals may redirect their funds away from local expenditures with the rise of remote work, which could harm businesses like restaurants, cafes, and stores that rely on consistent local trade. Decreased spending in sectors that rely on face-to-face interactions, such as transportation, hospitality, and retail may also happen because of the shift towards remote working (Li, Goel, Williams, 2023, 130-149). Alekseev, Amer, Gopal, et al. (2023, pp. 7-24) also highlighted that eateries, coffee houses, and convenience stores near office complexes that depended on office workers may witness a decline in foot traffic and revenue and struggle to adapt to this shift or even face closure, ultimately leading to job losses and an economic downturn in specific regions. 

Meanwhile, the potential advantage of remote work lies in its ability to decrease carbon emissions, aligning with the Climate Action Plan (2021). The primary environmental improvement is expected to stem from reduced travel emissions, though this might be counteracted to some extent by increased home energy usage. Estimating the impact on public transport emissions is complex due to regional variations in usage and contractual obligations for service provision. However, if adjustments to schedules can be implemented, it is projected that there could be annual CO2 savings of 1,820 tonnes for buses and 6,310 tonnes for rail transport nationwide (Crowley, 2021).

Reference: 

Annamalah, S., Paraman, P. (2023). The economic impact of remote work: Unpacking regional transformations and economic multipliers. Journal of Applied Economic Sciences, Volume XV, Fall 3(81): 160 – 168. Available at: https://doi.org/10.14505/jaes.v15.3(81).03.

Elena, S., et al. (2022). The economic effects of working remotely: causes and implications. Volume XXIX (2022), No. 3(632), Autumn, pp. 103-112.

Green, A. (2023). Academic library employees and their work modality options and preferences. The Journal of Academic Librarianship, 49(5), 102764. Available at: https://doi.org/10.1016/j.acalib.2023.102764

OECD. (2021). Implications of remote working adoption on place based policies: A focus on G7 countries. Available at: https://www.oecd.org/regional/PH-Remote-working-G7.pdf

Williamson, H. (2022). An Evaluation of the Impacts of Remote Working. Irish Government Economic and Evaluation Service (IGEES).