The Great Reset: Rethinking the Future of Work
In retrospect, the year 2020 will certainly be seen as the Great Reset. This theme is one that has been echoed repeatedly from different quarters. It is almost certain that the world of work post-Covid, will no longer be geographically bound.
The workplace of the future
The successful shift to working-from-home over the past year has raised questions about the role of the office and the potential of flexible working. But while some have been quick to embrace the change, others are keen to get back to business as usual. Companies such as Ericsson, Salesforce, Square, Spotify, and Twitter have given their employees the choice to work from home permanently, or at least on a hybrid model. Yet, several others such as Netflix, Goldman Sachs, and JPMorgan are transitioning back to the physical workspace. Things are however changing even for those keen to return to the office. There is an increasing demand for agile and quality workspaces, prompted by a shift in priorities. Occupiers want office spaces that are flexible, cost-efficient, human-centered, ergonomically designed, enabling an environment that nurtures collaboration and inspires positivity.
New standards are emerging for the modern workplace, presenting a chance to revisit the way commercial offices are planned and delivered, having a yoga center, recreation activities, to sport centers and even nurseries for employees’ young kids.
Dematerialization through digitalization
There is an ongoing digital transformation to support the workplace of the future. This ongoing transformation will change the business place dramatically to a point where work becomes a place to meet periodically, where the workweek of 9 to 5 schedule will likely transform into a 24-7 work environment where some times are considered quieter than others, and where the obsession with butts-in-seats gets replaced by a more goal-oriented view, since reaching demonstrable objectives becomes more important than attendance.
Creating more with less is what enterprises always strive for. So, dematerializing the future workplace is inevitable as dematerialization front-runners are already en route. Decision makers expect significant energy savings by 2030, not only within their own businesses, but for society as a whole. 5G will be an important enabler, set to grow more than 50% by 2030. Meetings of the future will take place via immersive online collaboration services, with enterprise use of AR and VR. Dematerializing through innovation could hold the key to greater profitability, and also increase sustainability. This is echoed as nearly half of decision-makers agreed that improved productivity and profitability were key benefits of dematerialization and around 40% said the same for sustainability. This should be seen as a win–win situation that benefits both enterprises and the environment.
The flexibility and possibility to predominantly work from home have opened up the job market to prospective employees further afield. Borderless employment opportunity will be a win-win for both employers and employees. Thanks to cloud-based tools and collaboration services, companies can tap into cross-border potential at all time and no longer source for candidates living nearby or willing to relocate. Employees will no longer have to migrate from rural to urban area, or across countries. As a result, process optimization for onboarding remote employees becomes ever more important. Japan’s FamilyMart chain of konbini has taken advantage of this unforeseen phenomenon that Covid-19 has unlocked. The chain of stores took an innovative approach to improve overall efficiency and reduce operational costs by introducing remote-controlled robot ‘employees’ to some of its Tokyo stores in the summer of 2020. The konbini robots will be operated remotely by human employees via VR terminals at a separate location. This will allow for a more flexible work schedule and help stores that have limited staff. From cost efficiency point of view, the company will be able to recruit its robot operators from regions with low cost of living.
Should salary depend on location?
The employers’ ability or benefit to recruit remote employees is now an ongoing conversation. The question is whether salary should be determined by location of the employees. The majority of the survey respondents seem to favor the notion of a fix salary at company’s office location irrespective of where the employees are living.
This survey was triggered by Reddit’s action of paying all US employees the San Francisco and New York salaries, even if they do not live in these expensive cities. Hence, igniting a discussion around whether or not salaries should be tied to location. Some might argue that if you want to buy an iPhone does the cost of that device change depending on where you live? Of course not. The device has a value, and you want it, so you will pay what it is worth.
Those supporting salaries not to be tied to the location might have a strong point because it is very annoying to work in an area and have a salary 25% smaller than another person that does the same job at 50-120km distance from you, due to cost of living, tax system, proximity to Head Office or capital city advantage. For this reason, the migration from villages or underdeveloped areas to the big cities appeared. One bad effect of this is overcrowding and big pollution around big cities. This is because people want to have their work rewarded and they will emigrate to the country or city where their work will ensure them a good life.
The race for space
Speaking of migration, if companies were to move further to a remote working solution, we could also see less need for expensive real estate and office spaces in capital cities, while smaller satellite sites will be opening up where there is greater density of workforce leading to a potential depression in capital cities property prices. The flipside of this is that, the satellite towns and suburban cities real estate prices will follow an upward trend as it is the current case outside London. Since July 2020, the UK property market has been on the rise, largely fueled by the government temporarily cutting stamp duty.
The most reliable barometer of house prices is the UK’s Land Registry House Price Index, which is based on sold property prices. According to the March 2021 HPI as revealed in the below charts, house prices increased on average by 10.2% year to date in March, up from 9.2% in February 2021.
The largest annual house price growth at country level in year to March 2021 was recorded in Wales, where house prices increased by 11%. Scotland saw house prices increase by 10.6%. Followed by England with an average house price increase of 10.2%, while Northern Ireland saw house prices increase by 6% in the first quarter of 2021.
Other indexes in the UK real estate market are Nationwide’s index (based on mortgage lending) which reported 10.9% annual rise in prices in May, Halifax’s index (also based on lending) reported 9.5% annual increase, Rightmove’s HPI (based on asking prices) report, it found average asking prices had risen by 7.5% year-on-year, and Acadata HPI statistics (Land registry price paid in England and Wales) reported 13.4% annual increase in May 2021. All the indexes suggested that while London prices have stood still since the first lockdown, areas further north have seen double-digit increases, due to the shortfall in supply that suits people’s changed needs and lives. This change in housing demand behaviors is now creating affordability crisis for young people as property prices in countryside locations soar by 14.2% a year compared with less than 7% in urban areas.
This upward movement in demand for new housing, generated an increase in prices that could be directly correlated with the need for home office. Should this relocation trend continue either for the sake of having a proper home office, a bigger house, the need for garden, or to be closer to nature, those driving the demand for new accommodation outside their company’s official location should also brace themselves for the initial cost implication of resettlement.
There is no question that the world of work has changed dramatically, and hybrid is most likely to be the new normal going forward. It is really going to be all about flexibility and choice. And it is not going to be just a shift in location.
As employers are contemplating the workplace of the future, employees need to take a cautionary measure in their relocation drive. What is for sure is that the workplace of the future will not be the same as we know it. Should the employers choose a hybrid model or transitioning back to the physical workspace, the good news is that salaries are tied to where the office is rather than where the employee lives. But for those already living outside their office city, they might have to travel one hour or more to office and easily have $400-500 a month in travel costs and won't get paid extra compared to somebody who lives 10 minutes away somewhere equally cheap if you are to factor in the cost of transportation. Some might argue that cost of living factor should be taken into consideration; however, cost of living is not something universal. In some sense, it is a chicken-and-egg problem: If you did not make much, you need to move to a cheaper place, your cost of living becomes lower, so should companies pay even less? That is not right.
The advantage of the remote working for employers will largely be the decrease in real estate rental and maintenance cost. Employee benefits go beyond the transportation cost, as the time spent traveling could be invested in other activities like spending quality times with family. As the nature of work is changing, it is recommended that those at the forefront of the change should be involved in an elaborate dance to determine a new parity, one where skillsets and the continuing need to acquire them are adequately compensated.
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