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Will Omicron Move More Work From Offices To Homes?


As the latest wave of Covid-19 cases hits the USA, there is increased speculation that some work may be shifting more permanently from offices to the home.  A large permanent shift would have major implications in many spheres, including the future of office work and downtown Central Business Districts (CBDs).  But although a large-scale work shift may be taking hold for some occupations, we don’t yet know how permanent it will be.

On the Covid-19 front, we are once again experiencing rapidly rising Covid-19 cases.  This spike comes from more people driven inside by winter weather, the rapid rise of the more infectious Omicron variant, declining protective behavior and holiday gatherings, and—most importantly—the continuing lack of vaccinations for many people. 

The nation’s vaccinations have stalled out.  Only 61.6% of Americans are fully vaccinated (defined as two doses of approved vaccines).  That has barely moved in three months—on October 20th, the level was 57.3%. And the rapidly spreading Omicron variants can more easily infect fully vaccinated people, although vaccines significantly reduce serious illness and death and reduce the load on our health care system.

This latest virus wave is adding to uncertainty about the longer-term future of office work.  If more jobs permanently change to working at home, that will weaken commercial real estate and also lower-paid service jobs in restaurants, cleaning, security, and other sectors that support higher-paid office workers in CBDs.

Prior to this latest Covid wave, businesses were moving towards more office-based work, although not necessarily a full-time return.  In August, PwC’s ongoing Pulse survey found that only 19% of surveyed firms anticipated “all in-person” work, while 69% were planning some mix of in-person, hybrid (mix of remote and office), and fully remote.  Only 4% thought they would be fully remote with no office-based work.

But firms now are unsure about how to move forward.  Owl Labs’ 2021 State of Remote Work  found that 73% of workers who did some remote work during the pandemic “have returned to the office at least one day a week,” but most opposed a full-time return.  Meanwhile, 39% of employers preferred that workers be in the office full-time, but at the same time they are cutting their office space and adapting jobs and physical locations to accommodate more hybrid work.

Overall telework due to the pandemic remains significant, according to the national surveys from the Bureau of Labor Statistics.  In May 2020, in the depth of the pandemic economic shock, 37.4% of workers reported doing some work at home because of the pandemic.  But by November of this year, that share had fallen to 11.3% of all workers.

But who those teleworkers are remains constant—higher educated professionals.  Of course, many sectors—restaurants, hotels, entertainment, manufacturing, health care—have very little remote work.  So telework always has been concentrated in office-based professional work.

In May 2020, BLS reported  72.5% of workers with a college education or higher did some telework, compared to 10.3% of those with a high school education or less.  In November of this year, those percentages were very similar—the share for high school or less fell to 7.9%, while the share for higher educated workers actually rose to 77.1%.

You can see the impacts in office occupancy data.  Kastle Systems’ “Back to Work Barometer” tracks keycard entries and occupancy in ten major metropolitan office markets.  The national average hovers around 40%, with the three highest markets in Texas (Austin, 57.3%; Houston, 53.6%; Dallas, 50.8%).  The New York metro is only at 35.8%, while San Francisco is the lowest at 28.8%.

And these are metropolitan area figures.  Central business districts in cities seem to be doing worse.  An October survey by the Partnership for New York City found that “28% of Manhattan office workers are in the office on an average weekday, with only 8% in the office five days a week.”  Remember this survey was done before the latest spike in Covid cases, so the numbers will likely get worse.

Fewer high-paying jobs located in offices jobs means fewer jobs in lower-paid service sectors such as restaurants, hotels, building cleaning and services, security, and others.   High paid professionals are doing well in the job market, but the change in their location has a major negative impact on low-paid service workers, who are disproportionately people of color.

My colleague James Parrott tracks Covid’s impact on the New York City economy.  He found that even before the current upward Covid spike, low-wage workers in face-to-face industries were not getting significant wage gains, even as employment came back somewhat.  Reductions in jobs, and more remote work for higher-paid office workers, will make things worse for these lower-paid workers, who continue to suffer the worst impacts of the pandemic.

If we continue experiencing successive waves of new Covid variants, employers and employees may adjust to accommodate more hybrid work as a permanent feature.  Workers want remote work more than employers do, so there is a balance of power issue lurking behind these numbers.

But continuing economic disruptions from Covid could well hasten a move to more permanent hybrid work, to the detriment of CBDs and lower-paid service workers.  The Omicron wave will regrettably give us another case of this dynamic.

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