Aaron Henry is the Senior Director of Natural Resources and Sustainable Growth at the Canadian Chamber of Commerce. ‘The Great Quickening’ is a new, regular column on CBRN focused on how COVID-19 will accelerate social, economic, and technological drivers of change. Based loosely on a strategic foresight approach, this column explores how certain trends are being accelerated in the post-COVID world to provide Canada’s business community with insight.
Last week Shopify announced it was by and large going to give up on having a centralized office. Shopify will be digital by default. Many other tech companies have signalled they plan to go in the same direction, Facebook announced that nearly half its workforce could go remote permanently.
This trend isn’t new as employees who work from home for at least few days of the week has been on an uptick for a while now, and increased 159% from 2005-2017 in the US. However, COVID-19 measures have pushed work from home into overdrive and with good reason. For employers, reducing office floor space will significantly drive down overhead and can yield greater productivity. For employees, the model offers greater flexibility, especially for two income homes that are often pressed to manage demanding careers and childcare, removes lengthy commutes, and saves on associated transportation costs.
The catch though is that what may have been a decade long transformation seems now to be unfolding in less than six months. The rapid pace of transformation carries the risk of that both retail businesses and policy-makers are operating on a set of assumptions that are fast becoming less credible. The added pressure is that the shift to work from home and potentially work from anywhere will further exacerbate the damage COVID-19 has had on the retail and service sector. Let’s unpack this.
In a recent post, the Canadian Business Survey revealed that 582,000 jobs were lost in the wholesale and retail trade sectors over the last two months, a fifth of the entire labour force in those sectors. Canada’s heavy personal debt loads could already suppress consumer demand a lead to a slow jobs recovery in retail and service sectors. However, we have not yet considered the added pressure on these sectors if work culture shifts significantly to a work from home model that permanently decreases foot-traffic from downtown cores where retail and service sector ecosystems are dense.
The potential impacts of this shift span across scales. Here are the top issues policy-makers and the business community should look to manage.
First, high cost commercial space could quickly become a unique stranded asset. Retail stores that manage to navigate COVID-19 will likely seek to downsize their physical footprint both as a cost-saving tactic but also to reflect the transition of their business online – 27% of which are now testing online services. Policy-makers, and developers may need to consider how to repurpose this space as component of COVID-19 recovery.
Second, much of our climate policy has focused on leveraging the significant benefits of increased urban densification. Densification creates more opportunities to displace personal vehicles with public transit, capture waste heat, and create more energy efficient dwellings. However, given the high debt levels of Canadians and preference for more space, if people find they can work from anywhere we may witness a significant migration to less expensive suburbs and rural communities.
This shift may challenge key assumptions on the marriage between urban development and climate policy. It may also put significant deficits in municipal revenues as ridership on public transit falls. Similarly, rideshare service providers may need to adjust their strategies to consider expanding their role in delivering goods rather than ferrying people. Cities will have to consider the social benefits they can offer to retain residents, especially millennials and Gen Z who are more likely to move away as they have been priced out of urban real estate markets.
Third, if work from home becomes work from anywhere we may see increased need to modernize Canada’s tax system as the workforce could be comprised of a greater number of workers who live in one province but work in another. Currently, 3% of the workforce is interprovincial, but if work from home becomes work from anywhere that number could jump significantly and could drastically transform the mix of provincial revenue across the country. When you add on the need to respond to changing work patterns and further incentivize the transition to the low carbon economy, a thorough review of our tax system looks all the more crucial.
The announcement from tech companies that they will shift to work from anywhere is not what is surprising, it is the potential pace of that change that is significant. The scope and intensity of this shift will depend on the extent to which industries outside the tech sector adopt similar policies. Nonetheless, spurred by necessity many companies and organizations generated a proof of concept. How businesses and policymakers respond to this proof of concept will have longstanding ramifications not least of all for industries and services where location remains king.
– Aaron Henry