We update our article to answer, “What does the impact of working from home have on the global economy?” In the last three years, the fluctuation between offering fully remote jobs allowing flexibility to work at home or work from anywhere has been in the news. Seems like many companies are retracting the work from home features and demanding a return back to the office.
The Impact of Working from Home on Global Economy
A few short years ago, more and more businesses went online to introduce remote and hybrid work models to support a flexible workforce. Distributed teams, virtual teams and remote teams became the norm. These models were driven by the impact of COVID-19 . Work from home had become the new “business as usual.” A report by Upwork revealed that more than two-thirds of professionals in America were working remotely during the height of the pandemic. Over the next five years, 20% to 25% of professionals will continue to do so.
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Distributed Work Team Arrangements Holding Steady
Distributed working team arrangements that offer greater flexibility for work is still holding steady. For this 2023 update, we turn to statistics gathered by Stanford University Institute of Economic Policy Research (SIEPR). SIEPR data revealed that the number of days worked from home increased five times (from 5% in 2019 to 25% in 2023).
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At present, SIEPR, contradicts earlier predictions to paint a rosier picture of remote work adoption. As of July 2023, about 40% of American workers report working from home at least one day per week. It is suggested, based upon their studies that ten to twenty years from now, 30 to 40% of American workers will still be working from home, but perhaps not for every day of the work week.
While there might be some challenges when working remotely, there are several positives you can’t ignore.
As vaccine rollouts continue to grow and the world enters a new normal with fewer restrictions, it’s time to assess the impact working remotely has had on the global economy.
What is The Global Economy?
Before we unpack the impact of working at home, let’s take a step back and understand the global economy. Simply put, it’s the economies of the world’s individual countries considered together as a single economic system. It looks at the sum of activities that occur both within a country and between different countries.
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How Big is The Global Economy?
The World Economic Forum (WEF) estimates that the global economy circulates about $88 Trillion US Dollars annually. To put it in perspective, Huuti Money calculates that if you spend just $60 dollars for every minute, it will still take you more than 2,789,600 years to spend it.
Every country has its own economy, operating as a separate unit. It technically sits in its own box, whether it’s industrial production, labor markets, financial markets, resource management, or environmental legislation. Globalization has enabled and enhanced the development and integration of economies worldwide. Countries have worked together, finding shared solutions from international trade and finance to migration. While there are countless benefits to globalization, it also means drastic changes in one country have a domino effect. Take Brexit as an example.
We use economic indicators to measure and analyze economic activity. One of the fundamental measures is gross domestic product (GDP), the total value of all goods and services manufactured within one year. At the beginning of 2020, the U.S. had the highest GDP, followed by China, Japan, and Germany. China, India, Russia, and Brazil were set to move up the ranks in the forecast for 2030. That all changed with the COVID-19 pandemic, which took its toll on every country. If you are an American, you may think that the world revolves around the US. How this could be farthest from the truth. Particularly as it relates to remote jobs and flexible working arrangements. Even though the US takes up quite a bit of geography, WEF says the European countries together represent more than 50% of the Global Remote Work Index.
Countries with the Highest Remote Work Adoption
The World Economic Forum (WEF) finalized its 2023 Remote Work Index last month and reported these countries with the highest remote work utilization.
- The Netherlands
These three countries were considered top in the field because of four main criteria:
- Cybersecurity (the ability and agility to respond to digital threats, hacking and data breaches)
- Economics (quality of life, healthcare, and cost of living)
- Infrastructure (fast internet service, electricity, roads and rail)
- Social Safety (physical security, safety, and lack of prevalence for crime)
All of the above are critical elements needed for remote workers to work effectively and efficiently while ensconced at home and away from the traditional office infrastructure.
Countries Attractive for Remote Workers
The WEF may cater to the class of venture capitalists, hedge funds, money managers and McKinsey, Bain and PwC consultants to advise multinational conglomerates on the advantages of committing to remote and hybrid models. So their report and the resulting Remote Work Index may speak to that audience. However, getting back to the SIEPR research. SIEPR scientists suggest that these three countries may hold some appeal for heads of companies to look for cheap remote working labor in these countries. This data may also be of interest to job seekers, retirees, career changers and digital nomads looking for a change of pace. These three countries may offer a multitude of remote jobs just as remote job opportunities in developed and more mature economies begin to taper off.
What Working from Home Looks Like On A Global Scale
The pandemic forced office blocks to close around the world. Only a quarter of those working from home in the U.S. would voluntarily return to the office. For many, a work-from-home lifestyle is preferable. Companies like Facebook and Twitter have gone as far as closing their office spaces, making working remotely a permanent fixture.
MIT compared the ease of transitioning to remote work in a study with 30 different countries. Naturally, developed nations with better access to the internet, a mix of occupations, and pro-employee policies transitioned with ease. Developing and middle-income countries battled more significant obstacles. The transition was much harder with low internet quality and penetration, intergenerational families, and challenging home setups.
While remote working during COVID-19 was inherently different across the globe, it did benefit the global economy. Productivity increased by 5%, and businesses embraced new technologies set to boost the economy in the future.
Countries with the Highest Remote Work Adoption
The World Economic Forum (WEF) finalized its 2023 Remote Work Index last month and reported these countries with the highest remote work adoption.
- The Netherlands
These three countries were considered top in the field because of four main criteria: cybersecurity, economics, infrastructure, and social safety. All critical elements needed for remote workers to work effectively and efficiently away from the traditional office infrastructure.
Countries Attractive for Remote Workers
If the world were your stage, where would you like to work? The WEF may cater to the class of venture capitalists, hedge funds, money managers and McKinsey, Bain and PwC consultants to advise multinational conglomerates on the advantages of incorporating remote and hybrid models into your business. So there report and the resulting Remote Work Index may speak to that audience. However, getting back to the SIEPR research. SIEPR scientists suggest that these three countries may hold some appeal for heads of companies to look for cheap remote working labor in these countries. This data may also be of interest to job seekers, retirees, career changers and digital nomads looking for a change of pace. These three countries may offer a multitude of remote jobs just as remote job opportunities in developed and more mature economies begin to taper off.
Are you interested in learning more about countries that are attractive to remote workers and digital employees? Read our article about digital nomad visas and the countries that offer them, see more here.
The Benefits Of Working Remotely
- Increased Productivity
Remote work relies on online collaboration technology, perpetuating the increasing demand for digital skills. Check out our article on the digital skills required to work remote. Once businesses are appropriately set up for remote work, productivity skyrockets. Things like meeting attendance rates, internal communications, and people management improve. With more breaks and a comfortable working environment, employees focused on time management. Remote work relies on processes being in place, but the beauty is, once they’re set up, employees are more susceptible, embracing the changes to fit their new environment.
- Employers Have Access To More Talent
Most businesses have embraced hybrid teams often made up of permanent employees and freelancers located in various places. From a hiring perspective, remote work delivers a bigger, more diverse talent pool, benefitting both parties. Employees have more choice for growth and opportunity, while businesses can access niche talent that’s often tricky to find.
- More Time And Money
Without the daily commute, remote workers are saving time and money. With much of the labor force working from home, saving money, more disposable income benefits the local economy. That same high-paid salary is no longer going towards fuel or public transport. Instead, it’s funneled back into the economy via restaurants, online shopping, investments, and more.
- Working Remotely And Pandemic Remote Work Are Two Different Things
While the pandemic forced us to embrace working remotely, it delivered a host of challenges like balancing child care when schools were closed. In a post-pandemic world, this isn’t the case. Parents can work from home, optimizing productivity with access to childcare and schools. Shared workspaces will continue to thrive as employees seek collaboration, but businesses won’t have to invest in their own.
- Smaller Cities Thrive
For decades, the larger cities and main metropolitans have owned a significant share in the spending flow thanks to a concentrated workforce. With remote work, smaller towns can grow as local businesses experience increased trade. Instead of grabbing lunch at the café opposite the office, employees support businesses closer to home. It’s created a boom in smaller cities that have faced disproportionate economic downtimes in the past.
- Company Culture Was Re-Prioritized
Pre-pandemic company culture revolved around the workplace. It was easier to arrange functions, have face-to-face check-ins and gauge employee engagement. Working remotely made website maintenance a priority for HR teams, ensuring they had systems in place to manage employees. It forced businesses to implement employee satisfaction projects, inventing unique solutions to drive engagement from anywhere.
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The Cost Of Working from Home
In our original article, we emphasized the six (there are even more) benefits of distributed teams working from different locations. Going back to the most up-to-date SIEPR statistics, the professors at Stanford University uncovered a few challenges. We will present the challenges but will also provide suggestions to counter each potential costs related to working from home virtually.
- Fully Remote Teams Can be Less Productive
When comparing the productivity of fully remote teams against their in person colleagues, the SIEPR data indicated that fully remote working teams can be associated with about 10% decrease in output.
- Global and Strategic localized Hiring Can Offset Productivity Losses
Remote first employers use creative strategies to strategically hire workers who demand lower pay based upon geographical place of residence and lower cost of living. Less expensive distributed teams employed from across the globe to right next door in inner cities and rural areas are typical considerations.
- Considerable Space Savings Can Offset Productivity Losses
Workers who are fully remote do not require a corporate or satellite office floor space in which to work. The Society of Human Resource Management (SHRM) estimates remote first employers can experience considerable savings (about 10-20% of labor costs).
- Increased Communication and Coordination Costs
The researchers at SIEPR indicated one main impetus to the reduction in employee productivity is the time spent communicating and coordinating with other members within the distributed team network. The way in which fully remote team members communicate with one another can become static and habit forming. Virtual team members were found to be less likely to build new relationships and establish new work connections. Work silos can be established out of routine. With which, less opportunities to meet informally, gather workplace helpful hints and tidbits. Increased multidisciplinary interactions and cross functional engagement can lead to increased profitability, a Forbes article suggests. So any astute business person would not want to leave any dollar on the table.
- Initiate Creative Ways to Interact Informally
Harvard Business Review (HBR) recommends that remote first, hybrid and mixed location employers take the opportunity to build in periods in which remote staff can interact informally with their remote team members. Examples to consider are to:
- schedule five minutes before a video call is to commence, members should be encouraged to engage in small talk
- introduce mixers, meet ups, virtual and in person events and activities like board games, quizzes, music playlists, book and movie clubs
- establish virtual forums with regularly scheduled coffee, trivia nights, happy hours to offer virtual team members a chance to ‘let their hair down’ and socialize
Businesses continue to embrace working remotely as we enter a post-pandemic environment. While the reason for working remotely may have evolved, the positive impact is undeniable. Whether it’s increased productivity, better company culture, and improved processes, both employees and employers see a benefit. As smaller cities experience a surge in local expenditure, it opens the door for new opportunities. It creates a broader hiring pool, giving businesses access to top talent to achieve their objectives. It also allows employees to grow into jobs outside their local network, moving into a new salary bracket. Worldwide, the pandemic has undoubtedly knocked the global economy, but we can’t ignore the positive impacts.