Three cheers for hybrid work

from Investment Times Newspaper 2023 Edition | Issue 9

GTS, MASLOC Regional Manager to spearhead economic projects in Upper West Region

By Pinelopi Koujianou Goldberg

There is no shortage of hyper- bole in the debate about whether companies should demand a full return to o ce work. According to Citadel’s Ken Gri n, the hedge fund owes its record-breaking $16 billion haul last year to its sta ’s full-time presence in the o ce.

But such sound bites ignore all the bene ts that remote work o ers to employers, employees, and the economy more broadly.

Naysayers dismiss employees’ preference for remote work as a manifestation of entitlement or “quiet quitting” (doing the bare minimum to remain employed). But that snap judgment is far too crude.

A recent study by Harvard University economist Raj Chetty’s Opportunity Insights lab estimates that there are around 2.6 million people in the United States who should be working, but are not. At a time when many employers cannot ll vacancies, o ering greater exibility both increases the applicant pool and contributes to higher retention rates, easing the pressure on hiring.

Happier employees also tend to be more productive. Survey data on attitudes toward remote work from multiple countries show that many employees were surprised by their own productivity during the pandemic. Remote work saved them hours of exhausting commutes, and they were able to tailor their days to do their work when they felt most productive. Women and parents of young children especially came to appreciate – and make the most use of – this newfound exibility.

More broadly, remote work o ers greater opportunities for labor-market participation to talented individuals who had been previously disadvantaged by time or mobility constraints (including not just women and parents but also people with disabilities). Research by Harvard’s Claudia Goldin shows that the need to work long hours outside the home at prescribed times is one of the most important challenges that women (especially those with a college education) face in the labor market.

Remote work thus could help eliminate some of the tension between career and family. But as the pandemic taught us, leveraging remote work to the fullest requires complementary policies, especially adequate childcare. Otherwise, remote work will not spare women from the double duty of full-time employment and managing household and childcare responsibilities. If broadly implemented and accompanied by the right policies, remote work would deliv er far-reaching bene ts for the overall economy. It would reduce labor costs and thus inationary pressures, because employees could move to cheaper locations. And these relocations could in turn lower congestion costs, making commutes easier and less expensive for those who still need to be physically present in the workplace. In real-estate markets, rents and house prices would be more evenly distributed geographically. Though this might raise prices in some previously low-cost locations, it would eliminate the extraordinarily high rents and house prices found in highly congested areas such as the New York City metropolitan area or the San Francisco Bay Area. Of course, there are also some disadvantages to consider. In some sectors, employers worry that a lack of structure, o ce “culture,” or the ability to monitor employees’ prog- ductivity. And since remote work is not an option in many industries – from restaurants to health care – its uptake might add another dimension to labor-market inequality.

Each project under the partner ship will work to increase the yield, mechanize the farm work and expand growing area.

Under the partnership, factories and processing plants are to be built for manufacturing the raw crops into products.

The aim of the collaboration is not only to improve agricultural production in the Upper West Region, but also to keep as much of the processing stages locally, thus keeping most of the value and work opportunities in the region.

As part of its mandate under the partnership, the region will be re sponsible to facilitate the alloca tion of the land needed for facto ries, eld plantations, transporta tion and handling as needed.

The Upper West Region of Ghana is well-known for its local resourc es and ability to support major economic growth.

Still, even those workers who need to show up every day would bene t indirectly from remote work, through the reduction in commuting costs, rents, and house prices. Moreover, if markets are functioning properly, there should be a compensating di erential for workplace labor. Employees already seem to recognize this tradeo . Recent estimates suggest that, on average, employees would be willing to give up 5% of their pay to work from home 2-3 days per week. Critics of remote work also often argue that personal interaction (at the proverbial water cooler) fosters creativity and innovation, as if to suggest that new ideas never emerge from a Zoom screen. And, of course, many employers and employees (especially younger cohorts) cherish a good o ce culture. But most of these needs can be met through hybrid models, whereby employees are physically present on a few pre-determined days of each week or month.

Finally, it is true that the widespread adoption of remote or hybrid work would have serious implications for the future of city centers, particularly those that are deemed less appealing or competitive. Many local jobs, especially in services and entertainment, would be lost, contributing to a vicious cycle of urban decline. And yet the advantages of remote, and especially hybrid, work seem to outweigh the disadvantages, especially if such work is supplemented by complementary policies to provide childcare and support urban development. The COVID-19 pandemic was horrible for everyone. But like every crisis, it taught us some valuable lessons and accelerated innovation in certain sectors. Remote and hybrid work are a silver lining of a prolonged tragedy. We should cling to it.

After the “currency wars” of the previous decade and the “trade wars” unleashed by former US President Donald Trump, a new kind of con ict is emerging between two of the world’s leading powers. Or at least that was the talk during the World Economic Forum in Davos, where pundits and policymakers fretted over so-called “subsidy wars.”

The rst shot was red with the United States’ passage of the In ation Reduction Act (IRA), which includes $369 billion in subsidies and tax benets for American companies using green technologies. In response, European Commission President Ursula von der Leyen promised to loosen the European Union’s rules on state aid, enabling member states to pump cash into green industries. “To keep European industry attractive, there is a need to be competitive with o ers and incentives that are currently available outside” the EU, she said, at pains to defend the bloc’s protectionist turn. To be fair, those concerned about the costs of a European-American subsidy war are mainly academics. Businesspeople dislike subsidies only when they are not receiving them. “It is a game-changer,” I heard a tycoon say about the

IRA. He added that his company recently decided to launch four mammoth green investments in the US and would consider doing the same across the Atlantic if the EU put enough money on the table.

With the recent US and European moves, the green subsidy debate is heating up. Proponents of these policies describe them as an indispensable response to the existential threat of climate change, while skeptics claim that the massive deployment of resources will inevitably lead to rent-seeking and ine ciency.

The issue is not whether governments should subsidize environmentally friendly industries. It is widely acknowledged that because the social returns on green investments exceed the returns that accrue to private rms, governments must provide nancial incentives to prevent under-investment. Instead, the issue is whether governments should o er those incentives only to domestic companies.

In Davos, von der Leyen called on President Joe Biden’s administration to grant European companies operating in the US access to the same subsidies as domestic rms. But in the unlikely event that Biden agreed, that would still put the rest of the world at a disadvantage. If an electric car assembled in Michigan by an American company yields the same emission savings as a similar car assembled in Seoul by a South Korean company, why subsidize one and not the other?

There are at least three reasons why a subsidy war could be economically harmful. The rst is retaliation. While green subsidies could encourage more investment, they could also entrench ine cient incumbents. If the US and the EU cooperatively decided on the level of subsidies, they would choose what is “right” for both. But that is not the outcome in a subsidy war. One side’s attempt to attract green investment triggers a reaction by the other side. The subsequent escalation of subsidies and counter-subsidies can cause costs to outweigh benets.

The second problem is that what is good for Europe and the US is not necessarily good for the world. If the goal is to reduce global greenhouse-gas emissions, the planet might be better o if dollar and euro subsidies were used to buy cheaper Chinese solar panels. That way, the same expenditure would accomplish more emission reductions and lower temperatures for all of humanity. The third risk is that a subsidy war might lead to a waste of scal resources. If long-term real interest rates in the US and the EU remain below their growth rates, as many eminent economists believe, then this is a non-issue, because governments can spend and borrow without having to raise taxes in the future. But if the era of low interest rates is over, then the huge scal cost of green subsidies should be a concern.

How big are these economic risks?

No one can be sure, but there are reasons to take dire warnings with a grain of salt. For example, recent estimates suggest that Trump’s trade war with China had a much smaller e ect on the US economy than many had predicted, resulting in welfare losses of roughly 0.1% of GDP. And that war was fought with tari s, which discourage trade, while subsidies encourage bene cial emissions reductions. In addition, eligibility for the subsidies depends on complex “domestic content” requirements that can be tweaked if they become too onerous.

Moreover, the economic impact of a US-EU subsidy war on the rest of the world will most likely be limited. Yes, rms outside the US and the EU might be harmed. But if green subsidies accelerate the clean-energy transition and help contain global warming, the whole world will reap the benets.

The same goes for scal risks. Yes, both the US and the EU could eventually encounter problems if real interest rates continue to rise and stay high. But if and when that day comes, there are many other wasteful expenditures that governments could and should reduce before cutting green subsidies.

The more immediate risk is political. The US subsidies violate the World Trade Organization’s rules prohibiting discrimination against products or rms based on their country of origin. The EU must not follow in Biden’s footsteps. At a time of heightened geopolitical tensions, the world’s leading democracies should aim to strengthen the global rules-based system, not undermine it.

Most importantly, a subsidy war would sour political and diplomatic relations between the US and Europe at the worst possible time, when liberal democracies face Russian aggression in Ukraine, Chinese expansionism, and illiberal regimes in Central and Eastern Europe, Asia, and Latin America. If we are to mitigate the worst e ects of climate change, American and European policymakers must work together, instead of being consumed by petty squabbles over green subsidies.