Transcript
Speaker: Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
Speaker: Thanks for listening, and now onto today's show.
Speaker: The following podcast was recorded for publication on the 31st of August 2023 by HSBC Global Research.
Speaker: All the disclosures and disclaimers associated with it must be viewed on the link attached to your media player.
Speaker: Remember, you can follow this weekly podcast on Apple and Spotify, or wherever you get your podcasts, by searching for The Macro Brief.
Speaker: Now, on to the podcast.
Speaker: Hello, I'm P.S.
Speaker: Butler in London and welcome to the Macrobrief.
Speaker: We're back from our break and with many people returning to the office after a summer holiday, we're talking about the future of work.
Speaker: The labor market has undergone huge changes over the last few years as a result of the pandemic.
Speaker: In some countries, we've seen some of the tightest labor markets in history.
Speaker: Remote and hybrid working have become commonplace and technological developments and the rise of automation could accelerate further changes.
Speaker: All of this has big implications for the jobs market in the economy.
Speaker: There's lots to talk about, so let's get straight into the discussion.
Speaker: James Pomeroy is global economist and is here with me in the studio.
Speaker: James, great to have you back on the podcast.
Speaker: Thank you for having me.
Speaker: So, yeah, let's talk firstly about the pandemic.
Speaker: It was a once in a generation event.
Speaker: Everybody talked about this revolution in terms of working from home.
Speaker: Now, we know from our experience in the market that the pendulum can swing very much in one direction.
Speaker: I feel like the pendulum has swung back a bit away from everybody working from home.
Speaker: Maybe sort of bring us up to date as to where we are.
Speaker: Was it actually more temporary than people imagine?
Speaker: Or are there some changes that are going to last for a long time?
Speaker: It's interesting because a lot of businesses at the moment are talking about the need to get people back in the office and I'm sure we'll talk shortly about why they're doing that but at the same time the numbers, the hard facts don't seem to suggest that people are going back into the office at any faster rate than they have been at all.
Speaker: So really what you've seen is this peaking out of that return to the office that's largely been in place for most of the last year.
Speaker: So if you look on some of the hard data in terms of people scanning into
Speaker: into their offices or we look at some of the survey data which looks at the number of days people are reporting working from home or what businesses are offering actually there appears to be a bit of a we're hitting this sweet spot in the middle there and that sweet spot is probably about half of days that can be done remotely being done remotely so you get we seem to be settling on this sort of midpoint so for all the discussions in the media about people going further and further back into offices that doesn't appear to be the case
Speaker: Now of course, let's be fair about this, there are some quite significant geographical differences, maybe illustrate that a bit.
Speaker: Of course, it's a wildly different story between Asia, Europe and the US, but also it's very different on a city-to-city basis as well.
Speaker: And a lot of this comes down to firstly the nature of jobs, but also the nature of people's living arrangements and the nature of how hybrid work evolved during the course of the pandemic.
Speaker: So if you take a lot of, say, Asian cities where people still live in those big cities, often in small apartments, the benefits of remote working are much smaller compared to if you take an example of London where people have moved to the sort of suburbs or slightly further out in commuting.
Speaker: Well, one thing we saw in the US during the pandemic is the rise of sort of donutting of cities.
Speaker: So people moving right out to the rim of those cities or even to other smaller cities where we saw these huge increases in house prices and rents.
Speaker: So that ability to work in a hybrid fashion or to work in the office much more is harder in some of those cities just because of how things evolved during the course of the pandemic.
Speaker: And as I say, those trends appear to be sticking around, particularly in the US, where we're still about half days being worked remotely.
Speaker: So maybe give us an illustration saying US versus Asia, what are the percentages like?
Speaker: In the US, we're about half.
Speaker: Asia, most cities, about 10%, if that, days done from home.
Speaker: In Europe, it's somewhere in the middle.
Speaker: London more so than other European cities, but it's somewhere in the middle.
Speaker: But it's also important to stress, a lot of this really does vary depending on the job you're doing.
Speaker: Some jobs really benefit a lot more from being there in person and working collaboratively, and others don't.
Speaker: So whilst you've got these sort of general sweeping stories across the big macro data, there is a big discrepancy within companies, within roles, even looking when we look a little bit more deep.
Speaker: Yeah, well, in fact, that's what's going to be my next question is let's look at working from home and the positives and the negatives.
Speaker: There are factors in both camps.
Speaker: So maybe let's delve into that.
Speaker: Yeah.
Speaker: So the clear positives of remote working, they're numerous.
Speaker: It's clearly there's a potential for a big productivity increase that comes from people not commuting.
Speaker: It comes from certain types of work are generally better to do at home.
Speaker: If you think about deep work, if you think about people getting stuck into writing or data or calls with clients, these sorts of things are easier to do from home in many cases.
Speaker: So there's a clear positive there, but also there's some positive externalities.
Speaker: We've written for a long time about how one of the biggest challenges we face globally and economically is urban congestion.
Speaker: All the time we waste sat in traffic or
Speaker: on busy trains or all of these things, it's dead time, right?
Speaker: And you take that out of the equation, that's huge macro productivity gains that also bring an environmental benefit as well.
Speaker: So there's some clear upsides there.
Speaker: You've also got a clear impact here on the diversity of the workforce.
Speaker: And you're seeing the number of women in the workforce, number of hours worked by women, number of people with disabilities in the workforce.
Speaker: All these numbers are at record highs.
Speaker: And there's no denying that remote work is leading to an improvement in all of those metrics.
Speaker: So there's a lot of really, really good things there.
Speaker: Now, of course, it's not all very, very good news.
Speaker: There's some challenges and we know that some people are going to learn better sat near their team, sat near their managers, sat peers.
Speaker: There's an element of osmosis.
Speaker: Some people will benefit more from mentoring in that environment.
Speaker: But also for some people, their working situation at home just isn't conducive to being productive at home.
Speaker: Some people will have a one bedroom flat where they'll have to work at the kitchen table.
Speaker: And some people will have a home office in the garden with a nice isolated separate space.
Speaker: And the benefits of each of those individual people of remote working is completely different.
Speaker: And the same is true between different jobs.
Speaker: If you have a job where you're actively working collaboratively with people who are in the same office, the benefits of being in person are completely different to if you work a lot more in isolation or with people geographically spread around the world.
Speaker: Now also there are some preconceptions like in terms of the impact on different age groups and one of the sort of general comments is it's worse for younger people because they need to be in the office to learn by sitting next to people.
Speaker: But that's not entirely true.
Speaker: You mentioned mentoring and there were some quite interesting statistics on that.
Speaker: Yeah, it's not so clear cut.
Speaker: Essentially, younger people say that a lot of younger people say they want to be able to go in the office.
Speaker: When you look at surveys in terms of preferences, young people often don't want to be completely remote because they get these benefits.
Speaker: But the survey data don't suggest they're actually getting an enormous amount of mentoring when they go into the office.
Speaker: Now some of that might be because some of their colleagues aren't there, but some of it might just be because of how we've adapted in terms of how we learn things, how we share information during the pandemic.
Speaker: And you've got a generation here who are much more digitally engaged, who are much better at learning in a digital environment.
Speaker: So the benefits of being there in person may not be quite as great as we might initially think.
Speaker: Now, that's interesting in many ways, but also what is interesting when you look at young people in surveys is they, as I said, they don't want to be entirely remote, but they also don't want to be entirely in the office.
Speaker: So there's an element of younger people really, really valuing that flexibility, which is something that we don't think is going to go away and will play a key role in the labour market going forwards.
Speaker: Now, the future of work, it's easy to spend a long time talking about working from home.
Speaker: It is not just about that.
Speaker: Obviously, you've written and write in this report about technological change.
Speaker: Now, again, the sort of general discussion about technological change and the implications for future of work is that it will destroy jobs.
Speaker: yet we're facing very tight labour markets and a lot of development economies.
Speaker: So what's going on?
Speaker: I mean, people just love to be negative, don't they?
Speaker: It's just something that's true in so many ways of thinking about the world.
Speaker: And if you look at the history of technological developments, whilst every single time people have been very, very nervous of this new technological breakthrough is going to destroy thousands of jobs,
Speaker: The history doesn't suggest that's what happens.
Speaker: History suggests that more jobs get created.
Speaker: And essentially, a lot of the analysis that we cite in this report suggests a very similar thing this time round.
Speaker: And it's not just about artificial intelligence.
Speaker: The broad suite of technological innovations hitting the global economy at the moment are likely to mean that there's whole sectors of the economy that get created or grow very, very quickly.
Speaker: And if you go down that path, then actually technological change doesn't necessarily mean jobs being lost.
Speaker: It can mean many jobs being created.
Speaker: But that net result is what can be good news.
Speaker: It does create challenges.
Speaker: We need to think about the type of jobs that are created, the skills that are needed for those jobs.
Speaker: And the biggest challenge, I think, from a lot of these technological changes isn't the amount of jobs.
Speaker: It's how we can make sure people are ready for those jobs.
Speaker: And that's going to require a lot more thought about skills, about training and about education from both businesses and from governments.
Speaker: So let's drill down a little bit in terms of this range of the areas that are going to benefit in terms of job creation versus those that are going to suffer.
Speaker: And overlaying that in your report, you talk about some of the macro cross currents.
Speaker: So maybe sort of overlay that as well.
Speaker: Yes, if we start thinking about the jobs that are most at risk from any form of automation, and I include sort of AI as well as more traditional forms of automation here, they're generally very process heavy jobs.
Speaker: And generally, if I'm honest, quite boring jobs, right?
Speaker: This is the stuff that technology is quite good at doing.
Speaker: And so what you're more likely to see is those sorts of roles be more at risk.
Speaker: Now, there can be across a whole range of different industries, a whole range of different skill levels, but anything that's very process driven is much more vulnerable to a lot of these technological changes.
Speaker: But that's not to say you're not going to see some of those jobs survive.
Speaker: It may be there's parts of jobs that are taken away, some of the boring parts within roles, and people actually then have more time to do some more interesting things with their day-to-day.
Speaker: I'm sure everyone listening to this can think about parts of their job they'd love to be automated away.
Speaker: And if you got rid of that out of your job, what do you do with the extra time?
Speaker: So you could see a huge amount of productivity increases as well from some of these changes.
Speaker: But also on top of this, you've got these big macro cross currents, like you say, when you think about the green economy, there's just whole new industries are going to be created here from technological innovations.
Speaker: How can we make sure that we produce enough clean energy?
Speaker: How can we ensure that we go into things like circular economies?
Speaker: How can we think about everything to do with the ESG agenda?
Speaker: A lot of that is going to create jobs.
Speaker: So there's big macro themes that are going to be job creators, as well as this technological concern about jobs being lost.
Speaker: One thing that's also going to be really, really interesting is, and something we've touched on in the report a number of times, is the rise in leisure time.
Speaker: And I think actually a lot of these technological changes create more time for people.
Speaker: If you think about pretty much every technological change in our lives, if it means that you can buy things online or I'm going to the shops, or it means you can buy
Speaker: go through a self-checkout rather than queuing up to pay.
Speaker: All of these things essentially are speeding up our lives.
Speaker: And if we see this same thing playing through in our productivity at work, then maybe we work less.
Speaker: And if we work less, we have more time for leisure.
Speaker: Well, that's a whole sector of the economy that's a big, big beneficiary.
Speaker: And I think
Speaker: That debate about the amount of working hours is one that's going to be really, really important in the years to come, partly because of flexibility, like we're talking about with remote work, but also some of these technological changes.
Speaker: And if we go to a world where working hours are reduced because of that greater productivity, a whole sector of the economy, anything to do with entertainment, so anything to do with leisure, travel, content, jobs in those industries should keep growing.
Speaker: Just coming back to this issue of new skills needed, are you seeing evidence that governments and therefore fiscal spending is tackling that?
Speaker: Not enough.
Speaker: And it's something that needs to be dialed up across the board.
Speaker: And if you read a lot of these sort of future work type reports written by a lot of consultancies and think tanks and these sorts of places...
Speaker: there's going to be an element of some of that has to come from governments and some of it has to come from businesses and it's how can we make people use these new technologies in the most productive ways and a great example is we've had this sort of huge boom in AI over the course of the last year and how many people know how to use those tools effectively how much training have people listening to this had on how to use those sorts of tools effectively if they're being put in place by their companies not much I'd imagine
Speaker: We have a workforce today across the board who struggle to use Microsoft Office effectively, let alone the new technologies that are arising.
Speaker: So there is an element of on-the-job training that's going to be needed across the board in the years to come.
Speaker: But I also think big picture, we're going to have to seriously think about education.
Speaker: You think about the nature of education systems in most of the world.
Speaker: We're training people to be automated.
Speaker: You get rewarded in the education system for repeating things.
Speaker: And that's not something that you need.
Speaker: What we need is people who can learn how to learn, people who can be adaptive, creative, work with people, emotive skills.
Speaker: Those sorts of things is what we're going to have to train much more.
Speaker: And that's going to require a change in education systems, a change in worker training and all of those things in the years to come to adapt to the new type of jobs that are going to grow.
Speaker: So there's another mega trend that is at play here, which you have written on as well, is demographics and the aging population issue that we're facing and which is becoming, I mean, we talk about demographics and there is a tendency to say, well, this is going to happen in 50 years time.
Speaker: I don't need to worry about it.
Speaker: But actually, from what you've written, it's getting closer and closer.
Speaker: That's it.
Speaker: We're at big tipping points in the global demographic transition.
Speaker: If you look at anything in terms of demographic data, this period we're living through right now is the fastest period of demographic change we've ever had and ever will have.
Speaker: And so when you put all that together, you get into a world where you go, hang on, actually, we're going to have to think seriously about how many jobs we're going to need.
Speaker: If you have fewer workers, if some of those jobs disappear, that's not so much of a problem.
Speaker: And so all of those sorts of questions become slightly different in terms of worrying about the number of jobs being created when you put that demographic overlay on top of it.
Speaker: And also, if you think about an older population as well, we're going to need many jobs that are going to have an automated component to them.
Speaker: We're going to have to think seriously about health care.
Speaker: We're going to have to think seriously about everything to do with that elderly population and how we work together.
Speaker: in terms of making quality of life high, in terms of thinking about the sort of jobs that people can do later in life as well.
Speaker: There's going to be so many interesting developments in the future of work because there's rapid change in the population, particularly in the developed world.
Speaker: Could you argue that rather than fearing technological innovation and AI in particular for the job destruction, that actually we really should be wishing for technology innovation to deliver?
Speaker: I think so.
Speaker: I think there's a positive angle here.
Speaker: Of course, as I said earlier, people like to be negative.
Speaker: But if you put the positive lens on this, there's a chance we see in the coming years huge increases in productivity, huge increases in quality of life.
Speaker: from these new technologies that are being rolled out.
Speaker: And I don't think it's out of the realms of possibility to start thinking seriously about considerably shorter working weeks for lots of people.
Speaker: That's not necessarily going to mean everyone starts working three days a week.
Speaker: But I'm thinking, you know, what about a world where people don't need to send an email at 7 o'clock at night?
Speaker: You know, 9 to 5 becomes 9 to 5.
Speaker: Or the four-day week actually becomes...
Speaker: the norm and that sounds crazy but all of the studies on this sort of stuff are looking really good and the way that's happening the businesses that accept that four day week can be success are those that are embracing other changes it's how can we use the tools we've got at our disposal better how can we plan meetings better how can we use the technology we've got to communicate better to learn better and so all of these things combined these shifts in terms of more flexibility with work more remote work more technological change
Speaker: All of that together could actually lead us down a pretty good path of stronger productivity growth, fewer working hours.
Speaker: And actually, that's good news, I think, not just for the economy, but for society too.
Speaker: So let's just finish on the implications for cities.
Speaker: You know, you write again about the evolution of future cities.
Speaker: During the pandemic, everybody said we're sort of leaving the cities, we're remote working.
Speaker: That's quite as straightforward as that.
Speaker: It's not.
Speaker: And there's a big difference between individual cities.
Speaker: As I sort of mentioned earlier about that geographic split and remote working, the nature of that population change during the pandemic was very different in different parts of the world.
Speaker: But one thing we do continue to see is the outperformance of smaller urban areas compared to large urban areas.
Speaker: And it's essentially in a more hybrid world.
Speaker: These are the areas that are competitive.
Speaker: When you think about the ability to do a job from more places, well, if your home costs half the price in one city rather than the other, then why not move there?
Speaker: And if you've still got a good quality of life, then these cities become pretty attractive.
Speaker: So there continues to be an outperformance of smaller urban areas and commuter towns and these sorts of places around Europe and the US.
Speaker: but that is maybe slowing down.
Speaker: You've had this big outperformance, but it's sort of coming back a little bit.
Speaker: But cities are changing and they're going to have to keep evolving because, yes, people still want to live in the centre of London or New York or Hong Kong, but your role that you play there and what you do there is going to be very different in future.
Speaker: If you came into the centre of London, you lived in the centre of London because you worked in the office five days a week, how you react to that city is very different if you only go into the office two or three days a week.
Speaker: And so it's much more that cities are a place for leisure.
Speaker: They're a place for more activities than just work.
Speaker: And we may well see buildings repurposed as a result.
Speaker: We may see transportation systems evolve in line with this as well.
Speaker: And cities are going to thrive.
Speaker: It's just that the role they play is now one of play rather than work.
Speaker: And again, I think that can be a good thing, particularly going back to what I said earlier about some of the urban congestion stuff.
Speaker: Because if you basically...
Speaker: smooth out the amount of time throughout the day that people are using urban areas rather than having rush hours.
Speaker: That's really, really good news as well from a productivity perspective as well as hopefully doing something good for the environment.
Speaker: James, I've really enjoyed talking to you.
Speaker: I always come out of a discussion with you with a sort of more hopeful outlook and certainly I'm hoping for fewer working hours at some point in the future.
Speaker: You're on LinkedIn, you post regularly.
Speaker: I would encourage people to follow you because we make some of the parts of the report available there.
Speaker: So...
Speaker: With that, James, thank you very much for joining us.
Speaker: Thanks very much for having me.
Speaker: A few quick things to finish with.
Speaker: First, don't forget that you can follow the podcast on Apple and Spotify or wherever you get your podcasts by searching for the macro brief.
Speaker: Second, the next edition of our Live Insights series is coming on the 12th of September.
Speaker: I'll be sitting down with Murat Ulgan, Global Head of Emerging Markets Research, to ask him your questions on all things emerging markets.
Speaker: Go to the HSBC Global Banking and Markets page on LinkedIn to find all the details.
Speaker: And lastly, sticking with the EM theme, our Global Emerging Markets Forum is fast approaching.
Speaker: It's taking place online from the 18th to the 29th of September.
Speaker: There are some fascinating panels on the agenda.
Speaker: So if you're an HSBC client and would like to attend, please get in touch with your HSBC sales representative.
Speaker: So that's it from us.
Speaker: Thanks for listening to the Macrobrief.
Speaker: We'll be back next week.
Speaker: Thank you for joining us at HSBC Global Viewpoint.
Speaker: We hope you enjoyed the discussion.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
