BoE's chief economist Andy Haldane warns working from home will stifle creativity

Happier people are more productive but workers need more face-to-face stimuli, he says

Andy Haldane, chief economist of the Bank of England. Bloomberg via Getty Images

Working from home could stifle creativity and hamper productivity if it continues long-term, according to the Bank of England’s chief economist, who has only been to the office twice in the last six months.

Andy Haldane said the rapid shift to remote working during the coronavirus outbreak had improved happiness levels, however, this did not apply across the board with the lack of external stimuli and face-to-face interaction affecting creative expression and productivity for some.

“Mandatory home-working thrust large numbers of workers into an alien working environment – their kitchens, bedrooms and attics,” he said in a speech peppered with personal anecdotes that was delivered online this month and published on the BoE’s website on Monday. “Productivity, predictably, was hardest hit among those with least prior experience of home-working.”

The British government’s drive to encourage office workers back into the City of London has been hampered by an escalation in the number of new coronavirus infections, leading to heightened restrictions in the capital and advice to employees to work from home if they can.

In his speech on the effects of new working practices on productivity and output in the workplace, Mr Haldane said, like virtually all the BoE staff, he had been working from home since the pandemic started, only going into the office twice in the past six months.

“Full-time working has, for me, been a radical shift. For the past 30, my working week has been 5-0, office versus home. Nonetheless, like many others, if you asked me how my future working week might look, I think it unlikely I will revert back to the 5-0 model,” he said.

Over the past two decades the number of people working flexible hours has increased five-fold - from less than 10 per cent to more than half the workforce - according to a 2019 analysis of working trends by the Association of Professional Staffing Companies.

Meanwhile, data from the Office for National Statistics found that prior to Covid-19, just 5 per cent of people worked from used their home as their main working location while around a quarter of those polled said they had worked from home at some point in the recent past.

The pandemic saw those figures rise dramatically with almost half the workforce working from home in any given week at the peak of the lockdown in April, Mr Haldane said.

However, this is hindering productivity for some, he added. While pre-Covid studies suggested home-working improved productivity, the reverse has been the case since the pandemic started.

He pointed to survey evidence for Japan, that found a 7 per cent hit to labour productivity from home-working. Meanwhile, a quarter of UK workers believed their productivity has been negatively affected by home-working, compared with 12 per cent that said it had improved, according to ONS data.

“These differences in the productivity effects of home-working, pre and post-Covid, are perhaps unsurprising,” Mr Haldane said. But even if the amount workers produce each hour has fallen, he added, it does not imply their overall economic contribution has dropped, as many now work longer hours due to reduced commuting time.

Studies, he said, indicate daily savings in commuting time of almost an hour, with a third of that saved time spent working. As a result, an eight-hour working day has seen an increase in working hours of up to 8 per cent, meaning extra hours compensate for reduced productivity.

“I do not miss the commute,” Mr Haldane. “But I feel acutely the loss of working relationships and external stimuli – the chance conversations, listening to very different people with very different lived experiences, the exposure to new ideas and experiences.

“Those losses will grow with time. At some point they will offset the benefits of avoiding South West Trains.”

The ripple effects of home-working include a rise in demand for home office equipment and video-conferencing facilities, while staff have often had to become more digitally savvy to adapt to the new style of working.

It may be that, over time, any hit to productivity could be reversed, Mr Haldane said.

“I do not know whether working from home has affected my productivity, which is never easy to measure at the best of times. Early on, as I juggled new ways of working and home-schooling, my personal productivity probably suffered,” he said.

However, he said self-reported surveys with BoE staff found their productivity had not been affected by working from home.

Mr Haldane said the lack of commuting has given him back two hours a day, a chunk of which he spends working “to offset the time spent answering the door for Amazon deliveries”.

“Like many others, I also felt a surge of productivity when the kids went back to school, although in my case that might well have just been relief,” he said. And his digital skills have also improved to the point he is “(almost) competent on around 10 different video-conferencing platforms”.

However, Mr Haldane said happiness is also key because “happier people tend to be more productive”.

Despite home-working leading to longer hours, well-being has actually increased for many, something he attributes to people no longer commuting into the office and the empowerment they feel from having their working day tailored to their needs.

However, while the Covid crisis may have inadvertently "fast-forwarded the population to a better way of working", the lack of distractions at work may not be beneficial as exposure to different experiences is “fuel for our imaginations”.

While virtual meetings can be an efficient way of getting things done, they risk losing the “capacity to explore uncharted territory, to share tacitly knowledge and personal information”, Mr Haldane said.

“It is the loss of those informal moments that has resulted in many of us running down our past stock of social capital for the past six months. This cannot be done indefinitely,” he said.

“I always knew I picked up a lot of information from the unscheduled time between meetings, when informal and sometimes chance conversations take place. Having now lived without them for six months, I now realise these … were often my main source of information.”

Mr Haldane, who said the Monetary Policy Committee, which sets interest rates, has taken place virtually since March, cast doubt on the long-term effects of home-working on increasing productivity and creativity.

“Whether it is creative sparks being dampened, existing social capital being depleted or new social capital being lost, these are real costs and costs which would be expected to grow, silently but steadily, over time, he said. "They cast doubt on whether it will lead to the promised land of improved productivity and greater happiness.”