Will Omicron move more work from offices to homes?

As the latest wave of Covid-19 cases hits the US, speculation has mounted that some jobs may be moved from offices to homes more permanently. A large permanent shift would have a significant impact on many areas, including the future of office work and downtown Central Business Districts (CBDs). But while large-scale work shifts could become a reality for some occupations, we don’t yet know how permanent they will be.

On the Covid-19 front, we are again witnessing rapidly rising Covid-19 cases. This increase is due to more people being driven indoors by winter weather, the rapid rise of the more contagious Omicron variant, declining protective behavior and holiday gatherings, and – most importantly – the continued lack of vaccinations for many people.

The nation’s immunizations have stalled. Only 61.6% of Americans are fully vaccinated (defined as two doses of approved vaccines). That has barely moved in three months – on October 20thth, the level was 57.3%. And the fast-spreading Omicron variants can more easily infect fully vaccinated people, even though vaccines significantly reduce serious illness and death and relieve our healthcare systems.

This latest virus wave is adding to the uncertainty about the longer-term future of office work. As more jobs are permanently shifted to home office, it will weaken the commercial real estate market and also lower-paying service jobs in restaurants, cleaning, security and other sectors that support higher-paying office workers in CBDs.

Prior to this latest Covid wave, companies were moving towards clerical work, although not necessarily full-time. In August, PwC’s ongoing Pulse survey found that just 19% of companies surveyed anticipate “fully in-person” work, while 69% plan to have a mix of in-person, hybrid (mix of remote and office), and fully remote. Only 4% thought they would work completely remotely without office work.

But companies are now unsure how to proceed. Owl Labs 2021 Status of remote work found that 73% of workers who did some work remotely during the pandemic “have returned to the office at least one day a week,” but most were reluctant to return full-time. Meanwhile, 39% of employers prefer employees to be in the office full-time, but at the same time they are reducing their office space and adjusting workspaces and physical locations to allow for more hybrid work.

Telecommuting remains significant overall due to the pandemic, according to the Bureau of Labor Statistics national surveys. In May 2020, amid the economic shock of the pandemic, 37.4% of workers reported doing some work from home because of the pandemic. But by November of this year, that proportion had fallen to 11.3% of all workers.

But who these teleworkers are remains constant – higher educated professionals. Of course, in many industries — restaurants, hotels, entertainment, manufacturing, healthcare — there is very little remote work. Thus, telework has always been focused on professional activity in the office.

In May 2020, BLS reported that 72.5% of workers with college degrees or higher have telecommuted, compared to 10.3% of workers with college degrees or less. As of November of this year, those percentages were very similar — the percentage for high school or under fell to 7.9%, while the percentage for those with higher education actually rose to 77.1%.

You can see the impact in the office occupancy data. Kastle Systems’ Back-to-Work Barometer tracks keycard entries and occupancy across 10 major metropolitan office markets. The national average is around 40%, with the top three markets in Texas (Austin, 57.3%; Houston, 53.6%; Dallas, 50.8%). The New York Metro is only at 35.8%, while San Francisco is the lowest at 28.8%.

And those are metropolitan numbers. The central business districts in the cities seem to be doing worse. An October survey by the Partnership for New York City found that “28% of Manhattan office workers are in the office on an average weekday, with just 8% in the office five days a week.” Keep in mind that this survey was conducted before the last spike in Covid cases, so the numbers are likely to get worse.

Fewer high-paying clerical jobs mean fewer jobs in lower-paying service sectors such as restaurants, hotels, building cleaning and services, security, and others. High-paid professionals do well in the labor market, but shifting their location has a major negative impact on low-paid service workers, who are disproportionately people of color.

My colleague James Parrott is following the impact of Covid on the New York City economy. He found that even before the current Covid uptick, low-wage workers in face-to-face industries were not making meaningful wage gains, even as employment returned somewhat. Downsizing and more remote work for higher-paid office workers will make things worse for these lower-paid workers who continue to suffer the worst of the pandemic.

If we continue to experience successive waves of new Covid variants, employers and workers could adjust to embracing more hybrid work as a permanent feature. Workers want remote work more than employers, so there’s a balance of power lurking behind these numbers.

But continued economic disruption from Covid could accelerate the transition to more permanent hybrid work, to the detriment of CBDs and lower-paid service workers. The Omicron wave will unfortunately provide us with another instance of this dynamic.

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