The coronavirus (COVID-19) outbreak is a health crisis with substantial economic impacts. This small virus is tracing and exposing the fault lines in our deeply connected and interdependent lives.

The focus on containment in Australia is increasing with the lockdown of non-essential activities across the country and an increasing focus on closing interstate borders in the interests of public health. This will have substantial impact on the Australian workforce. Some workforce effects can be anticipated, while others will surprise us. The Commonwealth government announced a second financial package with an emphasis on providing relief for small businesses and keeping people employed.

The impact on the pattern of work in Australia is now starting to play out. While some people are grappling with the 'how-to' of flexible work, others in the contingent workforce are wondering what tomorrow holds.

Many employers and employees are embracing flexible working on an unprecedented scale – this will put organisational systems, processes, leadership and culture to the test. Those organisations that have invested in the right technical and cultural foundations will survive and thrive, while others will struggle.

The response of other countries that are later in the COVID-19 cycle is instructive. For example, the Japanese Prime Minister spoke about the success of measures such as letting employees work from home and expanding hospital treatment capacity as key factors in whether the country can control its virus outbreak. Japan is known for long working hours a corporate culture that allows little room for flexibility. There is an open question as to whether a long-term positive outcome from COVID-19 will see greater acceptance of a more flexible approach to workforce management in the future. Certainly, it is a natural workforce experiment on a grand scale.

In Australia, flexible working is a more accepted practice, but it is not widespread. Our experience is that acceptance of flexible work is contingent on two factors: the way work is designed and the attitude of middle managers. More often than not the difference between those who do and those who don't comes down to differences in leadership and culture.

We have also drawn the connection between business continuity and workforce flexibility. We asked, ‘What happens when the screens go dark?’ We highlighted that while business continuity was a front of mind issue for many business leaders, the discussion often went to systems risk and the ability to quickly verify the location of employees. At the time, the scenarios we considered were either disaster or terrorist attacks on critical infrastructure. COVID-19 reframes the risk and brings working flexibly to the foreground.

We noted that from our experience that:

An organisation that is culturally conditioned and practiced in flexible working is the one most likely to have the agility and resilience required to respond to disaster or crisis. It may also be one most likely to have the mindset and tools to adapt and posture for recovery.

Today, we have a health crisis that is impacting directly and materially on the economy. The workforce is central to our response to both aspects of the problem.

How flexible is the Australian workforce?

The following chart shows that on a normal business day up to 25% of the Australian workforce (or 2.36 million people) are already working from home as part of their normal pattern of work.

COVID-19 will have an impact on this portion of the workforce but we can assume the structure of their day-to-day work will only be impacted by businesses adapting to the new normal. This part of the workforce is productive and can remain productive.

Source: ABS #6333.0 Characteristics of Employment

Today, where nearly all people are being told to work from home, adjusting to a flexible way of working and learning the discipline that comes working alone and digitally the challenge will be greater.

If workforce flexibly is one aspect of our national economic resilience, then what is Australia’s base? Can that resilience be assessed?

There are two economic measures of workforce productivity. We can measure workforce productivity as GDP dollars per hour and this has been our most dominant measure. Alternatively, we can look at GDP dollars per full-time equivalent. Ideally, we should look at both.

Overall, (as shown in the following two charts) we can see that Australia’s productivity has improved over time, but overall growth has been flat 2017. The dominant contribution comes from large states, NSW (32%), followed by VIC (24%), QLD (19%) and WA (14%). Western Australia leads the productivity, followed by the Australian Capital Territory and the Northern Territory.

So, COVID-19 is coming to Australia at a point where overall productivity is flat and has been that way for a little while now. The Treasury relies on 30-year average productivity growth of 1.5%, but the reality is the labour productivity has been slowing down during the last five years as labour productivity growth has been associated with subdued wage growth. COVID-19 has already caused business and industry activity to trim down to the minimum, while tourism sector (led by air transport industry) is under significant pressure. Low-wage and part-time workers will feel the COVID-19 downturn most acutely. A sharp rise of unemployment rate is expected.

If we assume we still have access to lifeline of the internet, electricity, water and gas, a good quarter of the economy should be still active and functional. As a rough rule of thumb, if the current GDP growth rate is 2.2% per annum and COVID-19 results in most people working from home the GDP growth rate should still be positive 0.55% per annum.

While this is a very linear view that is jam packed with assumptions and unknowns, it shows that while many employers have not fully embraced flexible working there is a broad economic argument that when COVID-19 passes and we learn the lessons of a new pattern of work, we might note that if a larger proportion of the workforce was better geared to working flexibly would have reduced the impact on productivity in uncertain times.

What insight can we take from this?

Switching patterns of work in a crisis will be a significant challenge for many public and private sector workforces in Australia. It will likely result in a period of reduced productivity as we adapt to the new normal. How long that adjustment will take remains to be seen.

We believe that organisations that have the systems, processes, leadership, and practices in place will lose little in productivity and rebound faster when the crisis has passed. Having a well-crafted flexible workforce policy does not a flexible workforce make. Workforce flexibility needs to be an integral part of workforce design and practice.

This doesn’t mean that those who are coming off a low base can’t accelerate quickly; rather, emphasising working flexibly in this crisis is way to build the skills and practices that are the foundation of a flexible workforce culture. It will require effort and attention but there are long term benefits. Our advice is to embrace the opportunity to build resilience for the future.

About the Authors

Sally Dorsett and Dr. David Schmidtchen lead Synergy’s creativeXpeople practice. You can find out more about that here.

Dr. Jiao Wang and Dr. Jan Drienko – specialise in Labour Market, Workforce and Demographic Modelling (incl. migration), Macroeconomic Modelling, Economic Impact Analysis, Circular Economics, Cyber Security Economics, and Critical Infrastructure Modelling.

If you are ready to accelerate your flexible working response or just improve your existing approach, contact us today.