Black stones CEO Larry Fink declare in one recent interview with fox that “we have to get our people back into the office” and that doing so will lead to “increased productivity that will offset inflationary pressures to some extent”.
Fink does not provide any data in the form of statistics, surveys or research to support its claims. He simply emphasized, without evidence, that in-service jobs would reduce inflation. So what do data says?
An extensive quote Research July 2022 from the highly regarded National Bureau of Economic Research (NBER) found strong evidence that teleworking lowers inflation. Specifically, because employees have strong hobby for primary or full-time remote work, they are willing to accept lower wages to work remotely.
As a result, the researchers found that remote work reduced pay growth by 2% over the past two years. Notably, the growth slowdown particularly occurred in predominantly higher-paying positions, which can be performed remotely, leading to wage compression that reduces wage inequality between jobs blue collar and white collar. Given that higher wages lead to more consumer spending leading to inflation, the study concludes that teleworking lowers inflation.
More evidence supports the finding that telecommuting reduces wage growth, such as June 2022 survey by the Human Resources Association. It reports that 48% of survey respondents will “definitely” look for a full-time work-from-home job on their next search. To get a full-time job with a 30-minute commute, they’ll need a 20% raise. For a combined job with the same commute, they would need a 10% raise. Another survey among 3,000 workers at leading companies such as Google, Amazonand Microsoft found that 64% would prefer a permanent WFH deal over a $30,000 raise. Indeed, companies offering remote work opportunities are increasingly hiring in lower cost-of-living areas of the US – and even outside USA – to get the best value for talent. That’s the main reason why one of my clients, a late-stage software-as-a-service startup, decided to offer some completely remote locations.
This data shows that telecommuting lowers labor costs and therefore reduces inflation. What about Fink’s claims about productivity?
Survey has long found workers report that working remotely is more productive, but we may feel some skepticism towards self-reported responses. It’s hard to feel cynical about the evidence from Employee monitoring software Prodoscore company. Its Chairman David Powell said that “after evaluating more than 105 million data points from 30,000 US-based Prodoscore users, we discovered a 5% increase in productivity over the course of time. pandemic at home”.
And we’ve gotten better at working remotely over time. Stanford University research found that teleworkers were 5% more productive than in-office employees in the summer of 2020. By spring 2022, remote workers became 9% more productive, due to companies learn how to do Better remote working and invest in more remote condition-friendly technology.
A July 2022 research reported in another NBER paper that productivity growth in remote work-based businesses such as IT and finance has increased from 1.1% between 2010 – 2019 to 3.3% since at the beginning of the pandemic. Compare that to industries that rely on direct contact, such as transportation, catering, and hotels. They went from a 0.6% productivity gain from 2010 to 2019 to a 2.6% decline since the start of the pandemic.
Case study evidence supports these broader trends, as reported in another paper Paper NBER about a study at a real-world company, Trip.com, one of the largest travel agencies in the world. It randomly assigns some engineers, marketers, and finance people to work remotely on their own time, and others to the same role with full-time in-office work. Guess what? People who work on a hybrid schedule are 35% more likely to retain users, and engineers are 8% more likely to code. Coding is a standardized and difficult measure of productivity and provides strong evidence of greater productivity in remote work.
Evidence shows that remote labor costs less and is more productive, reducing inflation on both ends. What about ancillary costs?
Employees can save a lot of money, up to $12,000 on full-time remote work under one Flexjobs analysis. That involves saving on transportation, such as gas, car maintenance and parking, or public transportation. Workers also do not have to buy expensive work clothes or eat at expensive restaurants in the city center. Workers need to pay a little more for home cooking and higher utilities. However, these costs are much smaller than the cost of going to the office.
Companies save a lot of money on real estate, utilities, office furniture, cleaning services and related expenses. Average office space per employee could be to $18,000 per year, which means savings can add up quickly. No surprise when using the office going down and companies are cut their real estate footprint. Example: Amazon – allows full-time and part-time telecommuting–recently paused the construction of five towers in Bellevue, Washington, due to remote work.
Companies are investing more in support for work from home like IT and cybersecurity. More forward-looking companies are providing remote working support to home offices. For example, Twitter, Facebookand Google provided $1,000 fixed spending for home office. As another alternative, one of the client, the University of Southern California Institute of Information Science, has researched the best options for home offices and offers a wide range of standardized home office furniture and technologies for its employees. . It’s a wise long-term investment that improves productivity and is far more cost-effective than leaving employees in the office.
Therefore, in addition to lower labor costs and higher productivity, both workers and employers pay much less for employees to work remotely. All evidence shows that teleworking lowers inflation.
Such information is readily available – and Fink may have appointed a summer intern at BlackRock to look for evidence. He chose not to do so, instead making mildly counter-facts statements. That way he shows Bad judgmentmay be due to a combination of cognitive bias.
One is called belief bias, where our belief in the desired likelihood of an outcome – such as Fink’s desire for workers to return to the office – leads us to misinterpret the evidence supporting this outcome. The other is confirm biaswhere we look for evidence that confirms our beliefs and ignore evidence that doesn’t.
By failing to properly assess the abundant evidence, Fink is eroding trust in BlackRock more broadly. His poor judgment should be a lesson to all business leaders to rely on facts – rather than fantasies – in their public and private communications. decision.
Gleb TsipurskyPh.D., is a cognitive scientist and CEO of a future-proof consulting firm Expert in Disaster Prevention. He is the best-selling author of Leading Remote and Hybrid Teams: Benchmarking Guide to Best Methods for Competitive Advantage.
Opinions expressed in Fortune.com commentary are those of their authors only and do not reflect the views and beliefs of Luck.
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