In August last year, Russian president Vladimir Putin told a group of manufacturing industry bosses that he had instructed government officials to swap their foreign cars for local ones.
It was “totally unacceptable” for them to continue buying foreign cars and they should only be riding in cars manufactured in Russia, he said.
"Our officialdom is wonderful and they should realise that we must strive to develop domestic brands of cars as well as other domestically produced products."
Never mind that leading car manufacturer Avtovaz has been forced to build its latest Lada car without airbags or anti-lock braking systems. It would be profligate and unpatriotic to drive anything else.
This week in Wellington, New Zealand’s central government has been accused of cooking up a similarly Soviet-esque scheme to force public servants to prop up the city's struggling business district.
Public Services Minister Nicola Willis announced she had issued updated guidance for flexible working arrangements in the public sector. She wanted to see more public servants working in the office five days a week, and less working from home (WFH) or flexibly.
This policy is officially motivated by valid fears that flexible work could erode long-term capability and productivity in the public sector due to weak mentorship and team culture.
But many were quick to link the new guidance to noisy complaints from Wellington hospitality business owners, many of whom blame WFH culture for poor sales.
Ayesha Verrall, the Labour Party’s spokesperson for the public service, said Willis just wanted to be seen to be helping local businesses, after laying off thousands of their former customers.
The idea promoted by business owners, such as Roger Young of the famous Fidel’s Cafe, is that government workers should be shopping, eating, and drinking in town, instead of working from home.
Howls of protest
Young should tread carefully though. Two unhappy public servants took to Reddit shortly after Willis’ announcement and promised to boycott any business that had lobbied for this.
Each comment received a thousand ‘upvotes’, which are similar to Facebook likes, and a third user replied: “this is exactly the backlash we need”.
It is easy to see why these workers are fired up. Flexible work arrangements are one of the most enduring and beloved changes that occurred during the pandemic years.
People were once obligated to sit at their desk from 8:59 am to 5:02 pm, grinding out spreadsheets in a noisy, ugly office surrounded by difficult colleagues. Now, they can work in a quiet environment that has been carefully catered to their individual needs, wants, and aesthetics.
At lunch, they can make a meal from fresh ingredients that is cheaper, healthier, and tastier than cafeteria food. Homemade coffee costs less than 50 cents a brew, so they can have nine cups before matching the cost of single flat white.
They’ve already saved between $6 and $20 by skipping their 30-minute commute; a lifestyle shift which will also claw back 10 days of their precious lives each year.
And, yes: they can hang their washing out between meetings, and put a casserole in the slow-cooker before knocking off work at 5:45pm — roughly when they would’ve got home on the bus anyway.
Research in the United States found, even pre-pandemic, that employees would be willing to take an 8% pay penalty in exchange for these perks.
A recent survey by a Kiwi recruitment firm found 90% of professionals would try to look for a new job if their employer demanded they work in the office five full days a week.
“Govt can remove wfh over my dead body,” another anonymous public servant posted on Twitter.
Short-term gain, long-term pain
But this enthusiasm for flexible work is not shared by all employers. The same survey found only 26% thought WFH “definitely” boosted productivity, compared to 61% of workers.
For what it is worth, most research sides with the employees. However, researchers are becoming concerned the productivity benefits could be short-lived and self-defeating.
A paper written by the New York Federal Reserve and Harvard University last November found remote working led to a trade-off between productivity and team building.
“It increases output today, particularly from more senior workers, but remote work decreases training of more junior workers, which has future costs,” they wrote.
Understandably, senior workers get more stuff done when they are at home and not getting interrupted by pesky juniors asking how the filing system works for the third time.
Productivity increases until these unguided juniors have gummed up the paperwork system so badly that all gains are eventually lost — or, so the story goes.
Employers initially got behind flexible working, as productivity was holding up and workers were wielding enormous negotiating power in the years after the pandemic first hit.
However, many have now cooled on the idea as labour markets have loosened and some of the longer-term costs of remote work have started to show.
This was what Willis and her boss Christopher Luxon have said they are worried about in the public service, which appears to have embraced flexible work with extra gusto.
Powerful forces
One reason for this may be the tendency for government jobs to pay lower wages than similar roles in the private sector. Flexible work is a free perk agencies can offer, instead of big pay.
If that is the case, public service chief executives should be able to make the case to the Government that WFH supports the capacity and productivity of the public sector.
Willis’ new guidelines do not come anywhere close to banning flexible work. They only require WFH arrangements to be negotiated on a case-by-case basis, and data to be collected.
The power dynamic between employees and employers has shifted dramatically over the past couple of years, so bosses who want to recall staff may be able to do so. But they shouldn’t expect them to come willingly, and should be conscious of the hit to morale that may occur.
Business owners in the precinct surrounding Parliament should also temper their expectations for a sudden public servant spending splurge.
These workers face wage restraints and deeply uncertain job prospects, as the Coalition prepares more cuts. Those who have mortgages will be paying high interest rates for another year or two, and it will be years before recent housing reforms lead to cheaper rentals.
Wellington’s appetite for discretionary spending has been bitterly curtailed.
It is unclear to what extent Willis has been motivated by wanting to rescue Wellington’s CBD, versus the explicit policy goals, but it has certainly inspired Auckland’s Soviets.
Viv Beck, chief executive of Auckland city centre business association Heart of the City, has joined the chorus calling on elected officials to force public servants to support central shops.
She told the NZ Herald that Auckland Council should ditch its flexible work policy, which allows WFH two days a week, and set an example for private businesses.
“It would make a positive difference if more people were back in the office,” she said.
As if guided by an invisible hand…
This sort of thinking completely misses the point of a market economy. Businesses are supposed to cater to the needs and wants of consumers, not the other way around.
If WFH is here to stay, and many experts think it is, then businesses will need to adapt to the new patterns of consumer behaviour and market prices will shift to accommodate them.
There is a half-serious joke in policy circles that every single problem stems from the housing shortage, and struggling CBD businesses are almost certainly another example.
Restrictive residential zoning rules have pushed urban workers further and further away from the central district, and made the option of skipping the commute more and more attractive.
This has meant more lifestyle spending has been happening in outer suburbs, and less in the expensive and inaccessible inner cities — this policy choice has been locked in forever.
Stuff’s report on WFH included quotes from several hospitality bosses who were expanding or relocating their Wellington CBD businesses into the suburbs.
It is tough for those who cannot shift, but that is the cruel reality of creative destruction.
Commercial property owners should take note: Rents are likely too high in many parts of these business districts, relative to reduced foot-traffic, and should be slashed.
This would make it much easier for businesses in these now less-desirable locations to compete on price and slowly rebuild the appeal that has been lost.
By all means, chief executives should call public servants back into the office if that looks like the way to build better teams — but don’t do it for the cafes and shoe shops.
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