The US economy has experienced a remarkable recovery from the 2020 covid-induced recession. The much-feared lasting effects of the pandemic have never materialized: employment, labor force participation, and GDP are once again in line with forecasts prior to the health crisis. We are still waiting to see if the House Republicans squander this achievement by pushing America into a wholly arbitrary debt crisis. But today I thought I’d take a break from the stress and talk about something important where the US economy is doing even better than the usual numbers suggest. One positive aspect of the coronavirus crisis has been a major shift in the way Americans work: We now spend less time and resources commuting to and from work.
A few days ago, my colleague Fahrad Manjoo was writing an article about the benefits of reduced commuting that inspired me to dig deeper. Although it has its drawbacks, the move to remote and hybrid work is, overall, a very good thing even if Elon Musk hates it (or maybe especially if he hates it).
The switch to teleworking is also a very didactic moment, in two ways at least. First, it offers a practical lesson in the fact that taking advantage of new technological possibilities often requires major changes in how companies operate. Second, it reminds us that economic numbers like GDP, while useful, can sometimes be misleading indicators of what really matters in life.
First things first: reducing commute time is serious business. Before the pandemic, the average American adult spent about 0.28 hours a day, or more than 100 hours a year, on work-related commutes. (Since not all adults work, the number for those who do was considerably higher.) By 2021, that time had been cut by around a quarter.
Attributing a dollar value to the benefits of this reduction is complicated. It is not enough to multiply the time saved by the average salary, because it is likely that people do not consider the time spent on the road (yes, most people drive to work) as totally wasted. On the other hand, there are many other expenses, from fuel to vehicle wear and tear and the psychological strain associated with commuting to work. And a third consideration: the option of telecommuting or hybrid work is usually within the reach of workers with a high level of education who receive above-average salaries and, therefore, with a high value associated with their time.
However, it is not difficult to argue that the global benefits of not commuting every day are equivalent to a gain in national income of at least one percentage point, and perhaps several. This is a lot: there are very few proposals for measures capable of producing benefits of this magnitude. And yes, the benefits are real. CEOs can rail against lazy or (according to Musk) “immoral” workers who don’t want to go back to their cubicles, but the purpose of an economy is not to make bosses happy.
What is interesting is that this transformation in the way many Americans work has not been driven by new technologies. It wouldn’t have been possible if many people didn’t have fast internet connections, but the big increase in home broadband took place between 2000 and 2010, then leveled off. Companies only learned to take advantage of the technological possibility of teleworking under the pressure of the pandemic.
The point is that, while the economy of the pandemic is behind us, the change in the way of working seems to be permanent. Overall, telecommuting seems like a classic example of a fledgling industry: uncompetitive at first, then gets a temporary boost (usually provided by tariffs or subsidies, but in this case a virus), learns by doing, and keeps going. remaining competitive even after the stimulus is removed.
If the rise of telecommuting ends up being indefinite, it will have profound economic repercussions, with some losers (such as commercial real estate and many cities’ tax bases) but many winners. However, what it will not do is manifest itself in the form of an increase in nominal GDP; the time Americans spend in traffic is not subtracted from national income, and the time spent with their families is not added.
I am not one of those detractors of the GDP who affirm that it is a useless number; it is an informative statistic and is not easy to substitute. But it can be misleading when societies opt for something different. Anyone who makes international comparisons knows that the United States has a GDP per capita higher than that of European countries, but that a large part of the difference does not reflect higher productivity; it reflects the fact that Europeans have a lot of holidays, while we are the “country without holidays”. So are we better? Are you sure?
Currently we see great benefits in households that are not reflected in GDP. It is true that these gains accrue mainly to workers with higher incomes, which is deplorable. However, there have also been significant pay increases at the bottom echelon, and that mitigates the injustice somewhat. One implication is that if we look at what an economy is for—namely, to meet human needs, not to generate favorable statistics—the United States’ recovery from the pandemic has been even more impressive than you might imagine.
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