Latest / Trumponomics / Japan’s Difficult Choice Between Economy and Pandemic

Transcript

Japan’s Difficult Choice Between Economy and Pandemic · Trumponomics

• 0:02
  Speaker 1: There are five thousand, five hundred and forty one entrance
• 0:05
  Speaker 1: in this year's Games, a near record as the hostation
• 0:08
  Speaker 1: the Japanese enter last The Japanese have spent two billion
• 0:12
  Speaker 1: dollars to welcome their guests and other taxpayers can play
• 0:16
  Speaker 1: out laugh, Hello, and welcome to Stephanomics, the podcast that
• 0:27
  Speaker 1: brings the economy to you. Fifty seven years ago, Japan
• 0:31
  Speaker 1: was bursting with pride to be hosting the Olympic Games.
• 0:35
  Speaker 1: Now of the country wants them to go away, but
• 0:38
  Speaker 1: the government can't bear the thought of canceling because it
• 0:42
  Speaker 1: feels like an admission that they haven't beaten COVID nineteen.
• 0:46
  Speaker 1: This week, our Tokyo based economy reporter Yuko Takeo, has
• 0:50
  Speaker 1: a great piece for you, delving into the economics and
• 0:53
  Speaker 1: the politics of Tokyo one. Later on, I'll be asking
• 0:58
  Speaker 1: our France economy reporter will Horror been about that landmark
• 1:01
  Speaker 1: agreement which the G seven countries have supposedly reached to
• 1:05
  Speaker 1: extract more tax supposedly out of big multinationals. At the end,
• 1:09
  Speaker 1: I'm also going to play you part of a conversation
• 1:12
  Speaker 1: about the work from Home revolution with Stanford University professor
• 1:16
  Speaker 1: Nicholas Blue. He says it could worsen inequality in the workplace,
• 1:20
  Speaker 1: even as it also makes downtown apartments a bit more affordable.
• 1:25
  Speaker 1: So plenty to come, but first let's go to Tokyo.
• 1:45
  Speaker 1: This is a sound that the International Olympic Committee wants
• 1:48
  Speaker 1: you to hear over and over again. It's the theme
• 1:52
  Speaker 1: music that would play when athletes at the Tokyo Olympics
• 1:55
  Speaker 1: pick up their medals if the games go ahead, as
• 1:59
  Speaker 1: did he, I feel I can already hear the footsteps
• 2:06
  Speaker 1: of athletes making their way to Tokyo from overseas. There
• 2:10
  Speaker 1: are people asking why we're holding the Olympic and Paralympic
• 2:14
  Speaker 1: Games at a time like this, But I believe it's
• 2:17
  Speaker 1: precisely because we're in these difficult times that we should
• 2:20
  Speaker 1: hold the games. That's Japan's Olympic Minister say Ko Hashimoto,
• 2:28
  Speaker 1: who herself has competed in seven Games, first as a
• 2:31
  Speaker 1: speed skater, then as a cyclist. I was listening to
• 2:35
  Speaker 1: her speak in Ariak Arena in Tokyo Bay, one of
• 2:39
  Speaker 1: eight bleaming new venues built for the Games. She was,
• 2:42
  Speaker 1: therefore the unveiling of the award ceremony anthem. The medals
• 2:46
  Speaker 1: podium and the medal's trade, each item demonstrating Japan's tirelest
• 2:51
  Speaker 1: attention to detail and its government's dogged determination to press
• 2:55
  Speaker 1: ahead with the Games, come what may. It wasn't meant
• 3:09
  Speaker 1: to be this way. The International Olympic Committee as the
• 3:15
  Speaker 1: honor of announcing that the Games of the thirty second
• 3:18
  Speaker 1: Olympias in are awarded to the city of Tokyo. As
• 3:31
  Speaker 1: it was in four when the first Tokyo Olympics became
• 3:35
  Speaker 1: a springboard for Japan's emergence as a major manufacturing power,
• 3:39
  Speaker 1: the Games were expected to give the economy a helping hand.
• 3:44
  Speaker 1: A country battered by a massive earthquake, tsunami, and nuclear
• 3:49
  Speaker 1: disaster would use the event to drive its recovery. The
• 3:54
  Speaker 1: Olympics would also help the country attract forty million visitors
• 3:57
  Speaker 1: per year. That inbound tourism would help sustain shops, hotels,
• 4:02
  Speaker 1: and travel throughout Japan, or given the regions a boost
• 4:06
  Speaker 1: as they struggle with the effects of a declining and
• 4:09
  Speaker 1: aging population. June Cito, an economist at the Japan Center
• 4:14
  Speaker 1: for Economic Research, believes that Japan needs to attract more
• 4:18
  Speaker 1: foreigners over the longer term, both for the tourism sector
• 4:22
  Speaker 1: and make up for labor shortages in a declining, graying population.
• 4:28
  Speaker 1: Man trying to boost the economy by linking the goal
• 4:34
  Speaker 1: of forty million visitors to the Olympics wasn't at all
• 4:37
  Speaker 1: unreasonable looking at the momentum before the pandemic. All of
• 4:41
  Speaker 1: this is connected with what kind of legacy you're looking
• 4:43
  Speaker 1: to get from the Olympics. Still, the Games were never
• 4:51
  Speaker 1: expected to compete with the economic punching power of the
• 4:54
  Speaker 1: ninety four Olympics. Those games marked Japan's return to the
• 4:59
  Speaker 1: international on stage from the destruction of the World War.
• 5:03
  Speaker 1: A massive spending blitz built key parts of the capital's infrastructure,
• 5:08
  Speaker 1: including its bullet trains and the elevated highways that give
• 5:12
  Speaker 1: Tokyo it's blade runner look. That ambitious national project also
• 5:17
  Speaker 1: got Japan hooked on the concept of the debt financing
• 5:20
  Speaker 1: government bond. In the decades since then, that addiction has
• 5:25
  Speaker 1: left the country with the developed world's heaviest public debtload.
• 5:33
  Speaker 1: I'm gonna taking me out of capital green. I you
• 5:46
  Speaker 1: donder that's weightlifter setting a new world record defend off
• 5:53
  Speaker 1: US challenger Isaac Berger. And when Japan's first gold medal
• 5:58
  Speaker 1: at the nineteen sixty four Games. Now A sprightly eighty
• 6:02
  Speaker 1: one year old Miak recalls the mood, hinting that the
• 6:06
  Speaker 1: public may still rally round in support of the games.
• 6:10
  Speaker 1: You many sins over in Japan lost the war and
• 6:19
  Speaker 1: it was trying to recover. The Olympics came around in
• 6:22
  Speaker 1: nineteen sixty four and everyone was intent on making it
• 6:26
  Speaker 1: a success. It wasn't quite like that at first, but
• 6:31
  Speaker 1: as the Olympic came closer and closer, everyone started frying
• 6:35
  Speaker 1: the Olympic caras. By the time the game as it started,
• 6:40
  Speaker 1: the entire country was duped up in moment. Today coaches
• 6:50
  Speaker 1: the Tokyo International University weightlifting team. When I entered the
• 6:55
  Speaker 1: training room with him, dozens of young men and women
• 6:58
  Speaker 1: line up to offer greetings the back to the Olympic legend.
• 7:05
  Speaker 1: The room of sweat and toil fills the air. As
• 7:09
  Speaker 1: the students return to training. My ears are pounded by
• 7:12
  Speaker 1: their pries and shouts and the sound of multi colored
• 7:15
  Speaker 1: weights crashing into the ground. Among those pumping iron is
• 7:19
  Speaker 1: twenty four year old Massacuro Miyamoto. He has one member
• 7:23
  Speaker 1: of the team who's highly likely to qualify for the
• 7:26
  Speaker 1: Olympics this year. Like he's feeling uneasy over the page
• 7:30
  Speaker 1: of the Games. Well, I've been thinking about the Olympics
• 7:38
  Speaker 1: as long as I've been involved in sport, and I've
• 7:41
  Speaker 1: always want to be a part of it. If the
• 7:43
  Speaker 1: Games get canceled now, then everything I've dedicated myself to
• 7:48
  Speaker 1: who have been for nothing. It's not only some athletes
• 7:58
  Speaker 1: who are hoping the Games will go. For Prime Minister
• 8:01
  Speaker 1: Yoshihida Sugar, staging the Olympics could be a prerequisite for
• 8:05
  Speaker 1: holding onto the pattern as Japan's leader. Eugi Zaka, an
• 8:11
  Speaker 1: academic at Narrow Women's University, has spent his career researching
• 8:15
  Speaker 1: the Olympics. He says that for Japan's leaders, there's no
• 8:20
  Speaker 1: political upside from a cancelation, even with public opinion against
• 8:24
  Speaker 1: holding the games. Because the scrapped Olympics would symbolize the
• 8:28
  Speaker 1: government's failure to contain COVID nineteen, Staging the Olympics is
• 8:37
  Speaker 1: tantamount to having the virus under control. Together with getting
• 8:41
  Speaker 1: the vaccines distributed faster, this could end up being a
• 8:44
  Speaker 1: plus point for the administration. Holding the Olympics has in
• 8:48
  Speaker 1: a sense become a lifeline for the government, and that's
• 8:51
  Speaker 1: why they can't cancel that ditching the Games would all
• 9:00
  Speaker 1: to be bad for an economy that's already teetering on
• 9:02
  Speaker 1: the brink of a double deprocession on the emergency restrictions,
• 9:07
  Speaker 1: But staging the Games comes with obvious risks too. Bringing
• 9:12
  Speaker 1: seventy eight thousand people to Japan from around the world
• 9:15
  Speaker 1: could turn the Games into a super spread event that
• 9:19
  Speaker 1: could have a greater cost for the economy in addition
• 9:22
  Speaker 1: to the human consequences. One reason why many corporate leaders
• 9:26
  Speaker 1: have joined medical professionals in calling for a cancelation. With
• 9:32
  Speaker 1: little more than six weeks ago, the national consensus in
• 9:36
  Speaker 1: favor of the games lies in pieces chattered by the pandemic.
• 9:41
  Speaker 1: Even Mia, our gold medal hero from four acknowledges that
• 9:47
  Speaker 1: a late surge of support has yet to arrive. For
• 9:51
  Speaker 1: what you can do compre how people feel. But the people,
• 10:00
  Speaker 1: our citizens, even my friends and really in that one
• 10:04
  Speaker 1: in big commodity. Yet I do say as that they
• 10:10
  Speaker 1: talk yoga, coredent's, they talk your clus Now there's a
• 10:22
  Speaker 1: nerdy topic which we've come back to a few times
• 10:25
  Speaker 1: on this podcast, that actually made it to prime time
• 10:29
  Speaker 1: news this weekend when G seven finance ministers agreed on
• 10:32
  Speaker 1: a deal to charge a global minimum tax on the
• 10:35
  Speaker 1: profits of big companies, so I think it's it's only fair.
• 10:38
  Speaker 1: We get the low down on this from Bloomberg's France
• 10:40
  Speaker 1: economy reporter William Horribin, who has been dutifully following this
• 10:44
  Speaker 1: story from the beginning. Will and then we have we
• 10:47
  Speaker 1: have a few other things to talk about today. But
• 10:49
  Speaker 1: let me ask you about all the headlines that we
• 10:51
  Speaker 1: saw at the weekend tax on on these big global companies.
• 10:57
  Speaker 1: Does that mean that companies like Google aren't going to
• 11:02
  Speaker 1: be able to do all these kind of fancy avoidance
• 11:04
  Speaker 1: operations anymore and end up paying no tax anywhere? I
• 11:07
  Speaker 1: guess the short answer is yes, they're not going to
• 11:11
  Speaker 1: be They're not going to be able to do those
• 11:15
  Speaker 1: things anymore. Um. But what was really significant about what
• 11:19
  Speaker 1: happened happened at the G seven was in some ways
• 11:22
  Speaker 1: more political than technical. There is there's some detail in
• 11:26
  Speaker 1: the in the final communicator that they've put down on paper, um,
• 11:29
  Speaker 1: But what it actually happened is that they've resolved a
• 11:32
  Speaker 1: major divide between Europe and the US on who gets
• 11:36
  Speaker 1: to tax the multinationals, how we share out the spoils
• 11:39
  Speaker 1: of globalization if you like. Um, and if we remember
• 11:43
  Speaker 1: that Trump always used to say his stance was America,
• 11:47
  Speaker 1: America taxes it's companies, not anyone else. And europe response
• 11:52
  Speaker 1: was like, how on a second. These are huge up,
• 11:54
  Speaker 1: they have huge operations in our country. They're relying on
• 11:57
  Speaker 1: our infrastructure, our people. Um, but they're not paying any
• 12:01
  Speaker 1: tax here and we want a slice of that pie.
• 12:03
  Speaker 1: So what happens at the G seven this weekend is
• 12:06
  Speaker 1: that everyone sort of recognizes, Okay, these multinationals, they need
• 12:10
  Speaker 1: to pay more in the places where more of the
• 12:13
  Speaker 1: tax that they do already pay in the places where
• 12:15
  Speaker 1: they're actually doing business. Um. So the home countries, if say,
• 12:19
  Speaker 1: for Google, for the US, need to share out some
• 12:22
  Speaker 1: of the rights to tax the profits of Google. And
• 12:26
  Speaker 1: it's worth pausing for a second there, because what they
• 12:29
  Speaker 1: have essentially agreed to is to let other governments tax
• 12:32
  Speaker 1: their companies instead of them. And conceptually, even even materially,
• 12:38
  Speaker 1: this may not be huge, but conceptually that's a that's
• 12:40
  Speaker 1: a huge breakthrough. And for the purpose of these years
• 12:43
  Speaker 1: long negotiations that have been happening at the o c
• 12:47
  Speaker 1: D is also key. You know, people at the o
• 12:49
  Speaker 1: c D always said, we're doing all this technical work
• 12:52
  Speaker 1: on lots of the nitty gritty of how to rewrite
• 12:54
  Speaker 1: tax legislation around the world, But what really, what really
• 12:58
  Speaker 1: has blocked us is this agreement on this willingness to
• 13:02
  Speaker 1: share out right to tax companies. And once that's resolved,
• 13:05
  Speaker 1: they've always said, the rest will just flow from that.
• 13:08
  Speaker 1: On the face of it, it seems surprising that the
• 13:10
  Speaker 1: US would be willing to give up that right. They've
• 13:13
  Speaker 1: produced this big, these big, successful global companies. Surely you want,
• 13:18
  Speaker 1: if you're the US, you want to keep as many
• 13:20
  Speaker 1: of those tax revenues to yourself as you can. Well,
• 13:23
  Speaker 1: there's there's various elements to how to respond to that,
• 13:27
  Speaker 1: and why the US has shifted, the simplest way of
• 13:30
  Speaker 1: putting it is that they've realized that if they want
• 13:33
  Speaker 1: to get what they want, they've they've got to cooperate,
• 13:37
  Speaker 1: and we've got to have a system that is stable
• 13:39
  Speaker 1: to some extent, rather than lots of people threatening each
• 13:42
  Speaker 1: other with tariffs or putting in place taxes on the
• 13:46
  Speaker 1: revenue of American companies all around the world. Um. So
• 13:51
  Speaker 1: it's that sort of this moment that you realize, you know,
• 13:54
  Speaker 1: these countries all countries around the world perhaps have been
• 13:58
  Speaker 1: competing on the basis of tax, and in some ways,
• 14:01
  Speaker 1: you know, they've decided actually with probably in our interesting
• 14:05
  Speaker 1: we become more of a cartel and so then we
• 14:07
  Speaker 1: can start getting what we want. And what the US
• 14:10
  Speaker 1: really wants is the minimum tax part of this deal,
• 14:14
  Speaker 1: so that companies are not sort of going off to
• 14:16
  Speaker 1: tax havents and that they can make sure that they
• 14:21
  Speaker 1: pay their fair share, and that the US isn't isn't
• 14:24
  Speaker 1: losing tax revenues all around the world. And that's that's
• 14:27
  Speaker 1: that's that minimum tax part of the deal is really
• 14:30
  Speaker 1: that is read the thing that rather than sharing out
• 14:32
  Speaker 1: the pie differently, it's a question of making a much
• 14:34
  Speaker 1: bigger pie for government to be able to fund all
• 14:38
  Speaker 1: the spending that they need to do in the wake
• 14:40
  Speaker 1: of the COVID pandemic. And I noticed, and we can't
• 14:42
  Speaker 1: afford too much time on this, but I noticed that
• 14:44
  Speaker 1: there had been this sticking point and it had come
• 14:46
  Speaker 1: up the last time I spoke to you. Around Amazon,
• 14:48
  Speaker 1: there's been a lot of focus on which are the
• 14:51
  Speaker 1: companies that will have this sort of sharing of revenues
• 14:56
  Speaker 1: across countries was going to be just the big companies
• 14:58
  Speaker 1: that have lots of profit. An Amazon, it's that frustrating
• 15:01
  Speaker 1: thing that although it sells an enormous amount in every country,
• 15:04
  Speaker 1: it seems to have quite a low profit margin. So
• 15:07
  Speaker 1: what's going to happen specifically with Amazon. Well, yeah, as
• 15:11
  Speaker 1: as you say the Amazon, it would be it would
• 15:14
  Speaker 1: be sort of crazy to create a global tax system
• 15:17
  Speaker 1: and then say, oh, by the way, Amazon isn't part
• 15:19
  Speaker 1: of this. It just wouldn't make any sense to people
• 15:22
  Speaker 1: who are pushing for such a change of the system.
• 15:27
  Speaker 1: So what they've got to do is find a way,
• 15:30
  Speaker 1: and they're still working on this, is find a way
• 15:32
  Speaker 1: of hitting a target without aiming for it. So they've
• 15:35
  Speaker 1: got to they've got to score a goal. An Amazon tax. Yeah,
• 15:39
  Speaker 1: they can't call it Amazon tax because otherwise that opens
• 15:42
  Speaker 1: up all the problems about taxing digital companies or targeting
• 15:46
  Speaker 1: certain things. So they're working on a way of of
• 15:50
  Speaker 1: potentially chopping up conceptually Amazon operations so that they can
• 15:55
  Speaker 1: find bits that are really profitable and say, right, we
• 15:57
  Speaker 1: can share out some of that profit for taxing purposes.
• 16:00
  Speaker 1: It's technically tricky because you open a can of worms
• 16:04
  Speaker 1: that they thought they had closed. We have these G sevens.
• 16:13
  Speaker 1: I always wondered why G seven still existed once they
• 16:16
  Speaker 1: created the G twenty, because the G seven is quite
• 16:18
  Speaker 1: a sort of old fashioned group of companies. We've got
• 16:20
  Speaker 1: the big the Heads of Government summit coming in Cornwall
• 16:23
  Speaker 1: this weekend, but when you look at the countries around
• 16:27
  Speaker 1: the table, it's it's most of the sort of new
• 16:30
  Speaker 1: world is not represented. Obviously, they can't just carve up
• 16:35
  Speaker 1: all these text revenues just for themselves. It's just not
• 16:37
  Speaker 1: not a very good look. So how is this going
• 16:39
  Speaker 1: to get sold to the rest of the world. How
• 16:41
  Speaker 1: are we going to how is it going to get
• 16:43
  Speaker 1: more sort of global buying. I think that the point
• 16:48
  Speaker 1: we made right the start that actually what's happened at
• 16:51
  Speaker 1: the G seven they resolved disagreement between the US and Europe,
• 16:56
  Speaker 1: and so once that's done, they the rest of what
• 17:01
  Speaker 1: is agreed at the G seven is actually leaves a
• 17:04
  Speaker 1: considered all amount of margin for everyone else to start
• 17:06
  Speaker 1: working on how to resolve how to find solutions to
• 17:09
  Speaker 1: their problems with this deal. The key really is that
• 17:11
  Speaker 1: G seven has lifted a problem that it had within itself,
• 17:15
  Speaker 1: and so now we can get down to really working
• 17:17
  Speaker 1: on all the exceedingly complicated issues that flow from and
• 17:23
  Speaker 1: I noticed there's some of the issues that have to
• 17:25
  Speaker 1: be resolved pretty big, like how do you define profits?
• 17:28
  Speaker 1: I mean that seems to be there'll be a lot
• 17:29
  Speaker 1: of accountants waiting to hear how they define so that
• 17:32
  Speaker 1: they can quickly find a way around it. Yeah, yeah, absolutely. Well,
• 17:36
  Speaker 1: the reassuring thing is that the O a CD has
• 17:38
  Speaker 1: been working on all these things for years, right, so
• 17:40
  Speaker 1: they've they've got it all sort of lined up to
• 17:42
  Speaker 1: go and they but it doesn't mean it's not complicated.
• 17:45
  Speaker 1: But a lot of their work has already been done.
• 17:48
  Speaker 1: And also there's a sort of there's a big global
• 17:51
  Speaker 1: shift going on, and that is that actually everyone wants
• 17:55
  Speaker 1: a deal, even even the big tech firms. Right. What
• 17:58
  Speaker 1: they want is some kind of stable mechanis and they
• 18:00
  Speaker 1: don't want to be hit by tariffs or or very
• 18:03
  Speaker 1: unilateral punitive taxes and different countries. And they think they
• 18:07
  Speaker 1: also recognize and from from a more political perspective, all
• 18:11
  Speaker 1: the governments realize that they have to make this work
• 18:14
  Speaker 1: because they're at the point where they they need to
• 18:16
  Speaker 1: end the race at the bottom because they don't want
• 18:18
  Speaker 1: to they need the money. They need money to be
• 18:20
  Speaker 1: able to invest in their economies. But also they want
• 18:23
  Speaker 1: to be able to sell the notion of globalization to
• 18:27
  Speaker 1: the middle classes and and and show that they are
• 18:30
  Speaker 1: taking back power from from the winners of globalization. And
• 18:34
  Speaker 1: to do that they've got to they've got to make
• 18:35
  Speaker 1: this work and keep the keep the accountants at bay,
• 18:38
  Speaker 1: if you like. So. I can't help thinking that we
• 18:40
  Speaker 1: will be returning to you at some point in the
• 18:41
  Speaker 1: next few months for the next exciting installment of the
• 18:44
  Speaker 1: definition of global profit for the corporate minimum tax. But
• 18:48
  Speaker 1: it is actually as you suggest, there's a lot of
• 18:50
  Speaker 1: money involved. It's quite an important point of principle about
• 18:53
  Speaker 1: whether you can make the global economy work work better.
• 18:57
  Speaker 1: Will horrorb and thank you very much, Thank you, Sephanie.
• 19:00
  Speaker 1: Thanks now. If you think of all the changes called
• 19:09
  Speaker 1: by the pandemic, one that does seem to be here
• 19:11
  Speaker 1: to stay is working from home. Companies such as Vanguard
• 19:15
  Speaker 1: Group and Ford Motor Company are permanently adopting what they
• 19:18
  Speaker 1: call hybrid work schedules. Employee spend some of the week
• 19:22
  Speaker 1: at home and the rest of an office. But what's
• 19:24
  Speaker 1: it going to mean for the rest of the economy?
• 19:27
  Speaker 1: While Stanford University economist Nicholas Blue has been researching the
• 19:31
  Speaker 1: impact of remote working for years, sin since COVID hit,
• 19:34
  Speaker 1: he's become the go to expert on working from home.
• 19:38
  Speaker 1: He's also co director of the Productivity, Innovation and Entrepreneurship
• 19:42
  Speaker 1: Program at the National Bureau of Economic Research, and he
• 19:45
  Speaker 1: spent the last year surveying tens of thousands of US
• 19:49
  Speaker 1: firms and employees, asking them about their post pandemic work arrangements.
• 19:54
  Speaker 1: US economy reporter Olivia Rockman went to talk to Bloom
• 19:57
  Speaker 1: about the results of that survey and working paper he's
• 20:01
  Speaker 1: just published, co author with his colleague Argent Romany. It's
• 20:05
  Speaker 1: pretty interesting stuff. Here's just a taste of their conversation.
• 20:09
  Speaker 1: It looks like the suburbs of large cities are the
• 20:12
  Speaker 1: hottest property markets. It's kind of odd that Central New
• 20:15
  Speaker 1: York has done really badly, but the suburbs of New
• 20:19
  Speaker 1: York had dined incredibly well. And then places further away
• 20:23
  Speaker 1: still like if you go to you know, very very
• 20:25
  Speaker 1: upstate New York. I'm thinking like Topeka, Kansas, or you know, Tulsa, Oklahoma,
• 20:30
  Speaker 1: or Hawaii, or you know, Mississippi or Alaska have done fine.
• 20:35
  Speaker 1: Because the whole U. S. Housing market is it's not
• 20:37
  Speaker 1: like they've exploded, so we think of this is all
• 20:40
  Speaker 1: due to the move to hybrid. So the vast majority
• 20:44
  Speaker 1: kind of sevent firms I've talked, you know, and you
• 20:47
  Speaker 1: see it in all the server data, I'm moving to hybrid,
• 20:49
  Speaker 1: whereby basically most big American firms telling people post pandemic,
• 20:54
  Speaker 1: when you come back, you're going to be coming back
• 20:56
  Speaker 1: probably three days a week typically, and if you grow
• 21:00
  Speaker 1: up from home two days a week, it makes it
• 21:02
  Speaker 1: more appealing to live out in the suburbs. It should
• 21:04
  Speaker 1: be clear that this is only half of people US.
• 21:06
  Speaker 1: Half of people, typically university grads, is going to go hybrid.
• 21:10
  Speaker 1: The other half but still, you know, on the business
• 21:12
  Speaker 1: premises every day because they're doing more physical manual jobs
• 21:15
  Speaker 1: than meeting customers, etcetera. UM, the richer educated half of
• 21:20
  Speaker 1: mostly the people buying houses. So that's why that's really
• 21:23
  Speaker 1: impactful for real estate. These folks are moving out. The
• 21:27
  Speaker 1: question as to what the long and impact will be,
• 21:31
  Speaker 1: I personally think it's actually maybe positive. It's not. It's
• 21:36
  Speaker 1: certainly not obviously negative. So to put it in context,
• 21:39
  Speaker 1: the center of American cities have had a forty year boom,
• 21:44
  Speaker 1: so from about to two thousand and nineteen they've been
• 21:47
  Speaker 1: on a continuous upward swing. And so what's happened is
• 21:51
  Speaker 1: COVID is probably unwound, maybe ten to twenty years of that,
• 21:54
  Speaker 1: but you know, probably no more. So you can think
• 21:57
  Speaker 1: of city centers relatively going to be the still worse
• 22:00
  Speaker 1: in two thousand and five, which is expensive, but that
• 22:05
  Speaker 1: gap has narrowed a little bit. You know, as an economist,
• 22:08
  Speaker 1: it's pretty clear the adjustment it's going to be on
• 22:10
  Speaker 1: many margins, maybe some bohemiums, maybe more artists will come
• 22:14
  Speaker 1: back from the city centers, folks that are driven out.
• 22:16
  Speaker 1: In fact, maybe people that need to work on the
• 22:21
  Speaker 1: business premises five days a week that were priced out,
• 22:23
  Speaker 1: but actually the very people that should be living in
• 22:26
  Speaker 1: the city centers for return. There was a mention in
• 22:28
  Speaker 1: one of your papers about promotions, and I wonder how
• 22:33
  Speaker 1: some of this ends up, you know, making it harder
• 22:36
  Speaker 1: for some people to to move up, especially let's say,
• 22:38
  Speaker 1: if there's a parent that decides to work from home
• 22:40
  Speaker 1: five days a week. Yeah, you know, I think you
• 22:44
  Speaker 1: know what so this this kind of to managerial decisions.
• 22:47
  Speaker 1: One is what to do post pandemic, and I would
• 22:50
  Speaker 1: say most firms have gone to hybrid, and that seems
• 22:53
  Speaker 1: like yesterday's decision quite frankly. So sure. But then the
• 22:56
  Speaker 1: big issue is on choice and do you set the
• 22:59
  Speaker 1: thing right at the top the firm what you said,
• 23:01
  Speaker 1: it right at the bottom and let people choose. I've
• 23:03
  Speaker 1: been against setting at the bottom because I think choice
• 23:05
  Speaker 1: is actually problematic for three reasons. The first to are
• 23:10
  Speaker 1: quick and kind of obvious. What is mixed mode doesn't
• 23:12
  Speaker 1: work very well. So when some people in the office
• 23:15
  Speaker 1: and summer our home, it just leads to a kind
• 23:17
  Speaker 1: of in and an outgroup. So even if evan in
• 23:19
  Speaker 1: the office joins meetings, you know on their own zoom screen,
• 23:22
  Speaker 1: you know, as soon as the meetings over, they get
• 23:23
  Speaker 1: up and go chat. So people are home until left out,
• 23:27
  Speaker 1: and that's almost impossible to deal with. There's a second
• 23:30
  Speaker 1: issue about if you let people choose. People say that
• 23:34
  Speaker 1: of their two days they work at home, it will
• 23:37
  Speaker 1: be a Wednesday and it will be a Friday. So
• 23:40
  Speaker 1: if you let people choose, you're going to find the
• 23:42
  Speaker 1: office crushed on the Wednesday and empty on It is
• 23:45
  Speaker 1: like tumbleweed blowing through on the Friday, so it's very
• 23:47
  Speaker 1: inefficient and office space. And then the final reason that
• 23:51
  Speaker 1: I'm against choice is the one you raise, which is
• 23:54
  Speaker 1: the most subtle, but it's maybe the most pernicials, which
• 23:56
  Speaker 1: is they're kind of the two facts us knowing. One
• 23:59
  Speaker 1: is who who would choose to work from home? In
• 24:02
  Speaker 1: our survey we ask people what would you how many
• 24:04
  Speaker 1: days a week would you like to work from home?
• 24:06
  Speaker 1: Post pandemic? And if you look at amongst college graduates,
• 24:09
  Speaker 1: which is well but over half of our workforce, and
• 24:13
  Speaker 1: you look at people with children under the age of twelve,
• 24:15
  Speaker 1: always said more women than men choose to work from
• 24:18
  Speaker 1: home five days a week. And yeah, that so already
• 24:23
  Speaker 1: amongst graduates with the young kids, there's a big gender
• 24:26
  Speaker 1: dividers to who would choose to work from home five
• 24:29
  Speaker 1: days a week. You hear it for people that disabled
• 24:32
  Speaker 1: people are living far out, etcetera. A group of people
• 24:35
  Speaker 1: who have given the choice to choose, you know, for
• 24:37
  Speaker 1: quite very logical and sensible reasons to work from home
• 24:40
  Speaker 1: more days. So that seems totally sensible. The problem is
• 24:43
  Speaker 1: the second factors. If you look in the data and
• 24:46
  Speaker 1: working from home in a team where there are other
• 24:48
  Speaker 1: people coming into the office is extremely costly in promotion.
• 24:53
  Speaker 1: So if you let people choose my theories, in some
• 24:55
  Speaker 1: ways the biggest cost in the long run, all the
• 24:58
  Speaker 1: single young men coming five days a week. College educated
• 25:02
  Speaker 1: women with a six year old and an eight year
• 25:03
  Speaker 1: old maybe come in two days a week and six
• 25:06
  Speaker 1: seven years down the road. There's a huge different in
• 25:09
  Speaker 1: promotion rates. And you know, you have a diversity crisis.
• 25:12
  Speaker 1: And honestly, for companies, you have it like a legal
• 25:14
  Speaker 1: mind field of why justifiable lawsuits. I mean, you know,
• 25:19
  Speaker 1: you would look at the data and you'd see lo
• 25:20
  Speaker 1: and behold, you've got a gender divide in promotion, a
• 25:23
  Speaker 1: disability divide in promotion, maybe an income divicer's wealthy people
• 25:27
  Speaker 1: live near you know stuff that's just the nightmare for companies.
• 25:30
  Speaker 1: So I have been advising that firms should probably harmonize
• 25:34
  Speaker 1: across the firm how many days people were from home,
• 25:37
  Speaker 1: and try and harmonize which days is in each team
• 25:42
  Speaker 1: in terms of you know, people sacrifices that they're willing
• 25:46
  Speaker 1: to make for flexibility. Did you did you serve anyone
• 25:50
  Speaker 1: about that, Like, oh, I would be willing to take
• 25:52
  Speaker 1: a pig cut for a hybrid model yes, so we
• 25:56
  Speaker 1: we've I have really good data on this, So we
• 25:59
  Speaker 1: servey people a parish pandemic. If you're allowed to work
• 26:03
  Speaker 1: from him two days a week, would that would you
• 26:05
  Speaker 1: be positive? Neutral? Negative? Then if you're either positive or negative,
• 26:08
  Speaker 1: we ask how much would that be equivalent to in
• 26:10
  Speaker 1: terms of your current salary? And you tell your average
• 26:13
  Speaker 1: across everyone and you get plus and I've done the
• 26:17
  Speaker 1: same seven that you catch is that they come out
• 26:18
  Speaker 1: there six. So basically people value being able to work
• 26:22
  Speaker 1: from home to two days a week at something like
• 26:24
  Speaker 1: six of salary. So you can think of it as
• 26:28
  Speaker 1: equivalent probably to a pension plan or a kind of
• 26:30
  Speaker 1: a mean healthcare plan. That raises why this is a
• 26:33
  Speaker 1: bit of an inequality issue. Another management change is only
• 26:37
  Speaker 1: half your employees get this, nearer half don't, and the
• 26:39
  Speaker 1: half they get this are typically the higher earning, better
• 26:42
  Speaker 1: educated half that mostly have had a better pandemics have
• 26:45
  Speaker 1: worked home. Well, that's it for this episode of Stephanomics.
• 26:54
  Speaker 1: All be back next week with a lot more from
• 26:56
  Speaker 1: around the world. This episode was produced by Magnus Hendrick
• 27:00
  Speaker 1: and the segment on the Tokyo Olympics was written by
• 27:03
  Speaker 1: Yuko Takeo and edited by Paul Jackson. Metic special thanks
• 27:07
  Speaker 1: also to William Horrabin, Olivia Rockman, and Professor Nicholas Blue.
• 27:11
  Speaker 1: Mike Sasso is executive producer of Stephanomics and the head
• 27:15
  Speaker 1: of Bluebird Podcasts is Francesco leaving h