We Did it To Ourselves – Again!

GDP fell to a -1.4% in the first Quarter and is projected to be a modest 1.5% in Q2. That is with and +/- error margin of 1.23%. Two consecutive quarters with negative growth officially kicks off a recession. Covid lock downs killed our nation’s growth in 2020. The demand, or acquiesce, to work/life balance for our current labor force is doing it to us now. Thousands of executives across this land gave into the notion that they could cut workdays, add PTO, expand Work From Home (WFH) and increase wages without a falloff in productivity, units sold, timely deliveries or profits. To look at the current dip of GDP in the United States without factoring a willful drop in worker productivity is leaving our economy unprotected on the “blind side.”

It was folly to think there would be no downside to allowing the "work/life" brigade to set the terms of employment. Countless businesses articles have been written about the “hyper-productive” state of the WFH employee. Numerous companies and personal branders on LinkedIn grew their footprints touting this new way to work. If this super productive WFH and hybrid worker scenario were true, wouldn’t our economy see it in GDP? Wouldn’t we also see increased productivity in speed of delivery and lower costs? Are not those three economic factors the tangible results of higher productivity? What happened to this glorious transition to happier, healthier and more productive employees?

Everything was hunky dory until it was not and too many CEOs bought into the unproven labor reset. In the C-suites, it was all Jell-O shots and backslaps until we got our economic “report card” last month. Well, the downturn has arrived, and guess who will be hurt the most? That's right, the W2 worker, those very same WFH super producers. A recession always brings a reduction in jobs and a restriction on wages. The utopian chasing work/life balance crowd will have plenty of time to contemplate the life part of that equation because the work part will dry up if a recession looms. Maybe this downtime will give the work/life crowd the time to read about the goose that laid golden eggs.

United States has held a unique spot in the history of work. We were founded with freedom and capitalism firmly entrenched within our national psyche. The Revolutionary war was not just fought to throw off the tyranny of King George III, we battled to rid the colonies of the arrogance of crony "capitalism" as well. While the sun never set on the British Empire, crony English elites created some of the first Western "public-private" corporations. The Hudson Bay Company, the South Seas Trading Company and East India Company (made famous for its shiploads of crown sponsored tea dumped into the Boston Harbor) were all using special government dispensations and protections to exploit subjected colonists. Some of these companies, such as the Hudson Bay Company, were even bestowed nation-state status by the crowd including the powers to commit war on Americans, as long as the enemies were not Christians.

Taxation without representation was one of the rallying cries of the Revolutionary War. But equally unsettling was the colonies’ contempt for King George’s favoritism towards the monopolistic companies of the day. Cronyism flew in the face of the Adam Smith "free-hand" capitalism in the colonies and our freedom loving brothers and sisters aimed to rid the Americas of it. United States was not just an experiment of self government, it was a test of true capitalism. Growth minded work and limited taxation followed our independence until the early 20th century, when progressives Teddy Roosevelt and Woodrow Wilson introduced the greatest economy killers known to man, the unelected bureaucrats!

Since the early 20th century, these “learned” government elites lurked about the cracks and crevices of Washington DC attempting to pull and sway the economy with evermore elaborate systems of punishments and rewards. Adam Smith’s “free hand” was replaced by the heavy hand of government and that hand put a moist finger in the air every four to eight years to determine which direction the political winds were blowing. But try as they might, tipping the economic scale to favor one political outcome never eliminated the unattended consequences of that stated desire. Thomas Sowell nailed it when he said in A Conflict of Visions, regarding economic governance “There are no solutions. There are only trade-offs.”

The reason Sowell is correct in his assessment of political economics, and why the WFH movement is not producing the utopian dream of increased worker satisfaction equals increases productivity is that the movement was unnatural. It was born out of the necessity of draconian Covid lockdowns. Economics, like physics, is Newtonian. For ever action there is an equal and opposite reaction in the opposite direction. When this principle plays out naturally, the economic waves are minimal, and the economy seeks to get into a smooth equilibrium as quick as possible. When the elitist take the helm and manipulate the economy towards a political end, the disturbance can be tsunamic. Our GDP report card is simply telling us that the unnatural proliferation of “tricks and gimmicks” to entice people to work is simply not increasing productivity. The government elites need not even look at the private sector to learn this lesson, their own WFH departments are lagging in productivity as well. The IRS is currently sitting on simi trailers full of 2019 paper returns that their WFH employees have not touched. Hiring 10,000 additional WFH agents will not master that summit of backlog. But bless theirs and congresses’ hearts, it will not stop them from adding increased complications to our nation’s failed tax code.

Let me be clear, I am not saying that WFH does not have a place in our economy and will not grow to more prominence as time goes by. But, the growth needs to be organic, measured and perfected. Prior to Covid, the gig economy paired with technology was aiding the WFH movement. Large companies with offices around the world were also adapting to internal remote collaboration. But, in the B2B setting, WFH has been found wanting. Services, prices and support have all suffered under the WFH environment. If CEOs are not seeing this, or worse yet, ignoring the economic realities this drop in the productivity illuminates, believe me, their competitors are. It might just take a recession to shake companies from their ESG chasing and work/ life balance promoting agendas. This economic downturn might finally get our industry leaders talking about the need for the work/productivity balance that grew their companies in the first place. It is amazing how quickly businesses seem to forget what made them successful…