Episode 4: Shifting balance, shifting priorities: Where work goes next

Transcript: Season 2 Episode 4: Shifting balance, shifting priorities: Where work goes next

Disclosure: The opinions expressed by Eurasia Group analysts in this podcast episode are their own, and may differ from those of Citigroup Inc and its affiliates.

Ida Liu: I think it's estimated that roughly 35% of the workforce relied on a gig job for primary or secondary income last year, which is double what it used to be just five years ago. I mean, this makes sense, especially as the workforce recently experienced a major shift in preference to more flexible working arrangements

Alex Kazan: 4.3 million people in the US quit their jobs in August. That's astronomical. It's not only the most on record, but it represents 3% of the total workforce. So what that means is that employers not only need to compete for finding new workers, but they have to be competing to keep existing ones from leaving.

Caitlin Dean: Welcome to Living Beyond Borders, the podcast from Citi Private Bank and GZERO Media that examines the risks and opportunities in our rapidly changing world—from global politics to economics—and what it all means for you.

I’m Caitlin Dean, Head of the Geostrategy Practice at Eurasia Group.

In early 2020, life as we knew it came to a grinding halt almost everywhere. While many essential workers bravely donned protective gear and headed to the front lines of the pandemic, millions more went from this....

[Traffic SFX]

To this...

[Zoom video: Can you say that again you were kind of going out…

Can you hear me now?

Yes yes we hear you

Mute yourself

I don’t know how to remove it, I’m trying to…]

But the truth is, work has been constantly evolving. The pandemic may have accelerated some shifts and trends that were already coming. But what will remain if and when we return to “normal”? Which changes we’ve experienced are temporary and which ones are here to stay?

Here to talk about the future of work are Ida Liu, Global Head of Private Banking at Citi Global Wealth, and Alexander Kazan, Chief Commercial Officer at Eurasia Group. Hello to you both.

Ida Liu: Hi Caitlin. It's great to be with you.

Alex Kazan: Thanks Caitlin. Very good to be here.

Caitlin Dean: So Ida, before we get into the specifics of how work has changed, let's talk about where we are now in the employment picture, starting with the United States. We've heard that in many sectors, employment has rebounded and that a lot of employers are even desperately looking for workers, but there are still many people unemployed. So what competing forces are you seeing in the labor market right now?

Ida Liu: Caitlin it's wonderful to be having this conversation with you and Alex. We know that fighting unemployment is a national priority. Obviously many of J. Powell's recent speeches have hit on the journey to maximum employment. Albeit it may be a long one. The Fed, however, seems to be setting policies with that goal in mind. In Powell's August 27 speech from Jackson Hole, he said to sum it up, "The baseline outlook for the continued progress is towards maximum employment."

So it is very fortunate that unemployment has been declining reaching 4.8% last month, but we're still recovering from the upset resulting from the pandemic. Job generation while strong - many companies did in fact boom in the past year and a half -but this does not entirely outweigh however, the millions of discouraged workers who've lost their businesses or jobs because of pandemic-related closings, and those who do not feel it's safe to return to work given COVID.

And very importantly, women have been disproportionately impacted throughout the pandemic as they often bear the burden of added responsibilities in their personal lives through childcare, care of elderly family members or others. And ultimately, while job creation is on the rise and unemployment looks to be improving, we still have a lot of progress to make for all Americans.

Caitlin Dean: Alex, are these trends relatively similar from a global perspective?

Alex Kazan: You know, they are. We see a lot of similar stories to the one that Ida just told about the US in different places around the world. I think that's especially true in other developed markets in Europe, the UK and Australia, where basically we've seen that labor force participation declined quite a bit during the pandemic and it's not really fully recovered.

We're also seeing labor shortages in some areas as we see in the US, and there's a risk that that contributes to supply side risks to economic recovery. And in a lot of emerging markets and Brazil is just one among many examples here, we saw very large declines in labor force participation during the worst days of the pandemic. And we've only seen a partial recovery so far. But I think beyond the labor market data and statistics, it's really important to look at this globally in this context of very uneven economic recovery around the world, which is really reflecting the still very unequal vaccine distribution.

It's remarkable when you look at the statistics on global vaccine distribution, about 80% of shots worldwide have come in higher income countries and less than 1% of doses have come in in low-income countries. Less than 1%. I mean, when you say that and look at it on the page, it's pretty shocking. So while all of that may not be reflected in official data on unemployment in the labor market, it's pretty clear that in most of the developing world, workers are still facing very large health-related challenges and risks.

Caitlin Dean: So Alex, we've been talking about the changing nature of work for quite some time now, even pre COVID. But to what extent did the pandemic accelerate existing trends that we had already started to see? And to what extent did it really change the course of how and where, and even why we work?

Alex Kazan: That's a great question Caitlin. I think the answer here is really both or some version of it depends. Very clearly, a number of existing trends that were in place in the workforce I think were accelerated. And a great example of that is the use of technology for remote working, for added productivity, things like that. Very clearly, all the tools that we had been using during the pandemic existed before the pandemic, but there was still a lot of hesitancy about adoption. We've had this very widespread, very rapid adoption of these proof of concept and now we're in a very, very different discussion about the utility of remote working, who it can apply to, when it's appropriate, et cetera.

So I think that's a very clear example where you got probably five to 10 years of the trend accelerated or compressed into one year, as a result of many of us professional workers at least, being forced to figure out ways to work from home with the inability to travel and go into the office.

I think there's some trends that it's probably going to force some reassessment. I think business travel is a big one, right? A lot of us are really itching to get back on the road, but I think there will be a reassessment of when it's appropriate. So when we do it, how long we travel and for what purposes. So we could go on, there's a lot of examples but for me, those are two big ones.

Caitlin Dean: And we're hearing a lot about the new normal or the new normal ways that we work. So what are some of the biggest ways that you think work has shifted in the last year and what do you think is likely to continue?

Alex Kazan: Most obvious here of course is the widespread adoption and normalization of remote work. And as I said, that's really been enabled by technology. I do think it's important to keep in mind that this increased flexibility, primarily benefits higher income and professional services workers, remote work simply isn't an option for a lot of workers, if not most workers. But for those who do enjoy the ability to do remote work, I think we're going to settle into a hybrid model. A lot of employers very clearly want workers back in the office, but lots of professional services workers don't really want to lose the enhanced flexibility and less time spent commuting.

And as someone who was stuck on a local train this morning for over an hour, I kind of get it. And the data really backs that up as well. There was a recent survey by Bloomberg, it found that 40% of workers actually said they would consider quitting if their employers wouldn't become more flexible about remote work. And we really see a huge generational difference. That number is really pronounced among younger workers, millennials, and especially Gen Z, where you're over 50% in terms of feeling that they would be willing to quit. So I suspect that we'll probably end up somewhere in the middle with people coming in a couple of days of work a couple of days a week, but also having the ability to work from home.

A second trend that I think really was accelerated during the pandemic was the rise of employers using analytics to looking into how we work. So sort of the flip side of remote working, trust employees to manage their time, to work from home, but use more technology to see what they're doing, how productive they are, et cetera. I saw a survey recently that suggested about 15% of employers are using those sorts of technologies, and I would expect that number to grow.

And the third, and what I find the most disturbing one, and Ida mentioned this already, has been the very, very sharp decline in female labor force participation. Women left the workforce much faster than men and they've been much slower to return. Oxfam International looked at this globally. They found that in 2020 alone women around the world lost more than 64 million jobs. That's 5% of the total jobs held by women and that represents 800 billion in annual earnings by women. That's shocking. And it's a major problem, not only for the women who have been unable to return to the workforce, but for the households that rely on that income.

Caitlin Dean: Ida, you're a leader yourself and a woman in the workforce, what are the biggest changes you've made to your own workplace policies since the pandemic?

Ida Liu: Well, Caitlin, in our business our talent is absolutely the most important asset that we have and we've always been focused foremost, firstly, on our team's health and wellness. And while Citi has always cared for the mental health and wellness of its employees, the last 18 months have been a difficult adjustment for everyone and it's been more important than ever to look out for the wellbeing of our team.

I've personally experienced firsthand the challenges of the last 18 months. I've adapted to remote work while caring for two young children, being a virtual educator, a caregiver, an experience that I can only describe as an extreme juggling act and working double double shifts. But I am very proud that we have been investing extensively in the wellness of our teams. We've rolled out increased programming to provide support and resources.

During the pandemic, we brought in, for example, a Buddhist monk to do guided meditation with our team to help them with stress management. We brought in a nutritionist to talk about how eating impacts your health, your wellness. We brought in exercise coaches, leading doctors and sleep experts, all to provide our team with holistic health and wellness support. Because we knew that everybody was going through a very challenging time and we wanted to provide as many resources as possible to arm them to be the best that they could be to navigate a very, very challenging period.

We also encourage Zoom-free Fridays for the benefit of our employees because let's face it, Zoom fatigue is real. And our firm also designated May 28th a Citi Reset Day to provide a day off for all of our employees, really to support everybody's wellness again. So the pandemic for us certainly reinforced our commitment to our team's health and wellbeing and we're always constantly looking for new ways to support the members of our team.

Caitlin Dean: Well, those are some really remarkable initiatives, but what are some of the biggest hurdles that you're facing as your employees either return to the office or are trying to embrace a new type of working model? And what are you seeing in terms of other companies embracing a more remote workforce versus returning to the office?

Ida Liu: Well, Caitlin, we've been hyper-focused on our return to office plans. Our CEO Jane Fraser has always stood by the approach of focusing on data and not dates regarding our plan to return to the office. Always prioritizing, as I mentioned earlier, the health and wellness of our teams.

We were really excited to return to the office in select U.S. locations last month, in September, and many of our employees have transitioned into a new hybrid style of work. And ultimately in private banking, our success is dependent in large part on our robust apprenticeship model. So being together is how we foster idea-sharing and learning from one another, and having the capacity to meet and work in person is somewhat necessary to our success and development of our junior talent. But with that being said, we're still very keen to provide our team with the flexibility that they need. And in the past year and a half I think we've all learned the important role of balance across all areas of our lives. And I believe Citi's hybrid model provides an appropriate balance between the benefits of in-person and the flexibility of virtual work.

I think creating a health-conscious office environment took us some time and preparation with all of the considerations around social distancing, limited office capacity, using masks in the office, providing our teams with the sort of the at-home testing kits, that we feel really confident in our ability to have and maintain a positive and safe work environment for those who are in the office. But with this new style of sort of hybrid, obviously comes some challenges, but I'm very proud that our team has been highly adaptable and resilient throughout. And I think it's exciting to combine the benefits of in-person collaboration and mentorship with the flexibility of work from home, and we believe that this hybrid model represents the best of both worlds. And frankly, as Alex was talking about earlier, it's the future of the modern workforce.

Caitlin Dean: Well, Alex we've seen worker preferences change at an individual level but that also has bigger implications. One obvious implication of workers working from home is that it really can open up the job candidate pool. So what does that mean for the market for jobs, both domestically and internationally?

Alex Kazan:At the most fundamental level, I mean, it's quite simple, if people can work from where they already live then you've got a much bigger candidate pool. That doesn't apply of course to all jobs but it certainly does impact the candidate pool and hiring strategies for any professional jobs and I think for most office workers. But the bottom line here is that by embracing remote work, employers will find it easier to move beyond their traditional talent pools. I think that can have a lot of benefits, whether it's for just being able to tap into different skill sets. If done right, I think it could support diversity and inclusion efforts. So I do think there are a lot of advantages there to that if done strategically.

Most of this of course will naturally be within country, but I think there is some evidence out there that suggests that the pandemic has seen an increase or has helped support an increase in cross-border online work. I think we're still a long way away from a global labor pool, but certainly the normalization and acceptance and technologies that enable remote work makes that a more plausible future.

I think particularly from a U.S. political perspective, the question here is whether this becomes or is at least perceived as what we used to think of as outsourcing but in another form. And if that's true, what sort of political response will we see to that given the surge of nationalism that you've seen in so much of the world? Alternatively, and I think from a more constructive perspective, it could be viewed much more as an expansion of a flexible gig economy, or at least the parts of that that can be delivered remotely, that moves beyond borders. That's still an unanswered question but I think that is going to have a lot of very important political implications.

Caitlin Dean: So, Ida, Alex just mentioned the gig economy, and that was a trend that we saw happening even before the pandemic. So where do you see the gig economy going next?

Ida Liu: Tens of millions of Americans take part in the gig economy today, and these figures are only expected to increase. And given the significant expansion of the gig economy over the last decade, it's projected that it will only keep growing as the popularity of the gig-based employers increases. Particularly throughout the pandemic, I think workers have flooded into the gig economy. I think it's estimated that roughly 35% of the workforce relied on a gig job for primary or secondary income last year, which is double what it used to be just five years ago. I mean, this makes sense, especially as the workforce recently experienced a major shift in preference to more flexible working arrangements, and surveys have shown that 44% of Americans now prefer having a work-from-home element in their jobs. And in fact, over half of Americans would consider seeking new employment if flexibility is not offered post pandemic. That's something that Alex talked about very early on.

So it's unlikely that this trend will subside, although shifts in the classification of gig workers could ultimately compromise some of the advantages that the position currently provides. And in April, the US Secretary of Labor made statements pushing to reclassify gig workers as employees, which would fundamentally change the nature of these jobs as regular pay and benefits would become required, but more rigid expectations of employees may then follow suit.

Caitlin Dean: And we've been seeing a lot of discussions, not only for gig workers, but for workers at large, around increasing fair wages. So where is that conversation now?

Ida Liu: Well, across the board, the US has seen increased compensation expectations in recent years. Average hourly earnings for all private non-farm payroll employees has increased to $30.73 this August, marking the fifth consecutive month of increase in this category. I think 30 states today maintain minimum wages exceeding the federal minimum, and an increasing number of states in recent years have been passing legislation to continue raising pay. The Biden administration issued an executive order in April to raise the minimum wage to $15 for federal contractors starting next year, and a widespread $15 minimum wage mandate could further drive up wage expectations across the board as the floor rises. And within certain industries we've seen wage expectations being pushed even higher.

It's also important to consider the relationship, by the way, between inflation and wages, a very important topic, right? Because in June, average hourly wages increased to 3.6% relative to the prior June of the prior year. But after accounting for inflation, the average worker in fact, experienced a 2% pay cut. So this is an ongoing discussion, particularly as we closely monitor the inflationary impacts.

Caitlin Dean: Alex, are there any other challenges that employers or employees are facing as they navigate this changing job market?

Alex Kazan: Well, employers, I think, will continue to struggle with the simple fact that workers just have more leverage right now, given the very strong demand for labor. Ida already cited a couple of the statistics from the labor department's last report, but one that I found absolutely astounding. 4.3 million people in the US quit their jobs in August. That's astronomical. It's not only the most on record, but it represents 3% of the total workforce. So what that means is that employers not only need to compete for finding new workers, but they have to be competing to keep existing ones from leaving. And so I think there are multiple challenges involved in that. That effectively means much more competition for people, more pressure on wages, which I'd already talked about, more benefits, better conditions, more flexibility, and not all employees, I think, are going to be set up to do that well.

So that could be something that becomes sort of another aspect of competition in the market for labor. I think another challenge is managing workplace safety in a world where COVID becomes more endemic. We're out of the pandemic, but COVID still comes back in smaller, more localized instances, but it's still with us. That raises a ton of questions, right? How do you keep vaccine requirements updated? How often will you require employees to have booster shots? How do they report that? If there are local outbreaks, what are the protocols for going back to full-time remote work? So I think there's a lot of challenges in that. That will be sorted out over time. But clearly something that most big employers are going to have to solve.

Caitlin Dean: Let's shift a little from the big picture to some individual sectors. So, Alex, what do we know about the sectors that thrived in the past year, year and a half, versus the ones that are still struggling? And to what extent are those going to be permanent changes?

Alex Kazan: The largest negative impact of the pandemic really fell on workers in food service, customer sales and service roles, and less skilled office support roles. None of that, I think, is particularly surprising. On the other side, we saw big growth in jobs in warehousing, transportation, really anything that benefited from the huge surge in demand for e-commerce and the delivery economy. I think that also plays into the gig economy story that Ida was talking about. But those increases, I think, at least what we've seen so far is that they're not big enough to fully offset the disruption and the loss of many lower wage jobs that we've seen.

And we, of course, see that not only in the unemployment numbers but in the downward pressure on labor force participation. Of course, we've seen bounce back in retail, restaurant, and hospitality as the economy reopens, although that seems to be hitting some obstacles, but I think, given the difficulty that so many companies have had in finding and keeping employees in a lot of these lower wage areas of the economy, we will see that some of this shift ends up becoming permanent. And I do think that, in some areas of the economy - think of things again like lower skilled office jobs, back office functions - lot of bigger employers probably will use this as an opportunity to invest more in technology and other labor-saving ways to save on the need for employees. And also you might see more willingness to tap into that global labor pool that we talked about earlier.

Caitlin Dean: That's an interesting point because, before the pandemic, a lot of the conversation was about AI, artificial intelligence, about robots taking human jobs, and about potentially the need for a universal basic income or for other government programs if those jobs were replaced. So are those worries and those conversations still there, when we think about the future of work?

Alex Kazan: Listen, I think the broader set of worries about the impact of AI on the economy, broadly speaking, are there to some extent, but the conversations themselves have certainly changed. I think they've grown much more nuanced. Pre pandemic, you had a pretty simple narrative, and that narrative around AI and automation was basically that it was going to displace millions of jobs, leave people out of work without income. That would create the potential for social and political unrest unless governments came in to put in place income support mechanisms. As we come out of the pandemic, I think that conversation is changing a bit again. More nuance is coming into it. The experience that employers have had over the past couple of months, where they're struggling to find enough workers in many cases, should force us to at least reevaluate some of our assumptions about the impact on automation, especially when you couple that with aging populations in so much of the world. And those demographic changes are also putting downward pressure on the size of the workforce.

Caitlin Dean: And when we think about jobs being taken by automation, the flip side of that is the need for additional worker training. So what needs to happen there? And are governments or private companies stepping up?

Alex Kazan: So the need is clearly there, but I'm a little skeptical that governments will step in and provide effective worker training. Most governments historically have struggled to do that. If you look back to previous trade and technology shocks over the last 20, 30 years, we just haven't seen it work very well. I remember very clearly before NAFTA was approved, going back sometime, the debate around that and there were a lot of promises about the large scale worker retraining that would come. And I think it's hard to argue, looking back over history, that those efforts that came out of that were really effective at scale. So I do think that most of the burden of retraining ends up falling to the private sector. And that actually gives an additional opportunity for employers to compete for workers and another area for them to develop a competitive advantage.

Caitlin Dean: Ida, to end, paint a picture for us. What do you think the future of work will look like?

Ida Liu: Well, Caitlin, I am very optimistic about the future of work, especially with increased hybrid work arrangements which allow for greater productivity and efficiency, which we've all been speaking about throughout this podcast. Those seeking jobs frankly have heightened expectations of their employer's ability to adapt and be flexible. And I believe this is a permanent shift. I'm very proud of how our team has adjusted to remote work in the past year and a half. We're more internationally connected than we've ever been before. Technology has made it easy, efficient to arrange meetings in 24 hours turnaround time globally. We've re-imagined the way that we're engaging with our clients virtually.

So as an example, we were able to open our flagship Family Office Leadership Program, it's one of our key global client events, from an in-person event that used to be 150 families in New York in-person. And now that we've opened it up digitally, we've got 5,000-plus participants virtually. So the virtual format is important. It's effective. And it's absolutely here to stay. And I think the silver lining of this pandemic is the acceleration of all things digital. And I think the pandemic has exponentially increased our digital adoption, so looking at ways to self-service. And I have to say that in the past, it used to take us about a week to get a new client account open with a stack of paper, Sign Here tabs and highlight places. Now we can open an account for a client in less than five minutes, completely digitally and paperlessly.

So I think that this is sort of the future of work. And I think marrying the work from home and in-person hybrid work model has the potential to create an elevated, flexible and equally, if not more, productive work dynamic. And I think our enhanced technological integration has been wonderful for our team and our clients alike. But again the apprenticeship element of our business does mean that we still need an in-person connection and collaboration. But I think with all this being said, I know our team is not alone in experiencing upside from this new mode of work. And I think it's a very exciting and innovative time to be a part of the workforce. And I definitely look forward to watching the future of work unfold together.

Caitlin Dean: Well, thank you so much, both of you. Really appreciated your insights. Ida Liu, global head of private banking at Citi global Wealth, and Alex Kazan, chief commercial officer at Eurasia Group. Thanks so much to both of you.

Ida Liu: Thank you so much for having me. It was a pleasure being on with you and Alex.

Alex Kazan: Thanks, Caitlin. Thanks, Ida. Really enjoyed the conversation.

Caitlin Dean: That’s it for this episode of Living Beyond Borders. Stay tuned throughout the fall as we look at the biggest issues impacting your world and your money. Next time we’ll look at the latest on the relationship between the U.S. and China. I’m Caitlin Dean, thanks for listening.