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JOHN HOOD COLUMN: Will hybrids drive the economy?

Plenty of politicians, planners and business folks think they know what North Carolina’s post-pandemic economy will look like. But few seem entirely sure. They are noticeably hedging their predictions, which I consider to be a wise precaution. They ought to be hedging their bets, as well.

John Hood

There are unanswered questions across multiple economic sectors and time frames. For many decision makers, however, perhaps the single most important questions involve the fate of hybrids.

I’m not talking about motor vehicles. I’m talking about work schedules. With so many North Carolinians having experienced months of doing their jobs from home, will they want to come back to the office full-time? If so, there won’t be meaningful changes in traffic patterns, consumer behavior and the market for commercial and residential real estate.

However, if a significant share asks employers to stay remote indefinitely — or, more likely, to split their workweeks between office and home — the result could be disruptive. I don’t necessarily mean that in a bad way. But even net-positive innovations have transition and transaction costs.

The early signals are noisy. Some workers are clearly desperate to get back to the office. They found being at home distracting, even without school-aged children needing frequent attention, and embrace the rigid separation of worktime and personal time that a physical commute can reinforce. Others quite enjoyed doing their jobs remotely. It saved them the time and expense of commuting, and of dressing up. They embrace the intersection of work and home for its flexibility.

As for employers, some found remote work fairly easy to inspire, manage and evaluate. Others felt their teams, dispersed by geography and otherwise out of sync, became less productive. This sentiment appears to be widespread in occupations such as banking, finance, and law. American Enterprise Institute analyst Brent Orrell calls it “a move that appears to be driven by a mix of tradition and a concern for new hires who need regular coaching on work practices and expectations.”

Of course the smart money will be wagered on some kind of midpoint. Many workers will resume a regular schedule. But not all. One recent academic paper published by the National Bureau of Economic Research projects that home-based work will account for 20% of full workdays in the United States, up from 5 percent before the COVID crisis. Amanda Mull, a staff writer for The Atlantic, predicts that many professionals will ask for hybrid schedules: three days a week in the office, two at home.

Such developments would have major consequences. The NBER paper estimated that if a fifth of workdays happened at home, consumer spending in major city centers would decline by as much as 10 percent. Think fewer workers parking their cars in decks, eating out for lunch, or running errands on the way home. Think major employers shrinking their footprints the next time they renew their leases.

Now consider what’s happening with urban transit across the country. Ridership across all categories fell dramatically during the crisis, but declines in rail use were especially large, in part because the very professionals most likely to be able to do their jobs from home also make up a disproportionate share of rail users.

The only relevant case in North Carolina is Charlotte — and it’s a revealing one. Bus ridership in the Queen City is down by about 49 percent year-to-year. Light rail ridership is down 71 percent, and isn’t bouncing back as fast as bus usage is.

I confess that I’ve been a rail-transit skeptic for a long time. I already thought the Triangle area was wise not to pursue a long-proposed rail line. That decision looks even better in retrospect.

If more jobs move to hybrid schedules, many North Carolinians will likely move further away from central cities, to exurbs and low-density counties. They’ll consume public services, of course, but not the same ones, from the same jurisdictions. And they’ll likely vote differently than their rural neighbors do.

Hybrids could be the wave of the future. Who knew?

John Hood is a John Locke Foundation board member and author.