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Is Globalisation through digital platforms a good idea?

5 October 2021
From our ‘Thinking outside the box’ series
The COVID-19 pandemic forced many employers to introduce flexible work from home arrangements for their staff. Professor David Hensher looks at the pros and cons of implementing this on a global scale so that labour markets are not restricted by state or even country.

As we increasingly connect to the world through digital platforms, it is becoming clear that we could view the world as the new employment market and hire the best of the best talent no matter where someone is located. People might start to choose a location to live where the focus is on lifestyle, wellbeing etc., and see the location of employment being of secondary concern because it is accessible via the digital spectrum. This great plan depends on being able to work remotely and having superb access via the internet. It also depends on employers, and indeed governments, accepting the fact that skills can exist in other countries and should be accessible without limitations.

This view has both upsides and downsides. The upside is as we have outlined - where an employer or businesses more generally can hire employees or consultants based anywhere in the world and indeed, may hire at a competitive price if such talent is less expensive to hire when based in another country compared to locally. This, however, may get the unions very concerned and object. A downside is that there is a risk of eroding the employment talent pool locally (including meeting national employment targets for residents) such that a significant amount of the expertise of merit resides elsewhere and spends it salary (and may even pay tax offshore) in another country, with all the associated multiplier benefits to a local economy lost even after allowing for any net productivity gains from the greater skills of employees or contractors. Of course, digital connectivity is not just a matter of domestic or of international labour input; it can also be associated with differing labour markets within a single country. A Professor at the University of Sydney lives in Tasmania and commutes to Sydney one day a week. There are many and growing such examples.  

No longer to the same extent as pre-COVID-19 does someone have to live in Melbourne in order to work in Melbourne, for example. One can have the office in Melbourne, live in Sydney and a satellite office from time to time at the Gold Coast. There are enough occupations where this is increasingly attractive as a growing number of employers have, through forced experimentation, found that employees working from home can indeed in the main be trusted, are productive and enjoy benefits of a more flexible working time regime with reductions in commuting. There is a growing sense that ‘flexibility is here to stay’ and ‘employers who offer a balance of WFH and in office will attract more high quality employees’ (The Future of Office Space Summit, 17 Feb 2021).

So we must tread carefully in this market place if we are to protect all the accumulated advantages of localised sourcing compared to global sourcing. The balance is delicate since it offers up some great new ways of doing business that can enrich skills as well as providing a useful way of contributing to global culture interactions and gain. In one sense, what we have is an alternative in part to international (and indeed local) travel, leading to structural changes focussed on getting work done, more so than getting to and from work.

This digital working environment will not work for all, quite clearly, but there appear to be enough jobs and individuals, employees and employers, where this has growing appeal. What has yet to be tested is what this will mean in the long term for where labour is sourced, what the costs to business will be and whether government and society more generally is content to allow this to happen. There will be complex ramifications on the ways our society has evolved, and with global tensions not in a good place at present, it may be that there are huge risks in opening up the borders to digital connectivity in the employment market without any need to be physically accessible for most or all of the working time. Issues surrounding taxation, workers compensation, liability in general and safety are already raised when some organisations in Australia during COVID1-19 will not permit employees (and indeed contractors) to be hired or work if they reside outside of their employer’s state. For example, I know of a number of large organisations that will not permit such employment if you do not live in NSW. We may have to eventually sort this out if we want to be a truly global player with access to the very best in the world, instead of ensuring we maintain employment for those who are local but are less skilled than those located elsewhere on the globe; a true island mentality. Indeed, I have recently hired a senior research staffer who lives in Chile because their skills are far superior to anyone I have managed to find in Australia; but it involved a rather convoluted journey to ensure this outcome. We are now reaping the benefits.