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Productivity in the post-COVID era

Craig Alexander, Chief Economist of Deloitte Canada, gives some thoughts on what the COVID 19 crisis could mean for productivity development.

One of my main concerns about economic recovery after the crisis is the potential slowdown (or total decline) in labor productivity. There is some evidence that workers are, on average, less productive when they work from a distance than when they are in the office. And since distance working is likely to remain a significant part of business life until a vaccine is fully implemented, overall productivity is likely to suffer.

This could be exacerbated by physical distance regulations in retail, finance, transportation and other service-producing sectors. The new restrictions are likely to increase costs and require investment in potentially unproductive capital (barriers, scanners, etc.) when maintaining an office, running a business or producing in a factory. In the absence of productivity gains, rising operating costs are expected to exert downward pressure on wages or upward pressure on prices, making a slow recovery scenario much more likely.

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