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Mark Johnson: Work from home is killing our cities

Commentary

The pandemic was officially declared over by the World Health Organization on May 5, 2023. It was realistically over in Canada long before then. Yet our downtowns are still dead. Storefronts are shuttered. Streets are empty. Public transit systems are starved for fare revenue. Street crime is up. People feel unsafe. This isn’t good and everyone knows it. 

The damage being done to our cities by continuing the work-from-home regime when it’s no longer necessary is real. It’s long past time for businesses and governments to bring their workers back to the office and inject our downtowns with their vital lifeblood–office workers. It’s time to get back to the office. Five days a week.

The tragedy of the commons

What we’re confronting is a variation of an economic theory called the tragedy of the commons. It posits that an individual or business will exploit a public or common resource to his or her advantage but to the detriment of wider society. Think of overfishing or overlogging. Hence the need for government regulation to manage that resource to avoid depletion for everyone’s benefit. 

What we face now is something similar. Fearing a loss of employees to competitors and recruitment difficulties, each single business in isolation has a strong disincentive to be the first to bring workers back to the office full-time. Each business is making a perfectly rational decision based on self-interest. Yet when those individual decisions are aggregated across the economy, they end up damaging the collective social body in the form of a vibrant and prosperous city life.

The highest profile example is San Francisco. Some have declared that once hip city as a no-go zone. Others say it’s in a death spiral. Empty offices, vacant storefronts, and dead neighbourhoods lead to rampant crime, which leads to more empty buildings—all a negative, self-reinforcing feedback loop. We know that busy, people-filled streets, shops, and offices create healthy urban ecosystems. Everyone benefits.

Waffling and indecision by employers

Over the past three years, I’ve sat on two executive teams at large entities that sincerely struggled with this issue amid serious discussions and meetings. The hybrid work model is not conducive to loyalty, teamwork, mentoring, efficiency, and the many intangibles that make a company tick. Outweighing this was the fear of employees quitting in a tight labour market and handicapped recruitment. Possible cost savings from a smaller office footprint also played a role. Studies of worker productivity cut both ways. Everyone has their own opinions and observations on this issue but they’re focused on their own workplaces, not the larger citywide impacts.

“Society isn’t back together enough,” RBC CEO David McKay said recently. “All CEOs in every sector I talk to are struggling with a balance of developing talent, promoting talent, building culture, creating productivity. It’s tough, we don’t have the final model yet.”

The longer the Covid lockdowns went on and as government and business leaders wavered on returning to the office, employees became more entrenched and entitled, to the point where some now refuse to even countenance returning to the office, something they did every weekday just a few years ago. Some thought the much-predicted recession would tilt bargaining power back in favour of the employer, but a recession doesn’t seem to be happening just yet. 

Private gain, public loss

Love it or hate it, workers commuting to the office is a large and healthy component of a vibrant city life and our social fabric. In short, our downtowns depend on it. It’s difficult to assess but much has been lost. Society simply cannot jettison a century of established work arrangements, people movement, consumption habits, and city building, all based on five days of commuting, in a one-week period in mid-March 2020 when COVID-19 exploded and forced everyone home. We cannot re-engineer our city life that fast. 

Downtown office vacancy rates in Canada are hitting highs not seen in decades. Suggestions to convert office space to housing to rescue our downtowns are hopelessly naive and pie-in-the-sky woolly thinking. Even if everyone agreed and started on it today, it would take many years to see the benefits.

Want better financed public transit? Bring workers back to the office full-time. In Toronto, ridership on public transit remains at 70 percent of pre-pandemic levels. As a result, the Toronto Transit Commission projects a $366 million budget shortfall for 2023. To save money, it cut service to the detriment of those who actually do use the system. In other words, we can inject over a third of a billion dollars annually back into Toronto’s money-starved public transit system by having workers back in the office full-time. The story is similar in Montreal.

Despite this, Toronto’s municipal government still has a hybrid work policy that requires only two to three days per week in the office. If Toronto’s leaders were tough-minded about the plight of their city and transit funding, they would be bold and bring their own employees back five days a week.

Want to help small businesses? Bring workers back to the office full-time. There’s no need for statistics here. Just walk along the streets and look at the boarded-up businesses and For Lease signs. 

Want to promote industrial equality? Bring workers back to the office full-time. Factory and warehouse workers, nurses, teachers, miners, loggers, custodians, police officers, and road crews can’t work from home. Just like containing the pandemic, everyone needs to play their part in helping our cities recover from it.

It’s time for leadership

It’s past time for government leaders and CEOs to show leadership for the common good. 

The federal, provincial, and municipal governments should bring their employees back to the office for the full week. Businesses should too. If every business in the industry does it, there’s no competitive loss in terms of recruitment and retention. 

All governments bear a special leadership obligation here. Their employees constitute huge swaths of downtown workforces. The federal public service now totals over 357,000 employees. Provincial ministries and agencies in Ontario employ roughly 86,000. Granted, not all public servants work downtown but those who do are much-needed transit riders and lunchtime shoppers. 

The federal government should explore how it can pressure federally regulated industries such as banks, among the biggest tenants and employers in our downtown cores, to bring their workers back full-time. Provinces and municipalities can think of how they might do the same in their areas of responsibility. Governments can act not only as employers and regulators, but they should also determine how they can, within constitutional bounds, leverage their roles as funders and customers to incentivize the repopulation of the downtown offices of their suppliers and recipients of their largesse. Want that big government contract? Well, what’s your plan to bring your workers back?

Undoubtedly, some employees will grouse, some may quit, and some will withdraw their job applications. Business operations may be impacted in the short term. Everyone will need to respond and adjust. Eventually and perhaps sooner than people think, a new normal will be found and everyone will benefit. 

COVID-19 is over but our downtowns are still sick with it. We need to go back to the office. Take a cue from The Beatles. Get back to where you once belonged. 

Sean Speer: What the Trudeau government can learn from Stephen Harper about how to control spending

Commentary

Some voices have criticized the Trudeau government’s recent pledge to identify $15 billion in fiscal savings over the next five years as unserious and hypocritical after years of large-scale spending growth. They have a point: annual federal program spending has increased by 80 percent since it took office in 2015. 

Yet if one has been critical of the Trudeau government’s high spending record, then he or she ought to support at least in theory its nod to finding fiscal savings. It could be far worse after all. 

We don’t know much about the review at this stage. Treasury Board President Anita Anand has indicated that it will protect transfer payments to other orders of government as well as spending on Indigenous services and the Canadian Armed Forces. She’s also said that it will aim to minimize actual job losses by relying on attrition and redeployment. 

Her main emphasis though has been that the government’s review exercise won’t be like the Harper government’s spending review following the global financial crisis which she claims involved “short-sighted cuts that had to be reversed.” 

I may quibble with her characterization of those cuts (which I was personally involved in) but I agree that the Harper government’s post-recession spending review isn’t the right model for Minister Anand and the government to pursue. The goal of the aptly named “Deficit Reduction Action Plan” was to boost the government’s own efforts to constrain program spending in the name of eliminating the recession-induced deficit. It must be understood as having been principally about deficit reduction in the short term. 

That is far less relevant in the current context. The deficit is far too high and the Trudeau government’s savings target is too low to make much of a meaningful difference to the annual deficit. It’s mostly about offsetting the net costs of the government’s ongoing spending ambitions. 

A better comparison from the Harper era therefore is the government’s Strategic Review process which ran from 2007 to 2009 before it was suspended due to the global financial crisis. Strategic Reviews weren’t driven by deficit reduction goals. They were principally focused on controlling or limiting the growth of new spending by reallocating departmental spending from low- to high-priority initiatives. 

They are a good model for conducting regularized reviews of pre-existing government spending and weighing the usefulness of existing spending against the demands for new spending. Individual ministers were empowered to carry out such a prioritization exercise on behalf of their own departments. The process was generally evidence-based and rigorous. Minister Anand should restore it to implement the Trudeau government’s newfound commitment to rationalizing program spending. 

Under the Strategic Review model, roughly 25 percent of government spending was reviewed annually over a four-year cycle. Participating departments in a given year were identified in the early spring. They were given a spending base and 5 percent target from the Treasury Board Secretariat and required to conduct a self-evaluation of where they were expected to achieve these savings using of set of metrics including:

  • Increase efficiencies and effectiveness: Do these programs and services deliver real results for Canadians and provide value for money?
  • Focus on core roles: Are these programs and services aligned with the federal role or is another level of government or some other institution (such as the market or civil society) better placed to deliver them?
  • Meet the priorities of Canadians: Are these programs focused on the needs and priorities of Canadians? 

The results of these reviews were then presented to the Treasury Board Cabinet committee in the summer or fall in order to inform the budget process. Treasury Board Ministers were free to accept or reject the submissions of their colleagues but the overwhelming tendency was to accept them since individual ministers had full ownership of what spending cuts they ultimately put forward. 

But remember the goal wasn’t necessarily to reduce spending as much as it was about controlling or limiting the growth of new spending. So while departments were required to identify their “lowest-priority, lowest-performing 5 percent of spending” for reallocation, they were also permitted to put forward alternative spending proposals for reinvestment. 

The 2007 experience is illustrative. Seventeen federal organizations (including departments and agencies) participated that year representing $13.6 billion in direct program spending or roughly 15 percent of all government program spending that was examined under strategic review. (The overall share of federal spending represented by the participating departments and agencies was a bit lower that year because it was a new process.) All identified savings were recycled back into the same departments or related areas (see Table 1). Basically, the government was able to use the Strategic Review process to control the growth of new spending through fiscal recycling.

TABLE 1: FEDERAL STRATEGIC REVIEW PROCESS, 2007 ($MILLIONS)
Graphic credit: Janice Nelson

That the identified savings were “reinvested” mostly back into the departments created an incentive for ministers and their departments to buy into the exercise. They knew that their full participation would be rewarded by partially or fully funding their new priorities. 

The key point here is that the Harper government’s fiscal objectives were not, by and large, the sole purview of the prime minister, finance minister, or Treasury Board president. There was a sustained commitment by every minister to scrutinize his or her own spending and to prioritize any requests for new spending within the government’s broader agenda.

My past experience in the prime minister’s office and the minister of finance’s office is that such system-wide buy-in is crucial for such an exercise to ultimately be successful. A government may be able to impose fiscal constraints on itself through a combination of public pronouncements, legislative targets, or internal processes. But a system-wide commitment to limiting new spending requires dedication and focus from the Cabinet and even the governing caucus. It won’t happen if Minister Anand is pushing this agenda on her own. 

This is especially true for the Trudeau government in which ministers and their departments have been socialized to believe that there are no fiscal trade-offs because new and more resources can be taken for granted. Resetting such a spendthrift culture will require more than a top-down “weed-whacking” exercise that extracts some marginal savings but otherwise leaves internal expectations and norms firmly in place. The risk is that such an outcome is overwhelmed by new, incremental spending in subsequent budgets. 

What’s needed instead is a new bottom-up culture in which every minister believes that he or she is personally invested in the government’s fiscal management. Institutionalizing the Harper government’s Strategic Review model can help to rebuild such an internal culture in favour of fiscal priority-setting and overall budget discipline. 

If the Trudeau government is indeed serious about its newfound commitment to “sound economic and fiscal stewardship”, then it should be lauded for a much-needed course correction. One test of its seriousness is if it’s prepared to restore its predecessor’s strategic reviews.