Question

Q1: Using what you know from Chapter 9 about economic growth, how do you think remote work is affecting/will affect the Real GDP growth rate in the U.S.?

Q2: How do you think this is affecting/will affect the distribution of income in the U.S.?

Answer 1

1. Working from home is highly likely to reduce the US GDP. This is because, even assuming that the productivity doesnt go down while working at home as compared to office, there are many activities that contribute to the GDP- which will no longer be done if working from home increased.

An example of this is commuting. Commuting is an act of consumption of quite a few things- fuel, taxi/cab services, public transport and more. Consumption is a very important part of GDP (Since we know Y=C+I+G+NX, wnere Y is GDP and C is consumption) and its reduction will result in lowering of GDP.

Another example of this would be lesser consumption of electricity in office, lower real estate activity because fewer offices are required, lower car sales because of lower commuting requirements and so on.

Though, to be sure, on the other hand there are a few activities and consumptions that will indeed increase. Home electricity usage will increase, so might the usage of data and entertainment services while people are at home. But most of these increases would be far lower than the decrease in consumption that work from office would cause.

Hence, the GDP growth is expected to decrease.

B. The income distribution will become further skewed and uneven. This is because the consumption that is going down- commuting etc, contributes mostly to the income of lower and middle class earners such as taxi cabs drivers etc. The benefits- such as lower real estate costs will benefit big corporations a lot. The increased home electricity usage will cost the employers of the companies.

Hence, this will make the inequality even higher.