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Firm-specific skills and working from home

September 17, 2020 - 17:01 -- Admin

One of the central features of the debate about working from home is that it leads to the loss of random, but productive, encounters with colleagues. I’ve responded with the observation that some of my best research ideas have come from largely unplanned encounters on the Internet.

It’s just struck me that there is a conflict here between the interests of workers and those of firms and managers.

A lot of universities (or, more precisely university managers), think of themselves as developing and promoting a corporate brand. In this context, research collaboration within the university (particularly if it is trans-disciplinary) is viewed very positively, while collaboration with other universities is less well-regarded. But for individual academics, the big rewards come from high-profile work within tightly defined fields, which implies a desire for collaboration with other people in the same field who will, in general, be located elsewhere. While intra-university collaboration may be rewarded in internal promotion decisions, the outside opportunities are greatest for people with external collaborators. Those outside options are routinely used as a bargaining chip in negotiations over salary.

This issue isn’t specific to universities. Labor market theory distinguishes between firm-specific skills and general skills (which are of value to any employer). Back in 1964, Gary Becker made the argument that firms would be willing to pay the cost of firm-specific training for their workers, but not for general training which increases their outside opportunities. (This seems entirely convincing to me, although the empirical evidence I found on a quick search is both limited and inconclusive).

What applies to training also applies to serendipitous encounters. Collaboration with co-workers can enhance productivity within the firm, but doesn’t do much for your market value outside. Conversely, if workers enhance their productivity at home by making more use of industry discussion groups, Skype chats with people in other firms who are addressing similar problems, and so on, that enhances their bargaining power relative to their employers.

In this context, it’s striking that the hardest push for a return to the office is coming from the finance sector, led by JP Morgan. Even though textbook finance is all about hard numbers on earnings, risk and so on, the industry actually operates largely on personal contacts, networks and exchanges of favours, particularly information. That’s why it’s concentrated in a handful of global cities, and why so much attention is paid to issues like “poaching” of staff, no-compete clauses and the like. It’s obviously in the interests of employers to build up internal networks and control external interactions.

As with all these issues, my ideas here are provisional and almost certainly wrong in some respects. So, feel free to correct me.