Page 61 – Kanebridge News

August 8, 2023

WHY ECONOMIES HAVEN’T SLOWED MORE SINCE CENTRAL BANKS HIT THE BRAKES

The world’s central banks raced at an extraordinary pace over the past year to cool inflation, but it hasn’t proved enough—yet.

Economic growth remains mostly solid and price pressures strong across affluent countries despite sharply higher interest rates.

Why haven’t growth and inflation slowed more? Much of the explanation lies in the pandemic’s weird effects and the time it takes for central-bank rate increases to curb economic activity. Additionally, historically tight labor markets have fuelled wage gains and consumer spending.

First, the unusual nature of the pandemic-induced 2020 recession and the ensuing recovery blunted the normal impacts of rate hikes. In 2020 and 2021, the U.S. and other governments provided trillions of dollars in financial assistance to households that were also saving money as the pandemic interrupted normal spending patterns. Meanwhile, central banks’ rock-bottom interest rates allowed companies and consumers to lock in low borrowing costs.

Households and businesses continued to spend heavily in recent months. Families tapped their savings, which were replenished by solid income growth. Businesses kept hiring thanks to pandemic-related labour shortages and large profits.

“There are just a lot of embedded pandemic-era forces that are working against this tightening,” Tom Barkin, president of the Federal Reserve Bank of Richmond, told reporters last week.

Two industries traditionally sensitive to interest rates—autos and construction—offer examples.

Pandemic-related shortages of semiconductor chips limited the supply of cars for sale, leading eager buyers to pay higher prices for the vehicles available. Although U.S. construction of single-family homes tumbled last year, construction employment grew over the past 12 months. Fuelling job growth were supply-chain bottlenecks that extended the time needed to finish homes and a record amount of U.S. apartment construction, which takes longer to complete.

U.S. single-family housing construction has rebounded recently thanks to historically low numbers of homes for sale. Many households refinanced during the pandemic and locked in low mortgage rates—a good reason to stay put. “I didn’t fully anticipate how much the move in interest rates would convince people not to put their houses on the market,” Barkin said.

Normally, the Federal Reserve’s rate increases force heavily indebted consumers and businesses to rein in spending because they have to pay more to service their loans. But consumers haven’t overextended themselves with debt over the past two years; household debt service payments accounted for 9.6% of disposable personal income during the first quarter, below the lowest levels recorded between 1980 and the onset of the pandemic in March 2020.

“A lot of the imbalances you might anticipate at this point in the cycle just have not had the time to build up,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

Second, government spending has continued to bolster growth, cushioning economic shocks that proved less catastrophic than expected. While Europe’s energy crisis helped to tip the region into a shallow recession over the winter, the region skirted the deep downturn that some analysts had forecast. European governments pledged up to $850 billion to support spending.

This year falling oil and natural-gas prices have pumped up economic growth by putting money into consumers’ pockets, boosting confidence and easing pressures on government budgets. The price of a barrel of oil has fallen by nearly half in the past year, from around $120 to less than $70—below its level before Russia’s 2022 invasion of Ukraine sent prices soaring.

The reopening of China’s economy supported activity in the country’s many trading partners, while weak domestic growth prompted Beijing this month to provide new stimulus.

In the U.S., fiscal policy has provided more oomph for the economy this year. Federal funding continues to flow from President Biden’s roughly $1 trillion infrastructure package approved in 2021 and two pieces of legislation signed last year that provide hundreds of billions of dollars to boost renewable-energy production and semiconductor manufacturing.

A rock waiting to drop

Third, it takes time for higher interest rates to ripple through the economy and cool growth and inflation. The Bank of England first raised interest rates from near zero in December 2021, while the Fed and the European Central Bank lifted off in March 2022 and July 2022, respectively.

By some estimates, the first two-thirds of the Fed’s rate increases only restored rates to a level that was no longer pushing on the gas pedal, while the last third slowed the economy by pressing the brakes. The upshot is that policy has restricted growth for just eight or nine months, Atlanta Fed President Raphael Bostic wrote in an essay published last week.

Chicago Fed President Austan Goolsbee compared the potential coming impact of the Fed’s 5 percentage points in rate increases to the unseen hazards faced by Wile E. Coyote, the unlucky cartoon character. “If you raise 500 basis points in one year, is there a huge rock that’s just floating overhead…that’s going to drop on us?” he said in a recent interview.

Dario Perkins, managing director at the research firm TS Lombard, said higher rates are slowing growth in ways that aren’t obvious, such as by causing employers to cut unfilled jobs or companies to forgo expansion. “It might appear that monetary policy isn’t working when, in fact, it is,” he wrote in a recent report.

Climbing the last mile

To be sure, some central banks might not have done enough to cool demand. The ECB, for example, increased its key rate to 3.5% this month, but it is still negative when adjusted for inflation—potentially a stimulative level.

Many economists still anticipate a recession over the next six to 18 months, either because of past rate increases or those to come.

Just how much higher to raise rates is hard to judge because of mixed signals about economic activity. In the U.S., hiring has been strong, but average hours worked declined in May and the number of people filing for state unemployment benefits has climbed in recent weeks to its highest levels since late 2021.

Falling energy and grocery prices helped lower U.S. inflation to 4% in May from a four-decade high last summer of around 9%, according to the Labor Department’s consumer-price index. The breadth of price increases has narrowed. In May, less than 50% of all prices in the CPI rose by more than 5%, down from 80% of the index at one point last year.

Central bankers remain anxious, however, because measures of so-called core inflation, which exclude volatile food and energy prices, have declined much less. Those readings tend to better predict future inflation.

Central banks in Norway and the U.K. announced half-point interest-rate increases last week to address persistent inflation. Central banks in Canada and Australia recently resumed rate increases after pausing, pointing to higher service-sector inflation and tight labor markets.

The Switzerland-based Bank for International Settlements, a consortium of central banks, warned in a report released Sunday that reducing inflation to many central banks’ 2% target could be harder than expected.

Easy gains from lower energy- and food-price inflation have been banked. The longer high inflation lasts, the more likely it is that people will adjust their behaviour and reinforce it, the BIS said. In that scenario, central banks might find they need to cause a sharper downturn to force inflation down to their goal.

“The ‘last mile’ may pose the biggest challenge,” the BIS said.

August 8, 2023August 8, 2023

DON’T BE A JERK AT WORK. (BUT DON’T BE TOO NICE, EITHER.)

How nice should you be at work?

We’ve supposedly moved on from the era of the militaristic chief executive who barks orders and threats. Most of us agree: We don’t like jerks. Be kind, we implore our kids.

Then we get to the office. We’ve got direct reports to rally, colleagues in other departments to convince and bosses who claim they want honest feedback. Speak with hesitation and you’re ignored. Handle your team with kid gloves and you’re a pushover, not a force to be reckoned with.

“I, personally, think you’re too nice a person to be in the job that you’re in.” That’s what Rep. Greg Murphy (R., N.C.) told Katherine Tai, the lead trade negotiator for the U.S., this spring during a hearing. His comments summed up feedback so many of us, especially women, have heard. We’re too bubbly or kind. We deploy too many apologies or exclamation marks. Yet when we do too little of all that, we’re overly aggressive.

“I want to be a nice person,” Sarah Kleinberg, the director of operations at a healthcare consulting firm, told me. She has realised, though, that being nice often makes others feel good, without actually moving a project forward or prompting a team member to improve.

“You have to have the level of confidence to be beyond people-pleasing,” she says.

‘Customer-service voice’

Many people, desperate not to offend, resort to what speaking coach Samara Bay calls “customer-service voice.” It’s that high-pitched, upspeak-y tone meant to inform the barista, I think you might be out of oat milk?

What are we saying when we use that tone? “I’m not powerful, don’t worry,” Bay says.

Making yourself non intimidating and as small as possible might work earlier in careers, she adds, making the people in charge feel secure. But as we ascend, or try to, the wavering voices can confuse others. Do it enough and people might question whether you’re leadership material, Bay says.

She recommends a vocal exercise for speaking more confidently. Pretend that you’re introducing yourself—“Hi, my name is Rachel”—while throwing a pretend ball against the wall. Match your vocal pitch to the ball’s trajectory. When you throw the ball down to the ground, you’ll hear your voice droop in energy along with the ball. Then throw the ball up, and notice the way your words sound as if you’re half taking them back. Last, throw the ball straight and allow your words to follow through, too.

“It’s the weirdest feeling to say something and mean it all the way to the end,” Bay says. “It feels brave.”

No hedging allowed

When pitching an idea, don’t undercut yourself with hedging language, says Bob Bordone, a negotiations coach. He cringes at questions like: “Would you be willing to consider letting me work remotely on Fridays?”

“It makes me just want to say no because it’s such a weak thing,” he says.

Instead, he says, start with a statement: “I wanted to talk to you about working out a new schedule.” Assure that any agreement you come to would be good for your manager and the company.

When someone tells you no, Bordone suggests trying: “How can we tackle this, even though we see it differently?” You sound strong and assertive, but not nasty, he says.

Good news for the nice guys among us: You don’t have to give up your personality to be taken seriously.

“I’m, 99.9% of the time, a jovial, happy-go-lucky guy,” says Colton Schweitzer, a user-experience designer and educator in Vancouver, Wash. When he doesn’t like the direction a project is going, he pushes back by asking questions and inserting the occasional joke.

“I’m smiling,” he says, “Even when I’m saying, ‘Are you sure about that?’”

Because he’s so pleasant, his serious moments carry weight. At one job, he cheerfully took on more work when colleagues asked—until his manager asked him to pick up the slack for an underperforming employee. He gave a resolute no. His manager dropped the issue, and seemed surprised and impressed by his response, he says.

“It’s like a currency,” he says of invoking a more stern style. “When I use it, it’s really valuable.”

Less yelling, more intensity

To be tough but not jerky, set clear expectations, says Harry Kraemer, a professor of leadership at Northwestern University’s Kellogg School of Management.

Before teaching, Kraemer rose to be chief executive of Baxter International, the healthcare company where he worked for 25 years. As a new manager, he would try to be everyone’s breezy friend, shrugging it off when his team turned in a project hours past deadline. The second time it happened, he devolved into yelling, only to realise he hadn’t made the stakes clear from the start.

“If I focus on being liked, the chance of being respected is very low,” he says.

He adopted a new leadership style of, “I’m not going to surprise you.” He says the yelling just made him look out of control, but following through with consequences worked. When his team missed sales targets, he gathered them for a two-hour debrief—no smiling, his voice intense.

“I don’t need a sorry,” he would tell them. “Hit the number. Do what you told me you were going to do.”

Dinah Davis, a Realtor in Highlands, N.C., still remembers advice an old friend gave her years ago on the golf course. The friend was a skilled neurosurgeon known for being direct, not touchy-feely.

“I have a great bedside manner,” she told Davis. “I just don’t have time for it.”

The advice was freeing for Davis, a former lawyer more comfortable with staunch negotiations than chirpy small talk.

“Do you want your pilot to be nice?” Davis asks. “Or do you want your pilot to get the plane on the ground?”

August 8, 2023August 8, 2023

HONG KONG’S PROPERTY MARKET IS A MESS—AND THE FED IS PARTLY TO BLAME

Hong Kong’s notoriously expensive property market is often seen as a barometer of the city’s economy. It isn’t looking good.

Home prices are down. Office vacancy rates have hit a record high. Commercial real-estate investment has plummeted. The shares of some big developers in the city are trading at a 30-year low to their net asset value, a measure of financial health, according to research by analysts at JPMorgan.

A key reason is high interest rates, which have increased the burden on mortgage-paying home buyers, said Cathie Chung, senior director of research at Jones Lang LaSalle, a real-estate services company. The Hong Kong dollar’s peg to the U.S. dollar forces monetary authorities in the city to track U.S. interest-rate decisions, limiting their ability to stimulate the property sector and the wider economy.

The Federal Reserve has embarked on a historic cycle of interest-rate rises since last March, raising the benchmark federal-funds rate from around zero to 5.25% to 5.50%. The Hong Kong Monetary Authority, the city’s de facto central bank, has followed these hikes, increasing its base rate to 5.75% from 0.75% over the same period.

The full impact of higher interest rates in the city still hasn’t been felt, said Asif Ghafoor, chief executive of online real-estate marketplace Spacious. Asking prices of residential properties listed on the platform have fallen 5% since the start of the year. Sales prices tend to follow suit, and are likely to fall 5% to 10% in the next six months, he said.

To prop up the market, the HKMA relaxed mortgage rules in early July for the first time since 2009, allowing home buyers to pay less upfront and borrow more for some properties if they plan to live in them. But those working in the sector think the pain is far from over.

“We expect that the recovery will be slow and long,” said Chung at Jones Lang LaSalle.

The slump in the property market has hurt the share prices of developers, a major source of wealth for some of the city’s richest families. CK Asset Holdings, Henderson Land Development, Sun Hung Kai Properties and New World Development—all still partly owned by the families of the founders—are performing much worse than the wider stock market this year. New World and Henderson Land have lost more than 15% this year, according to FactSet data.

Hong Kong is one of the world’s leading financial centres and is seen by many foreign businesses as a gateway to mainland China. It is now being hit by a slowdown in investment-banking activity—with several large banks cutting staff this year—and the shaky recovery of China’s economy, which has undermined confidence among businesses and potential home buyers in Hong Kong.

The overall vacancy rate for offices reached a record high of 15.7% in the first half of this year, compared with an average of under 5% in 2018, according to figures by CBRE. In the central business district, there was almost eight times as much empty office space as in 2018, when the area had a vacancy rate of just 1.3%.

The equivalent of $603 million was invested in commercial real estate between April and June, according to CBRE data, just a third of the first-quarter tally and the lowest quarterly figure since the end of 2008, when the global financial crisis caused a huge drop in confidence.

Hong Kong’s border with mainland China was reopened earlier this year, but companies from the mainland haven’t grabbed office space in the numbers many had hoped, said Ada Fung, head of office services at CBRE Hong Kong. Flexible working arrangements and geopolitical tensions that have made many companies pause expansion plans are also crimping demand, she said.

The drop in demand is being exacerbated by a supply glut. Developers bought land and started constructing a number of new buildings before 2019, when widespread protests rocked the city and only ended with the passing of a strict national-security law. Demand for commercial property after that was soon undermined by the spread of Covid-19.

This shift in supply and demand is finally giving potential renters the upper hand, said Fung. “It could be a healthy reset,” she said.

There are some reasons for optimism. Retail businesses have increased their demand for commercial property after the reopening of the border with China, which has brought in tourists looking to spend on luxury goods. There is also hope that a recent rise in residential rents could help home prices.

After an exodus of professionals and other residents in recent years, people have started to move to the city, including foreign students and those coming to Hong Kong through government talent schemes designed to reverse a brain drain. That is helping rents pick up after hitting a bottom in the first quarter, and could lead to more demand for properties as investments, said Cusson Leung, head of property research in Hong Kong at JPMorgan.

August 8, 2023August 8, 2023

WHILE EVERYONE ELSE FIGHTS INFLATION, CHINA DEFLATION FEARS DEEPEN

Signs of deflation are becoming more prevalent across China, heaping extra pressure on Beijing to reignite growth or risk falling into an economic trap it could find hard to escape.

While the rest of the world tussles with inflation, China is at risk of experiencing a prolonged spell of falling prices that—if it takes root—could eat into corporate profits, sap consumer spending and push more people out of work. Its effects would ripple across the globe, easing prices for some products that countries like the U.S. buy from China, but would also deprive the world of important Chinese demand for raw materials and consumer goods, while also creating other problems.

Prices charged by Chinese factories that make products ranging from steel to cement to chemicals have been falling for months. Consumer prices, meanwhile, have gone flat, with prices for certain goods—including sugar, eggs, clothes and household appliances—now falling on a month-over-month basis amid weak demand.

Most economists think China will probably avoid a deep and lasting period of deflation. Its economy is growing, albeit sluggishly, and the government has unveiled a variety of small stimulus measures that could help more. Earlier in July, Liu Guoqiang, a Chinese central bank official, dismissed concerns that China is slipping toward deflation.

But some economists see alarming parallels between China’s current predicament and the experience of Japan, which struggled for years with deflation and stagnant growth.

In the 1990s, a collapse in stock markets and real-estate values in Japan pushed companies and households to drastically cut back spending to service burdensome debts—a so-called balance-sheet recession that some see taking shape in China today.

Data released Thursday showed industrial profits are sinking and average new home sale prices fell in June.

If China were to tip into protracted deflation, it has another big problem: Traditional methods of fighting it are either unpopular in Beijing, or lack potency due to the country’s heavy debt load and other issues. Beijing is wary of large deficit-financed spending programs that could juice growth and push prices higher, while big debts mean consumers and businesses are reluctant to borrow and spend.

“The big concern is whether the policy tools that they have will have much traction in terms of trying to avert deflation, or deal with deflationary pressures once they arrive,” said Eswar Prasad, a professor of trade policy and economics at Cornell University and a former head of the International Monetary Fund’s China division.

For the global economy, extended deflation in China might help cool inflation elsewhere, including the U.S., since its factories make up such a large share of the world’s goods.

However, a flood of cut-price Chinese exports on global markets could squeeze out rival exporters in some countries, hurting jobs and investment in those economies. Chinese export prices for steel and chemicals fell by about a third over the 12 months through June.

A deflationary spell in China would also likely mean weaker Chinese demand for food, energy and raw materials, which big chunks of the world rely on for export earnings.

“The market is underestimating the deflationary impact on the global economy,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.

Consumer prices in the U.S. rose 3% in June from a year earlier, a sharp slowdown from the 8% annual rate a year earlier but still above the 2% rate targeted by the Federal Reserve. Annual inflation in the European Union last month was 6.4% as the region continues to feel the squeeze from high energy and food prices.

In China, annual consumer-price inflation in June was zero. Producer prices fell in China last month by 5.4% from a year earlier.

Subdued consumer spending is one big reason. Some idiosyncratic factors are also at play, including a steep rise last year in the price of pork—a staple in the Chinese diet—that hasn’t been repeated.

But weak price pressures are also a payback of sorts for China’s experience during the Covid-19 pandemic, when exports rocketed thanks to Western demand for gym equipment, home improvement supplies and other goods.

The demand surge helped push Chinese producer prices up 12% between the start of 2020 and their peak in April last year, according to an index calculated by Moody’s Analytics.

When governments lifted lockdowns and Western demand eased, the trend reversed. Producer prices began falling on a year-over-year basis in October and have kept falling every month since.

Chinese factories, which expanded to meet Western demand during the pandemic, now face overcapacity. The hope was that Chinese consumers would step into the breach and soak up excess inventories as export markets dried up. But that hasn’t happened, and as more businesses pivot toward selling into the domestic market, the downward pressure on prices is building.

With global energy and food prices also weaker than before, economists expect overall consumer prices in China to stay nearly flat, or even fall, in the coming months. In addition to many foodstuffs and clothing items, prices have also been falling for electric vehicles, as Chinese automakers and Tesla have slashed prices amid slower sales growth and in an effort to win more share in a crowded market.

China could escape further deflation if growth regains momentum later this year, helped by government stimulus, as some economists anticipate. Nomura economists expect annual consumer-price inflation in China of negative 0.2% in the third quarter, with inflation eventually turning positive again toward the end of the year.

The risk for China is that deflation proves more persistent than expected. Falling prices tend to squeeze spending as consumers await a better deal tomorrow, reinforcing a downward spiral.

The longer it lasts, the more severe its effects become. Entrenched deflation means debts become harder to bear as profits and incomes fall. Companies shed workers to fatten shrinking margins.

In Shanghai, Liu Wang has held off on plans to upgrade his apartment because he is worried about sinking more money into a property whose value he believes could keep dropping.

“The economic condition is highly uncertain now,” said Liu, who works at a logistics firm that is shifting its focus toward domestic business after its export business weakened. In his hometown of Qufu in China’s northeastern Shandong province, demand for homes has been tepid despite a drop in prices, he said.

“The housing bubble is still quite large,” Liu added. “I don’t see any reason why prices will go up.”

In Japan, deflation first appeared in 1995. Excluding a few respites, it more or less stuck around until the 2008-09 financial crisis. Even today, Japan is battling to sustain higher rates of price growth with ultraloose central bank policies.

One textbook response is a massive monetary expansion, lowering interest rates and printing money to spur borrowing and spending, which in theory should trigger more inflation.

But data show Chinese companies are reluctant to take on new debt to expand production, while droves of homeowners are choosing to repay mortgages early. Both are signs of weak demand for loans, muffling the effectiveness of interest-rate cuts.

A major reason is that many companies and households already have such large debts that they don’t want to add more. Household debt has surged to 1.5 times that of income, far above the level of most developed countries, including the U.S., according to calculations by Jens Presthus, associate director of Global Counsel, an advisory firm.

Deflation, or even just the fear of deflation, can make the problem worse. Borrowers worry the cost of servicing their debts is going to rise, so they respond by saving more and spending less.

“Deflation is particularly dangerous when there’s a lot of debt,” said Arthur Budaghyan, chief emerging markets economist at BCA Research.

June 15, 2023

THE BEYONCÉ EFFECT: SWEDEN’S INFLATION FEELS THE HIT

Call it Bey-flation.

Sweden’s higher-than-expected inflation in May was due in part to Beyoncé launching her Renaissance World Tour in Stockholm, according to an economist at Danske Bank.

Fans flocking to Sweden’s capital city sent hotel prices soaring, said economist Michael Grahn. Calling it a “Beyoncé blip,” he estimates that Beyoncé’s tour contributed about 0.2 percentage point to inflation.

“This is very rare,” Grahn said about the effect that Beyoncé’s Stockholm performances on May 10 and 11 had. “Basically, her fans vacuumed hotels around Stockholm with a radius of some 40 miles,” bidding up hotel rates.

Inflation in Sweden was at 9.7% in May, falling from 10.5% the month before, according to Sweden’s government. Economists surveyed by FactSet were expecting inflation to drop to 9.2% last month. Statistics Sweden, which puts out the country’s inflation and other economic reports, said hotel and restaurant prices rose 3.3% in May from the month before.

“Beyoncé probably had an effect on hotel prices in Stockholm the week she performed here,” said Carl Mårtensson, a price statistician at Statistics Sweden, “but it should not have had any significant impact” on Sweden’s inflation.

The Renaissance tour, named after Beyoncé’s most recent album, is making its way around Europe before coming to the U.S. next month. The superstar’s first tour in seven years is playing in soccer and football stadiums, where fans watch her dance with robots and sing while riding a mirrored horse that floats in the air.

Beyoncé, whose hits include “Crazy in Love” and “Formation,” broke the record for most Grammy wins in February after “Renaissance” won best dance/electronic music album. She’s had 32 Grammy wins over her career, the most of any person.

When Renaissance tour tickets went on sale earlier this year, Beyoncé superfans, who call themselves the BeyHive, tried to buy tickets in several cities, fearing they would go quickly. A day after tour dates were announced, Ticketmaster said fan demand for the first round of tickets exceeded the number of tickets available by more than 800%.

Grahn said Sweden’s currency, the krona, is weak, which means tickets and other costs are likely cheaper for fans outside the country.

Other superstars touring this year after a long break have also made an economic impact on the cities they have visited.

Taylor Swift, who is in the midst of her Eras Tour, helped Las Vegas nearly match pre pandemic visitor levels when she performed there in March, the Las Vegas tourism authority said. Cities have been going all out to welcome Swifties in town for the Eras Tour, lighting up monuments in her signature colours and temporarily renaming streets after her.

June 15, 2023

FIRST IT WAS QUIET QUITTING, NOW WORKERS ARE FACING OFF WITH THEIR BOSSES

More and more Americans aren’t feeling great at work.

Half of workers aren’t engaged on the job, putting in minimal effort to get by, according to research by Gallup released Tuesday. Employee engagement in the U.S. declined for the second year in a row. There is also a growing share of the workforce that is disengaged, or resentful that their needs aren’t being met. In some cases, these workers are disgruntled over low pay and long hours, or they have lost trust in their employers.

“Employers are just not as in touch with employees,” said Jim Harter, chief workplace scientist at Gallup and lead author on the report. Some of the recent shift in attitude stems from workers having unclear expectations from their managers.

Workers’ frustrations have been building since 2021, after Gallup-measured U.S. worker-engagement levels hit their highest level on record in 2020. In the spring and summer of 2020, as Covid-19 spread and there was social unrest in the wake of George Floyd’s murder, executives at many companies had town halls and listening sessions with employees, communicating organisational mission and keeping workplace relationships strong.

This year, more companies are trying to bring workers back to offices as bosses fret about worker productivity and loyalty.

Gallup surveyed more than 60,000 people in the U.S. to compile the report, which has tracked Americans’ sentiment about their jobs since 2000, and says engaged workers are more productive and tend to stay at their jobs for longer.

“If you feel like your employer isn’t giving you what you need to do your work, you’re going to be much less loyal—and looking for other work,” said Harter.

The remote work divide

Gallup’s findings come amid backlash from workers, many of whom have recently stepped up protests against in-office requirements as companies change pandemic-era policies.

Workers at insurer Farmers Group called to unionise, and some pledged to quit after a new chief executive said he would require most workers to be in-office three days a week. Amazon.com workers demonstrated at lunch recently against a hybrid-work policy with three days in the office a week.

An employee’s relationship with a direct boss is more important to engagement than where people work, said Harter. One way to build these connections is for managers to have meaningful conversations with their employees, preferably at least once a week.

Working on trust

Many employees see shifts away from flexible schedules and remote work options as a signal that executives don’t trust them to do their jobs outside of the office. Others say benefits to remote work they experienced during the pandemic, including more time with family and cutting back commutes, are now critical to their happiness.

The employers making more in-office work a requirement are, in part, motivated by trying to bolster workers’ loyalty, which they correlate with longer retention, said Katy George, a senior partner and chief people officer at McKinsey & Co.

Kyle Pflueger, 34 years old, was hired in 2020 to work remotely as a product manager. He met his co-workers in person just a few times over the years and never felt fully connected to his work or colleagues, but as the breadwinner for his family, he needed the pay, retirement benefits and health insurance.

Pflueger left his full-time job this month to focus on his independent projects.

“I wasn’t feeling particularly happy with the work that I was doing,” he said. He now works full time for himself, building and maintaining websites for businesses.

Looking for less stress

Workers also said they were more stressed this year than last, according to Gallup’s survey. American workers are among the most stressed, tied with workers in Canada and parts of East Asia.

Workplace stressors include low salaries, long hours and a lack of opportunity for advancement, according to an October report from the U.S. Surgeon General. The report also warned that workplace stress can be bad for mental health, disrupt sleep and raise one’s vulnerability to infection.

Michele Spilberg Hart, who directs marketing for a Boston-area health nonprofit, said that she has told her staff to take time off when they aren’t feeling well mentally or physically. Their work isn’t life-or-death, and taking breaks can help people come back with more energy and better ideas, she said.

“They cannot do good work and be healthy if they’re not taking care of themselves first,” she said. “If you don’t take care of yourself, nobody else will.”

June 1, 2023June 1, 2023

WE ASKED WORKERS WHY THEY’RE NOT COMING BACK TO THE OFFICE

What’s still keeping American workers out of the office?

At a time when restaurants, planes and concert arenas are packed to the rafters, office buildings remain half full. Thinly populated cubicles and hallways are straining downtown economies and, bosses say, fragmenting corporate cultures as workers lose a sense of engagement.

Yet workers say high costs, caregiving duties, long commutes and days still scheduled full of Zooms are keeping them at home at least part of the time, along with a lingering sense that they’re able to do their jobs competently from anywhere. More than a dozen workers interviewed by The Wall Street Journal say they can’t envision returning to a five-day office routine, even if they’re missing career development or winding up on the company layoff list.

Managers say they will renew the push to get employees back into offices later this year. The share of companies planning to keep office attendance voluntary, rather than mandatory, is dropping, according to a survey released in May of more than 200 corporate real-estate executives conducted by property-services firm CBRE, one of the largest managers of U.S. office space.

A battle of wills could be ahead. The gap between what employees and bosses want remains wide, with bosses expecting in-person collaboration and workers loath to forgo flexibility, according to monthly surveys of worker sentiment maintained by Nicholas Bloom, a Stanford University economist who studies remote work.

Escalating expenses

One reason workers say they’re reluctant to return is money. Some who have lost remote-work privileges said they are spending hundreds, or in some cases thousands, of dollars each month on meals, commutes and child care.

One supercommuter who treks to her Manhattan job from her home in Philadelphia negotiated a two-day-a-week limit to her New York office time this year. Otherwise, she said she could easily spend $10,000 a year on Amtrak tickets if she commuted five days a week.

Christos Berger, a 25-year-old mortgage-loan assistant who lives outside Washington, D.C., estimates she spends $2,100 on child care and $450 on gas monthly now that she is working up to three days a week in the office.

Berger and her husband juggled parenting duties when they were fully remote. The cost of office life has her contemplating a big ask: clearance to work from home full time.

“Companies are pushing you to be available at night, be available on weekends,” she said, adding that she feels employers aren’t taking into account parents’ need for family time.

Rachel Cottam, a 31-year-old head of content for a tech company, works full time from her home near Salt Lake City, making the occasional out-of-town trip to headquarters. She used to be a high-school teacher, spending weekdays in the classroom. Back then, she and her husband spent $100 a week on child care and $70 a week on gas. Now they save that money. She even let her car insurance company know she no longer commutes and they knocked $5 a month off the bill.

Friends who have been recalled to offices tell Cottam about the added cost of coffee, lunch and beauty supplies. They also talk about the emotional cost they feel from losing work flexibility.

“For them, it feels like this great ‘future of work’ they’ve been gifted is suddenly ripped away,” she said.

Parent trade-offs

If pandemic-era flexible schedules go away, a huge number of parents will drop out of the workforce, workers say.

When Meghan Skornia, a 36-year-old urban planner and married mother of an 18-month-old son, was looking for a new job last year, she weeded out job openings with strict in-office policies. Were she given such mandates, she said, she would consider becoming an independent consultant.

The firm in Portland, Ore., where Skornia now works requests one day a week in the office, but doesn’t dictate which day. The arrangement lets her spend time with her son and juggle her job duties, she said. “If I were in the office five days a week, I wouldn’t really ever see my son, except for weekends.”

Emotional labor

For some, coming into the office means donning a mask to fit in.

Kenneth Thomas, 42, said he left his investment-firm job in the summer of 2021 when the company insisted that workers return to the office full time. Thomas, who describes himself as a 6-foot-2 Black man, said managing how he was perceived—not slipping into slang or inadvertently appearing threatening through body language—made the office workday exhausting. He said that other professionals of colour have told him they feel similarly isolated at work.

“When I was working from home, it freed up so much of my mental bandwidth,” he said. His current job, treasurer of a green-energy company, allows him to work remotely two or three days a week.

Lost productivity

The longer the commute, the less likely workers are to return to offices.

Ryan Koch, a Berkeley, Calif., resident, went to his San Francisco office two days a week as required late last year, but then he let his attendance slide, because commuting to an office felt pointless. “I’m doing the same video calls that I can be doing at home,” he said.

Koch, who works in sales, said his nonattendance wasn’t noted so long as his numbers were good. When Koch and other colleagues were unable to meet sales quotas in recent weeks, they were laid off. Ignoring the in-office requirement probably didn’t help, he said, adding he hopes to land a new hybrid role where he goes in one or two days.

Jess Goodwin, a 36-year-old media-marketing professional, turned down an offer to go from freelance to full time earlier this year because the role required office time and no change in pay.

Goodwin said a manager “made it really clear that this is what they’re mandating right now and it could change in the future to ‘you have to be back in five days a week.’”

Goodwin, who lives in Brooklyn, N.Y., calculated that subway commutes to Midtown Manhattan would consume more than 150 hours annually, in addition to time spent getting ready for work.

Goodwin’s holding out for a better offer. She said she would consider a hybrid position if it came with a generous package and good commute, adding: “And I would also probably need something in my contract being like, ‘We’re not going to increase the number of days you have to come in.’”

May 26, 2023

The designer’s Mind: Delving into the Best Interior Design Books

There’s no shortage of design inspiration online but nothing beats the joy of spending an afternoon immersing yourself in a good interior design book. Edited, carefully curated and, above all, designed, these titles take you behind the scenes of some of the world’s most beautiful interiors in a considered way. Think of it like the difference between listening to a few tunes on Spotify versus releasing a thoughtfully crafted studio album. We’ve assembled our top six of interior design books on the market right now for your viewing and reading pleasure.

1. Interiors beyond the primary palette

Step inside the world of award-winning interior design duo Juliette Arent and Sarah-Jane Pyke in this, their first compendium of their work. A ‘best of’ over more than 15 years working together, it’s a masterclass in working with colour and pattern as seen through 18 projects from around the country. With a focus on the idea of home as sanctuary, this hefty tome offers insight into the mind of the designer with points on where to find inspiration, meeting client briefs and the importance of relationships. Thames & Hudson, $120

2 House of Joy

If there was ever a book title for our times, then this is it. With a subtitle of Playful Homes and Cheerful Living, this book champions fun in interior design, with bold and bright homes from around the world to delight and inspire. While there’s a good dose of the unexpected, like a disco ball in the garden, there’s no mayhem in these spaces. Instead, they’re beautifully executed to tempt even the most colour shy. Gestalten, $105

*3. Abigail Ahern Masterclass***

Some design books are beautiful to look at, and that’s it. This is not one of those books. A master of colour and pattern, UK designer Ahern offers a practical foundational guide to beautiful interiors, mixing form with function in her latest book, Masterclass. Find the inspiration you need to create a gorgeous home. HarperCollins, $65

4. Interiors Now!

Looking for a visual crash course in international design trends with longevity? This is the book for you. Featuring homes across the globe, from New York to Auckland via Avignon, the biggest dilemma for readers is settling on a style. Many of the projects are owned by designers and creatives, lending a dynamic edge to this tome, now in its 40th year. Taschen, $50

5. Home by the Sea

For many Australians, the ocean holds an almost hypnotic appeal. Home by the Sea by Natalie Walton lets you imagine, for a little while at least, what it’s like living the dream in a beach shack in Byron Bay. The book tours 18 homes in and around the region and the hinterland owned by artists, designers and makers. With photography by Amelia Fullarton, it champions the good life. Hardie Grant, $60

6. The Layered Interior

Released last year, this is the third volume from award-winning interior designer Greg Natale. Different in format from his earlier books, the eight projects featured are Australian but with a slight Euro-centric focus. The writing is conversational, almost intimate, inviting the reader into the most luxurious spaces beautifully captured by photographer Anson Smart. This coffee table tome is perfect for dreamers and doers alike. Rizzoli, $110

How can I improve my interior design knowledge?

To be an interior designer, most people have completed a bachelor’s degree or advanced diploma. However, anyone can improve their interior design knowledge by listening to or reading about the design process, as well as taking short courses in design from a reputable design school. Look for online tutorials or interior design books that provide step-by-step guides to creating beautiful spaces and follow interior design social media accounts to get you started. If you want to learn more, you can contact industry bodies such as the Design Institute of Australia for next steps.

What should I read for interior design?

While interior design is often considered a visual medium, there is a lot to understand about the way spaces flow and the balance of materials required. If you have a casual interest, look for design books that appeal to your personal style, which will offer tips on using colour, pattern and texture. For further information, opt for books explaining the main principles of interior design which will discuss questions of balance, scale and proportion, as well as form and function.

Can I teach myself interior design?

In an age where information on most topics is widely available online, yes, you can teach yourself the rudimentaries of interior design. However, a reputable course or degree will provide you with set tasks to test your knowledge and skills before going out into real world experiences. There are several options to qualify as an interior designers, including university and TAFE courses, as well as private colleges.

May 26, 2023May 26, 2023

Best Floor Lamps for Modern Living: Embrace Contemporary Illumination

It’s that time of year when getting off the lounge seems like way too much effort. Instead, a comfortable chair, a good book and a warm beverage beckon. Making sure your living space works, whether you’re looking to create zones within an open plan, or you want to read without straining your eyes, depends on your choice of lighting. As well as being up to the task to create mood and function, these floor lamps make a style statement. We’ve selected the best, from classic designs to timeless contemporary to ensure your living areas are inviting, as well as inspiring.

Tote Standing Lamp

The classic shapes of the Tote standing lamp by Tide Design have been given a clean, contemporary feel with the added warmth of natural timber. It’s the perfect shape for those who love tradition with a side of biophilic design. Available in three timbers, from $1,430 from Workshopped.

Foscarini Twiggy floor lamp

Made from coated fibreglass , coated metal and aluminium, the impossibly flexible Foscarini Twiggy floor lamp is ideal over lounges and cosy corners. From a design perspective, it breaks up strong lineal shapes associated with modular sofas. Plus, it creates pools of light perfect for zoning, $2,885 from Space.

Cliff 02 Lamp

The tripod base of the brass and black matte Cliff 02 lamp from the Lambert & Fils workshop adds extra stability with a contemporary edge. A study in minimalism, the brass finishes deliver a jewel-like finish to the supporting rods, $4,380 from Living Edge.

Copenhagen SC14 Lamp

Perfect for creating visual warmth on cold nights, the Copenhagen SC14 lamp by &Tradition emits a soft ambient light with the control of a dimmer option and opal glass shade, $2,448 from Cult

Alma Lamp

US designer Kelly Wearstler’s stunning Alma lamp has the solidity of a white marble base and the allure of an antique burnished brass base. The cylindrical head of the pharmacy floor lamp can rotate 20 degrees left or right to best direct light, $2,079 from Montauk Lighting.

Tonone Bolt 2 Arm Floor Lamp

This lamp is right at home in any room in the house, from the living room to the kids’ bedrooms. Adjustable at two points to allow a change of height, as well as direction, it has a steel base and rods with an aluminium shade. It’s also available in a range of colours suitable for contemporary or traditional interiors, $1100 from Mondopiero.

What light is best for living room lamps?

Lamps are an ideal way to create a sense of warmth in your living room but it’s critical to choose the right light bulbs to avoid your spaces looking like a convenience store. The colour temperature of lights are measured in Kelvins, with 2700k-3000k considered warm and 4000k-5000k considered cool light.

How much should you spend on a floor lamp?

The good news is floor lamps are available at a wide range of price points. Like most furniture, however, you get what you pay for. Prices for a reasonably good floor lamp start from $200 up to $5000 or more. Ensure it has at least a 12-month warranty.

What type of floor lamp gives off the most light?

This will depend on the type of lightbulb you use, as well as the style of lamp shade. Light intensity is measured in lumens and watts. A standard 40w lightbulb emits 450 lumens, while a 60w bulb emits 800 lumens. LED (light emitting diodes) lights output the most light in the most energy efficient way. A wider lampshade design will allow the light to extend its reach.

May 17, 2023

HOW AI WILL CHANGE THE WORKPLACE

Artificial intelligence has been affecting how we work for some time—helping to craft job postings and evaluate applications, judging how efficiently we complete jobs and, for gig workers, determining assignments and pay.

But in the past year, and especially the past six months, generative AI has supercharged the potential of technology to help, hinder or reorient how we work. Visual tools like DALL·E 2 and Midjourney may drastically change graphic design. Large language-model text generation, beginning in earnest with the release of ChatGPT, promises to affect every activity that involves touching a keyboard.

To learn more about how the worlds of work and AI will interact, we spoke with experts in computer science, human resources, recruiting, corporate leadership, psychology and more. Here are some of their predictions.

Automating ideas

AI will continue the current process of automating parts of workers’ jobs. But while today’s automation is often described as applying to dull, dirty and dangerous tasks such as moving parts in a factory or warehouse, generative AI brings a new dynamic: Primarily, it supports knowledge work by providing the ability to create first drafts of documents, emails, presentations, images, video, product designs, etc.

So, knowledge workers might spend more time editing than creating, particularly as generative AI is embedded into all the software products they use today. For instance, instead of an email system just typing ahead a few words, it could draft several paragraphs. Customer-relationship-management software could suggest topics to discuss with a sales prospect and even a script to follow. And a salesperson could describe a presentation in natural language, and draft slides could be created, accessing corporate data and images to fill out details.

But there are some GenAI applications where the potential to have transformative impact really comes to the fore: For example, in research and development, some experiments using generative AI to support writing software code have shown very high levels of increasing productivity. But that doesn’t mean we’ll need a lot fewer software engineers, because the world needs more software. Generative AI also has the potential for improving the productivity of contact centres. There already were technologies that could automate interactions with customers; generative AI has the potential for making these interactions feel much more natural.

—Michael Chui, partner, McKinsey Global Institute

Flatter organisations

Artificial intelligence is likely to flatten many organisations due to its ability to automate work activities. Right now, most organisations have entry-level people who perform routine tasks, midlevel individuals who supervise them and high-level employees who set the direction of the organisation.

That organisational structure will no longer be necessary. AI can automate many of the tasks performed by entry-level workers. Accounting features, purchase orders and job requisitions are already being automated, and workplaces no longer need people who manually compile or analyse information.

As generative AI becomes more widely deployed, even more tasks will be automated. In addition, job supervision and assessment won’t need as much human oversight. Customers can rate employees on how well they perform basic tasks and allow people to get the services they want. Using data analytics and AI, companies can use the responses to weed out low-performing workers and reward their top individuals. The end result will be fewer layers of management and a smaller number of employees overall in the organisation.

—Darrell West, senior fellow, governance studies, Brookings Institution

How human are we? Machines will tell us

In the past, managers turned to software to judge workers on technical matters—counting keystrokes or time away from the screen. Now companies are using machines to judge how much empathy their employees show.

I was recently sent a “management tip of the day,” advice on how to prepare for a job interview conducted by an artificial intelligence—a process that is all too common these days. A good score required that I appear “natural” with the machine, defined as injecting “authenticity and humanity to the interview.” It seemed a through-the-looking-glass request. A machine would be judging me on qualities that only human beings can exhibit.

The AI judgments don’t end with interviews. It is increasingly common for corporations to use AI programs to monitor employee empathy on the job. For instance, in call centres, AI programs coach and score workers on an empathy scale to judge their performance with callers.

With the addition of ChatGPT to a full suite of office products, texts, emails and calls, there is no limit to the interactions that may be judged by pretend-empathy machines. They will pretend to understand jealousy, competition, depression and insecurity, all the messy human feelings that come up in the life of a firm.

When machines test us on how we respond to such human complexities, high scores may go to those who exhibit qualities that machines value most—consistency and a bias toward tidying up what seems messy. Those who don’t stack up may lose their jobs.

It is backward thinking: Technology redefines human empathy as what machines can understand. Having built the machines that will judge us, now we will train ourselves to please the machines.

—Sherry Turkle, author and Abby Rockefeller Mauzé Professor of the Social Studies of Science and Technology, Massachusetts Institute of Technology

A threat to ethics

We are already seeing the rise of digital assistants that speak with a human voice and can use human appearance and social intelligence to negotiate disputes, brainstorm business strategies or conduct interviews. But our research illustrates that people may act less ethically when collaborating via AI.

Traditionally, teammates establish emotional bonds, show concern for each other’s goals and call out their colleagues for transgressions. But these social checks on ethical behaviour weaken when people interact indirectly through virtual assistants. Instead, interactions become more transactional and self-interested.

For instance, in typical face-to-face negotiations, most people follow norms of fairness and politeness. They feel guilt when taking advantage of their partner. But the dynamic changes when people use an AI to craft responses and strategies: In these situations, we found, people are more likely to instruct an AI assistant to use deception and emotional manipulation to extract unfair deals when negotiating on their behalf.

Understanding these ethics risks will become an active focus of business policy and AI research.

—Jonathan Gratch, professor of computer science, University of Southern California

An edge for the aged

AI will enable older workers to be seen, even by those with ageist eyes, as young again.

Younger adults tend to excel at work that uses fluid intelligence that involves analysis and solving discrete problems quickly. Older workers are thought to exhibit greater crystallised intelligence—the capacity to leverage experience and knowledge gained over years to quickly see patterns, nuance and emotional insights, and the capacity to determine which problems should be addressed and which are just noise.

AI is likely to provide a kind of augmented intelligence to older workers, enabling experienced professionals to fully leverage their talent and skills.

For example, AI will be an invaluable collaborator with physicians, speeding the collection and organisation of critical information such as patient symptom history, genetic profiles, medication interactions, as well as past successful treatment plans for similar conditions, etc. These systems will enable physicians of all ages to gather information quickly, but older doctors will be better equipped to apply their years of experience and knowledge to validate AI diagnoses and treatment recommendations.

AI will be more than a collaborative assistant to older workers. It will also be a valuable coach. The sheer growth and velocity of knowledge and technology is making training and upskilling essential. Unfortunately, many employers don’t invest in older-worker education. Now AI applications are being deployed in workplace education to address individual learning and knowledge gaps, helping older workers remain current and competitive.

—Joseph F. Coughlin, director of AgeLab, Massachusetts Institute of Technology

Navigating new tech

Today, most organisations suffer from a “digital dexterity gap,” where the workforce is largely unable to keep pace with fast-changing technology. Organisations have more technology than their employees are comfortable using, creating barriers to efficiency and productivity growth.

AI services strip away complexity. By using conversational interfaces and natural-language processing, AI removes the need for workers to master complex computer functions and menus. People simply describe what is needed, in nontechnical language, and refine their requests to get better output.

An employee, for example, could give an AI historical data and say, “Find and rank all the variables that will determine the market potential for this new product.” Before conversational interfaces were developed, getting the information would require a lengthy and complex series of interactions.

—Matt Cain, vice president and distinguished analyst, Gartner

An opportunity for building talent

As AI takes over routine tasks, there will be a temptation to cut the whole tier of entry-level employees: Summarising documents, answering routine emails, writing basic computer code and solving simple logistical challenges are all tasks that AIs can do about as well as an inexperienced human, and at much lower cost.

But employers still need an on ramp for new hires. If you stop hiring entry-level employees, you’ll have to do all your midlevel hiring from outside the organisation. And if every organization pares back on entry-level hires, it will get harder and harder to find experienced midcareer talent anywhere.

That’s why it pays to cultivate your own long-term talent pool by hiring green employees, but rethinking how they are tasked and trained. Instead of piling your juniors with grunt work and trusting that they’ll learn through observation, assign them more challenging tasks, like drafting reports instead of just summarising them—the explosion in AI research and writing tools means that kind of work is now well within the grasp of inexperienced hires. With more active coaching and mentoring, these green employees can grow into valuable colleagues, much more quickly.

—Alexandra Samuel, digital-workplace speaker and co-author of “Remote, Inc.”

The danger of following blindly

So many jobs involve writing standard responses—thank-you notes to customers, responses to job applicants and unfortunately term papers—that AI is instantly and easily used in almost every white-collar role.

The concern isn’t that the responses produced aren’t original or creative. How creative does a performance appraisal need to be? It is that if ChatGPT writes the report, the “author” hasn’t thought about it, hasn’t weighed the arguments and then come to their own conclusions in the text. They cannot explain to someone why the report says what it does, but they now have to live with its conclusions.

What happens when the ChatGPT report fails to include proprietary information that you could have found if you searched yourself, and it changes the conclusions? How do we explain to a subordinate why the appraisal written by ChatGPT gave them a lower score compared with last year, even though their performance seemed to be the same? The temptation to use it without thinking through the arguments and explanations could lead to big mistakes.

—Peter Cappelli and Sonny Tambe, professor and associate professor, Wharton School of the University of Pennsylvania

Big-picture thinking

Workers are already using ChatGPT to craft the perfect Facebook ad or tools like Descript to edit videos, but AI will get incorporated in more upstream work. AI will be in the boardroom, brainstorming sessions and planning meetings.

Imagine an AI system that runs global simulations and impact analyses for 5,000 different budget plans. Or an AI that proactively writes new code for you when it discovers that you have a bottleneck in your sales planning. Or a proxy AI trained on customer research that allows you to have simulated conversations with your target market. We’re moving from task-oriented AI to goal-oriented AI, and enterprises are looking to leverage it safely, securely and ethically.

—Allie K. Miller, AI entrepreneur, adviser and investor

Money management and the human touch

Many asset-management companies are now offering hybrid advisory services—involving both human advisers and algorithms—to their clients. But these new services are unlikely to reduce the demand for human advisers.

Instead, automation is expanding the market for financial advisers by making it more cost effective to serve clients with lower levels of wealth. Human advisers can now cater to more clients, since certain tasks, such as addressing simple customer queries and constructing portfolios, can be automated. As a result, asset managers are now hiring more human advisers instead of laying them off.

In addition, the requirements for a financial adviser’s success are changing. As more portfolio management is turned over to algorithms, technical portfolio-allocation skills are becoming less significant. However, it is becoming more important for advisers to explain how algorithms operate and assist investors in navigating turbulent market conditions. Our research shows that human advisers are still essential for customer satisfaction and retention because of their ability to reduce clients’ discomfort from interacting with algorithms and reducing clients’ uncertainty regarding the algorithms’ performance.

—Alberto Rossi, finance professor and director of the AI, Analytics and Future of Work Initiative, Georgetown University

Navigating the corporate-benefits maze

AI-powered “concierge” systems will reduce or eliminate the frustrating search for answers that many employees endure today when seeking services from their employer. These systems will help employees make the most of their benefits, stay compliant with policies or simply find out information about their colleagues, organisation structure or customers that can sometimes be difficult to unearth in large organisations. When do my health benefits renew? What is my current deductible? What is the policy for meal expenses in New York?

What’s more, in the hybrid work environment, AI-driven concierge tools will book conference rooms, optimise the location of colleagues in the office so they can better collaborate, and help office managers manage capacity and services.

—Joe Atkinson, U.S. chief products and technology officer, PwC

Don’t forget human judgment

At its best, AI will drive better collaboration and productivity. It will help employees turn notes into documents and documents into presentations. Yet human judgment is key to unlocking AI’s power. Our data reveals that only around half of employees believe they know when to question the results of automation or AI—the other half don’t think they have that skill. But generative AI is already known to hallucinate—make up false facts—and employees who blindly follow its outputs risk failing.

So, companies must equip employees with the skills and inclinations needed to successfully use AI. Rather than acting on the AI’s meeting summary alone, employees must understand that talking to human colleagues who attended the meeting isn’t optional. They must also learn to proofread AI-produced text, confirming cited facts with outside sources. And governance structures must ensure that AI-produced content always includes a human in the loop before it is used.

—J.P. Gownder, vice president and principal analyst, Forrester

Machines get into human resources

The emergence of AI tools and data analytics is transforming the way organisations discover, assess and select talent. If trained with the right data, AI models can also compare candidate profiles to a company’s most successful employees, identify professionals with a proven record and determine who is most likely to consider a job change.

For example, for certain roles, high performers’ profiles include a broad range of skills that are relevant to multiple roles, while for other functions, optimal skill sets are much more narrow and specific. Our data indicates that the comparison of a candidate’s skills to those of high performers produces the most predictive indicator of future success, particularly on contract jobs.

Also, AI models can be further enhanced by incorporating individual performance data for employees or contractors who have previous experience with an employer. There is a wealth of such data available to talent solutions firms that employ hundreds of thousands of contractors annually.

Ultimately, though, it is important to think of AI as a tool—not a substitute—for the human art of recruiting. Assessing and selecting talent requires insight about a candidate’s communication skills, attitude and determination level and what it takes to succeed.

—M. Keith Waddell, president and CEO, Robert Half

A productivity boost

Early research suggests that while generative AI is likely to boost the productivity of all workers, it may benefit low-skilled workers more. A randomised field experiment by Microsoft reported that generative AI enabled a 55% decrease in average task-completion time for software developers, with the most benefit for older developers and those with less programming experience. Similarly, a study from MIT reports that ChatGPT’s use in professional writing raises average productivity and quality for low-ability workers more than their high-ability peers.

In an ongoing experimental study with M.B.A. students who were tasked with writing business reports, I found that ChatGPT’s availability not only increased productivity but also student satisfaction. More students expressed a desire to write when a tool like ChatGPT was available. In short, the impact of generative AI might not just be a general increase in productivity but also a narrowing of the productivity gap between low-skilled workers and high-skilled ones.

—Kartik Hosanagar, John C. Hower Professor, Wharton School of the University of Pennsylvania

A tool for hackers

It is the classic email scam: An employee receives a bogus note that appears to be from their manager, telling them to transfer funds to some account. For this to be convincing, the attacker needs to access the company’s computer systems to learn about the firm and the target, including their personal details.

AI makes this scamming much easier—and more dangerous.

By getting access to companies’ internal emails and nonpublic reports, hackers can use AI to generate very convincing messages. For example, the message might start with: “Fred, it was great to have dinner with you and your wife last Wednesday, we should do that again. Meanwhile, I need you to…”

Or how about a phone call or videoconference with your boss? Deep fakes make it possible to imitate the voice and even the image of your manager.

AI may also lead to smaller and smaller targets for scams. If it takes lots of manual labor to create customised spear-phishing emails, it is not worth it for hackers to cheat people out of $100. But if AI makes it trivial and cheap to create phoney emails, no one is too low on the totem pole to be ignored.

All this raises the level of skepticism that we must have substantially. Procedures will have to be put in place to validate the authenticity of who you are dealing with. In many cases, a phone call might be sufficient. A somewhat deeper approach might be a phone call to the boss’ administrative assistant, in addition to a boss—a bit like doing multifactor authentication on the computer. In extreme cases, a face-to-face meeting might be necessary.

—Stuart Madnick, professor of information technologies, MIT Sloan School of Management

Spotting the skill gaps

AI helps organisations build for the future by automatically detecting employee, team and organisation wide skills—and identifying ways to address gaps before management is even aware of them.

For roles like nurses, software developers and marketers, necessary skills are constantly changing, and it can be tough for organisations to keep track of what is needed. Nurses, for instance, must become familiar with an ever-increasing number of tech platforms, as well as data analysis to help patient outcomes.

As these needs evolve, AI can help keep track of what skills organisations need and predict what they might need next. For instance, a business could use AI to scan job descriptions in its industry to look for trends. The AI might notice that lots of marketing jobs now require employees to understand new types of analytics—and your employees must understand them, too, or miss out on important strategic insights.

—Mahe Bayireddi, CEO and co-founder, Phenom