Working from home (WFH) has been around for decades. The share of WFH three or more days per week was under 1% in 1980, growing modestly with the rise of the internet to 2.4% in 2010 and 4.0% in 2018. Then came Covid-19, forcing tens of millions around the world to work from home and triggering a mass workplace experiment that broke through the technological and cultural barriers that had prevented WFH adoption in the past.
Economists Jose Maria Barrero (Instituto Tecnológico Autónomo de México), Nicholas Bloom (Stanford University), and Stephen J. Davis (University of Chicago) have been tracking the evolution of WFH since May of 2020 by conducting monthly surveys. Their surveys ask a number of questions about working arrangements with WFH during the pandemic, as well as worker preferences and employer plans after the pandemic ends. Typical respondent are 40 to 50 years old, have one to three years of college, and earned $40 to $50 thousand in 2019.
One of their first surveys found that the percentage of paid full days worked from home once COVID hit in April of 2020 was 61.4%, a huge increase from their 4.8% WFH estimate just before COVID. The percentage then went down in subsequent months. One year later, in April of 2021, WFH was around 45%.
Let me share a few details of the August 2021 survey. The percentage of paid full days worked from home was 40.5%. Workers said that that post-COVID their percentage of working days from home was likely to be around 25%. Survey respondents said that post-COVID they would like to work from home around 2.3 days per week, while their employer would want them to work from home around 1.3 days per week.
About two years later, the June 2023 survey found that 12% of full-time employees were fully remote, 59% were full-time on site, and 29% were in some kind of hybrid arrangement. Overall, the percentage of paid full days worked from home was around 28% in the first half of 2023. Post-pandemic, employer plans for those able work from home is about 2.2 days per week, fairly close to the 2.7 days per week wishes of the employees able to do their work from home.
In an April 2021 working paper, “Why Working from Home Will Stick,” Barrero, Bloom, and Davis wrote that “Much of the COVID-induced shift to WFH will stick long after the pandemic ends. … [W]e project that American workers will supply about 20 percent of full workdays from home in the post-pandemic economy, four times the pre-COVID level. Desires to work from home part of the week are pervasive across groups defined by age, education, gender, earnings, and family circumstances. … We also estimate that higher levels of WFH will boost productivity by about 4.6 percent. Over half of this productivity gain reflects the savings in commuting time afforded by WFH.”
“In some ways, one of the biggest lasting legacies of the pandemic will be the shift to work from home,” said professor Bloom at a Stanford colloquium on the future of work earlier this year. But, a June, 2023 article in The Economist raised a number of questions about whether and how WFH is likely to stick.
“A gradual reverse migration is under way, from Zoom to the conference room,” said The Economist in “The Working from Home Illusion Fades.” “Wall Street firms have been among the most forceful in summoning workers to their offices, but in recent months even many tech titans — Apple, Google, Meta and more — have demanded staff show up to the office at least three days a week. For work-from-home believers, it looks like the revenge of corporate curmudgeons. Didn’t a spate of studies during the covid-19 pandemic demonstrate that remote work was often more productive than toiling in the office?”
The article references “Working Remotely? Selection, Treatment, and the Market for Remote Work,” a May, 2023 paper by economists Natalia Emanuel and Emma Harrington. “How does remote work affect productivity and how productive are workers who choose remote jobs?,” asked the authors in the paper’s abstract. Does working remotely reduce productivity? Does remote work attract less productive workers? Emanuel and Harrington addressed these questions by analyzing the productivity of remote and on-site call center workers in a Fortune 500 retailer.
“Prior to COVID-19, remote workers answered 12 percent fewer calls per hour than on-site workers,” wrote the authors in the paper’s abstract. “When the call centers closed due to COVID-19, the productivity of formerly on-site workers declined by 4 percent relative to already-remote workers, indicating that a third of the initial gap was due to a negative treatment effect of remote work. Yet an 8 percent productivity gap persisted, indicating that the majority of the productivity gap was due to negative worker selection into remote work. Difference-in-differences designs also indicate that remote work degraded call quality — particularly for inexperienced workers — and reduced workers’ promotion rates.”
The Economist article cites other studies that have reached similar conclusions. “Working from Home, Worker Sorting and Development” by David Atkin, Antoinette Schoar, and Sumit Shinde found that the productivity of workers randomly assigned to working from home is 18% lower than those in the office. “Work from Home & Productivity: Evidence from Personnel & Analytics Data on IT Professionals” by Michael Gibbs, Friderieke Mendel, and Christoph Siemroth found that at a large Asian IT services company, productivity declined between 8% and 19% while hours worked outside normal business hours rose by 18%.
“The reasons for the findings will probably not surprise anyone who has spent much of the past few years working from a dining-room table. It is harder for people to collaborate from home,” said The Economist. “Teleconferencing is a pale imitation of in-the-flesh meetings. … To use the terminology of Ronald Coase, an economist who focused on the structure of companies, all these problems represent an increase in co-ordination costs, making collective enterprise more unwieldy.” The article does add that “Some of the co-ordination costs of remote work might reasonably be expected to fall as people get used to it.”
On the other hand, The Economist observed, “There is more to work (and life) than productivity. Perhaps the greatest virtue of remote work is that it leads to happier employees. People spend less time commuting, which from their vantage-point might feel like an increase in productivity, even if conventional measures fail to detect it. They can more easily fit in school pickups and doctor appointments, not to mention the occasional lie-in or midmorning jog. And some tasks — notably, those requiring unbroken concentration for long periods — can often be done more smoothly from home than in open-plan offices. All this explains why so many workers have become so office-shy.”
“Indeed, several surveys have found employees are willing to accept pay cuts for the option of working from home,” said the article in conclusion. “Having satisfied employees on slightly lower pay, in turn, might be a good deal for corporate managers. For many people, then, the future of work will remain hybrid. Nevertheless, the balance of the work week is likely to tilt back to the office and away from home — not because bosses are sadomasochists with a kink for rush-hour traffic, but because better productivity lies in that direction.”
But, in a more recent Economist essay, professor Bloom reached a somewhat different conclusion. “Overall, about 20% of all days are now worked from home. Looking ahead, two powerful economic forces will drive WFH up, perhaps to 30% of days worked a decade from now. The first and most powerful of these is improving technology. … When markets grow, firms want to innovate to serve the newly enlarged and more profitable market. As WFH has jumped since 2019, the rewards from producing the best video camera, video-conference package or desk-scheduling software have also shot up.”
“Data show that younger startups tend to be more remote-focused,” is the second economic force driving WFH higher. “These firms have been born in an era when having an office is optional and meeting customers and business partners online is standard. Many see forgoing offices and using more remote workers as a key cost-saving strategy. As a result, employees at today’s new firms work almost twice as many days from home as those at firms founded 30 years ago. … Indeed, recruiters I talk to argue that the ‘big two’ employment perks — pensions and health care — have become the ‘big three’ with the addition of remote working.”
Comments