The New Battles to Come Over Working From Home
(Bloomberg Opinion) -- A lot of things can be expected to go back to normal once the Covid-19 pandemic is truly over. Restaurants, cruise ships and resort towns will be packed again. Spending on home improvements will subside.
Since early last spring, though, many thoughtful people have been speculating that the workplace will never be the same. The success of the great experiment in working from home during the pandemic has made it much clearer than it was before that many of the things we do in offices can be done just as well or better while working remotely and communicating electronically. And because a lot of the best jobs in recent decades have been concentrated in crowded, expensive cities, this could also provide an opportunity for workers to relocate to places where life is simpler and real estate cheaper.
The extent of this permanent shift remains anybody’s guess. But views about it are becoming better informed as time passes, and two recent releases of survey data offer a fascinating compilation of them. They express a consensus that a lot more work will be done remotely in the future than was the case before the pandemic, but also reveal some potential conflicts over how exactly that will play out.
Hiring managers surveyed for online talent marketplace Upwork Inc., for example, predict that 37.5% workers at their organizations will be working remotely at least part of the time five years from now, up from 21.2% before the pandemic.
Meanwhile, on the basis of several large surveys of workers conducted from May through October, economists Jose Maria Barrero, Nicholas Bloom and Steven J. Davis, in a paper titled “Why Working From Home Will Stick,” forecast that 22% of all full work days in the U.S. will be supplied from home after the pandemic ends, compared with just 5% before.
That estimate is based on workers’ assessments of their employers’ plans. The workers themselves would like to stay home 44% of the time — a preference that is roughly constant across demographic groups, education levels and incomes. But expectations about employers’ plans vary a lot, especially by worker income.
Perhaps sub-$150,000 earners are being a tad too pessimistic here, but other evidence does point to high-end workers generally being the biggest beneficiaries of increased working from home. For one thing, they value it more.
For another, their employers may get more out of it. The Barrero-Bloom-Davis surveys asked respondents to assess their efficiency working from home during the pandemic relative to what they had expected, and higher-income workers reported the biggest positive difference.
These are self-reported estimates, and may not reflect actual productivity gains. But Bloom, a professor at Stanford University, is co-author of a much-cited study that found call-center workers at a Chinese online travel agency to be 13% more productive when allowed to work remotely. He, Barrero (Instituto Tecnologico Autonomo de Mexico) and Davis (University of Chicago) conclude on the basis of their surveys that post-pandemic work-from-home plans could raise productivity by as much as 2.4%.
There’s a famous paper by economist Paul David that explains why it took decades for electrification to bring big increases in manufacturing productivity. Manufacturers were reluctant to scrap existing factories designed around water or steam power even when they shifted the power source to electricity, and it wasn’t until they built new factories designed around electricity that the productivity gains came.
David presented the paper, titled the “The Dynamo and the Computer,” at the annual meeting of the American Economic Association in 1989, a time when many were wondering why the rise of computers had yet to have much impact on the productivity statistics. A productivity spurt followed a few years later, then subsided in the mid 2000s. Assuming that we’re still figuring out how best to arrange knowledge work around new information technologies, it’s possible that the pandemic has provided a useful shove forward that will bring economic gains for years to come.
That’s one reason Barrero, Bloom and Davis are confident remote working will continue at well above pre-pandemic levels. Other factors include the reduced stigma of working at home, investments by employers and employees in better work-from-home arrangements (which in their estimation added up to as much as 1.2% of 2020 gross domestic product), improved technologies and positive network effects from more people working remotely.
As we’ve already seen, though, the benefits of remote work probably won’t be evenly distributed among income groups. They also probably won’t be evenly distributed between genders: the Barrero-Bloom-Davis surveys found that men were more likely to be able to work from home, and also reported bigger productivity gains from doing so.
Then there are the geographical implications. Earlier this fall, Upwork Chief Economist Adam Ozimek concluded on the basis of multiple surveys that 6.9% to 11.5% of U.S. households are planning to move because of the new remote-work opportunities created during the pandemic, most to places two hours or more away from their current location (i.e. outside of daily commuting range). Barrero, Bloom and Davis estimate that increased working from home will decrease spending on meals, entertainment and shopping in major business districts in the U.S. by 5% to 10% relative to pre-pandemic levels.
A lot will depend on the particular shape that remote work ends up taking. In the Barrero-Bloom-Davis surveys, about half of those who can work from home envision a future in which they’ll do so one to four days a week but still come into the office at least once a week, while 27.3% hope to work from home full time.
The hiring managers surveyed by Upwork, though, envision that their organizations will have almost twice as many fully remote workers five years from now as partially remote ones. The difference can be chalked up partly to differences between the surveys, Upwork’s Ozimek emailed when I asked him about it, but he added that employers do have reason to favor fully remote work. “Not only does going fully remote save them a lot more on office space, but it opens up their labor market to be effectively the whole time zone, or whole U.S., or whole world, depending on the company,” he wrote. “In contrast, going partial only increases your labor market reach by something like an hour or two of commuting.”
What’s more, some Silicon Valley companies have already informed workers who have moved to places with lower living costs that their pay will be cut commensurately. So while there will likely be significant economic gains from increased remote work, it’s far from clear yet who will get to pocket most of them.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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