Will Remote Working Remain After COVID?

Summary

• Up to half of US workers have been working from home during the pandemic.
• Employees and managers alike view this transition as better than expected.
• Longer-term adoption of remote working could have substantial economic and social benefits.
• The expected growth rate of full-time remote work over the next five years has doubled.

Introduction

Before the pandemic, only a fraction of individuals worked from home. According to a recent NBER working paper, a 25,000-person strong Google Consumer Survey (GCS) indicated the figure was around 15%. In addition, only 2.3% of hiring managers that responded to Upwork’s 2019 Future Workforce survey had fully remote teams. In fact, it seems that for many institutions the whole work-from-home concept was taboo.

In this Deep Dive, we review the work of MIT and Upwork researchers to understand how perceptions around working from home have changed. We also look to future, considering how the current enforced experiment in running an economy without social interaction may cause long-term structural changes. Here are the surveys’ main results:

• Of those employed pre-COVID, about half are now working from home.
• The incidence of COVID-19 can help to predict the share of people switching to remote work.
• Employees in information jobs are more likely to switch to working from home.
• The majority of hiring managers feel that the shift to remote work has gone better than expected.
• The expected growth rate of full-time remote work over the next five years has doubled to 65%.
• The economic benefit of remote work from less commuting has been $90 billion (US, Aug. 2020).
• Remote work is set to spread economic opportunity and decrease the wage gap across geographies.

The results come from four sources: the two mentioned above, and another two Upwork reports, Where Remote Work Saves Commuters Most and When Work Goes Remote.

Have You Started Working From Home?

In April and May, researchers from MIT and Upwork ran two US-based surveys asking a single question: have you started to work from home in the last four weeks (Survey 1) or two months (Survey 2)? Collecting over 50,000 responses in total, 56% came back as employed. From those, the authors investigated the impact of COVID-19 on the working situation.

Pre-COVID, 15% of the sample worked from home and continued to do so during the pandemic (Chart 1). A further 35.2% switched to working from home, implying that about half the workforce are now working remotely. This is significantly more than the literature previously thought possible.

Source: NBER working paper, page 5

Businesses have been particularly adaptable and accommodative for those working in management, professional and related occupations. The authors find that a 1% rise in the share of workers in these occupations is associated with a 1.1% rise in those who report now working from home.

However, the ability of workers in these occupations to work from home is not necessarily related to these jobs being easier to do remotely. The NBER study reveals that places with greater capacity for increasing the amount of working from home were not places where workers were already working from home.

Nevertheless, some occupations and industries are finding it more difficult to work remotely. For example, pre-COVID-19 manufacturing share positively predicts continuing to commute. A 1% increase in the pre-COVID-19 share of employment in manufacturing is associated with a 0.84% increase in continuing to commute to work.

Another key factor that determines whether people can work from home is the virus itself. The study finds that a doubling in COVID-19 cases per 100,000 individuals is associated with a 5% rise in the fraction of workers who switch to working from home.

What Have Workplaces Learnt?

Post-pandemic, the decision to allow more remote working will depend on how successful hiring managers and businesses perceive this experimental period to have been. The Future of Remote Work report analysis uses two waves of survey data from November 2019 and April 2020. The surveys polled a combined 1,500 hiring managers including executives, VPs, and managers. The results reflect the views and plans of those with direct influence over businesses’ remote work decisions.

Unsurprisingly, between November 2019 and April 2020, remote work increased dramatically, with around 20% of teams now working fully remotely (up from 2%). What is unique, however, is that 56% of hiring managers said working remotely had gone better than expected (of which 25% reported it going much better than expected). Furthermore, 32.2% of hiring managers found that productivity had increased as a result of working from home, compared with 22.5% who found it had decreased.

Source: Future of Remote Work

Although proclaiming it a success from this data is challenging, the fact that workplaces have been pleasantly surprised by the experience, appears to have changed behaviour already. In the pre-COVID survey, 13.2% of the represented workforce was working entirely remotely, and hiring managers were expecting to increase this to 17.2% over the next five years. After COVID, this has jumped to 21.8%, and 61.9% of hiring managers say their workforce will be more remote going forward..

These results have positive implications for long-run adoption and overall productivity in the economy. Importantly, an increase in aggregate US productivity from remote work does not require every single job or even the majority to be more productive remotely – it requires only some to be. Firms will self-select what is better done inside versus away from an office. The results show there is room for productivity improvements, and consequently attitudes towards working from home have changed.

The Benefits From Remote Working

Productivity improvements are traceable to individual office-related factors. These include lack of commute, fewer unnecessary meetings, and reduced distractions – which 40% of respondents said they now benefitted from (Upwork, 2020).

Beyond improving productivity, time saved commuting can have real economic consequences. Upwork’s Where Remote Work Saves Commuters Most report estimates that cutting back on the average 54-mins-a-day commute can have environmental externality savings of $164mn per day and time savings of $411mn per day. Since the start of the pandemic, Dr Adam Ozimek, senior economist at Upwork, estimates the total economic benefit of remote work from fewer commutes to be $90bn.

Source: Where Remote Work Save Commuters Most

In his latest research, When Work Goes Remote, Ozimek also expects better job opportunities for individuals living outside of big cities, more options for professionals to earn higher salaries, and fewer rents to be transferred to landowners in ‘super-star’ cities. Structural changes will lead to a spreading out of labour demand, equalization of wages across geographical areas, and more equal opportunities.

The Potential Drawdowns (But Are They Really That Bad?)

One key drawdown of working from home is increased home-specific distractions, according to 32% of respondents in the Future of Remote Work report. Although children returning to school will mitigate some of this, social media remains a potential hurdle. But it might be less damaging than once thought. Working from home may mean fewer benefits from colleague interaction, but social media could actually turn out to be that place where chance ideas are formed (Macro Musings Podcast).

Another issue related to remote working is technology, something 36.2% of respondents indicated in the same survey. The necessity of quickly going remote meant that many workers and companies were adapting to new and unfamiliar technology. According to the researchers, however, experience will likely mitigate this problem over time.

The Bottom Line

Looking to the future, the recent scale of remote working is unlikely to continue. Nevertheless, it appears undeniable that the positive results of the 2020 ‘working from home’ experiment will accelerate the remote work trend.

There are obvious benefits, such as less commuting, fewer workplace distractions, and flexibility around living arrangements. In the short- to medium-term, however, the advantages of working from home could be much more fundamental: protecting the health and job security of employees, cutting fixed costs for struggling businesses, and thereby supporting a quicker economic recovery.

Click here to view the full paper.