Will Working From Home Outlast the Pandemic?
- By Sam van de Schootbrugge
- 6 min read
Summary
- A new NBER working paper examines the latest survey data to see if working from home will outlive Covid.
- They find that employers are planning to increase work-from-home hours after Covid by four times the pre-pandemic level.
- Most employees able to work from home want to continue doing so at least one day a week.
Introduction
Six months ago, we reviewed Upwork’s seminal research into the future of remote working. The general mood then was that the work-from-home (WFH) transition went better than expected and would likely remain at least partially intact on reopening. Now, as countries begin to remove social distancing restrictions, we examine the latest WFH survey responses included in a new NBER working paper on the topic. For data up to and including March 2021, the authors find:
- Around one in three respondents still spend over two thirds of their working hours at home. Those with higher education, higher earnings, greater internet quality and who are located in blue states are most likely to have worked remotely during the pandemic.
- Employers are planning for a fifth of full workdays to be WFH after the pandemic. This is four times the amount pre-pandemic but around one day less a week than what most employees want.
- Workers cite the cost of transitioning to WHF ($1,500 per person), greater productivity and fear of mingling as the main reasons for remaining at least partially at home. Indeed, the authors find that WFH can improve total productivity by 3.6-4.6%.
The Survey of Working Arrangements and Attitudes (SWAA)
The University of Chicago, ITAM and Stamford University ran the online survey jointly, starting in May 2020. So far, the survey has collected responses from an estimated 30,000 working-age Americans, and the latest wave covers March 2021. The core questions ask respondents about their current working status, their desire to WFH, and their employer’s plans for WFH after Covid-19.
Table 1 provides an overview of the individuals working from home (defined as those spending two thirds of their work hours at home) during the pandemic. The share of persons working from home rises steeply with education. It also rises with earnings and is slightly less prevalent among men than women. It also varies little by age and is somewhat higher in service-producing sectors, households with children and in blue states.
As a benchmark, the authors use American Time Use Survey (ATUS) data for about 10,000 wage and salary workers in 2017 and 2018. According to the tabulations, only 14.7% of employees performed any full workdays from home before the pandemic. Broken down by frequency, the majority worked less than once a month from home, and so the authors calculate that just 4.8% supplied full paid working days from home.
The Extent of Working From Home
In May 2020, 40% of respondents worked from home, while only 26% worked on business premises and 34% were not working. By March 2021, a larger share of employees was back working on business premises (43%), and the overall share working increased from 66% to 74%. This shows a partial recovery in labour market conditions and some WFH stickiness – around 31% of respondents are still working from home. In total, 48.6% of all paid working days are still provided from home (Chart 1).
Furthermore, the authors find the strongest predictors of WFH during the pandemic are education and earnings. A unit standard deviation increase in education involves a 6-9ppt increase in the likelihood of mainly WFH during the survey week, conditional on other observables. The likelihood also increases with President Joe Biden’s vote share and internet quality. Meanwhile, children appear to have no deciding influence on WFH.
Work-From-Home Stickiness
The survey asks the following two questions: (i) ‘After COVID, in 2022 and later, how often is your employer planning for you to work full days at home?’, and (ii) ‘After COVID, in 2022 and later, how often would you like to have paid workdays at home?’
On the plans of employers, an estimated 21% of workdays will remain from home post-pandemic, equivalent to an average of one day per week (Chart 1). This is four times the pre-pandemic WFH share and is again expected to be more prevalent among those with greater education and higher earnings.
These findings align with an employer-orientated survey that The Conference Board conducted in September 2020. It suggested 24% of employees will mainly WFH one year after the pandemic subsides. Several other studies also suggest that WFH will be 3-4 times more common after the pandemic.
On workers’ desires, nearly 80% of those able to WFH (two thirds of the sample) want at least one day per week (Chart 2). Also, roughly half of those who can WFH want to split the workweek between home and employer premises. And the majority of those see WFH as a benefit equivalent to a 5% pay rise.
In terms of characteristics, the desire to WFH is pretty uniform across workers, but is marginally higher for those aged 30-39 years, have at least a college degree, earn more than $100k and work in the service sector. Employers, on the other hand, are much more inclined to offer more WFH hours to individuals with greater education, higher salaries, and who have children under the age of 18 (Table 2).
Why Do Employees Want to Work From Home?
Almost 60% of respondents say they are more productive when WFH, relative to their expectations pre-Covid. This ‘productivity surprise’ has changed employer perceptions of WFH – employees who reported being more productive also reported employers being more likely to allow WFH in the future.
Furthermore, the sudden shift in WFH patterns spurred workers and firms to invest in physical, human and organisational capital to improve remote-working capabilities. According to the survey, the average employee has invested $1,500, or 1.2% of their annual salary, into WFH. Aggregated across the whole economy, this is equal to 0.7% of annual US GDP.
Another important reason for choosing WFH is a fear of mingling. More than 10% of respondents will continue to social distance even after large-scale vaccination rollouts, and 34% will remain wary of riding the subway or a crowded elevator. In fact, 85% of respondents are still concerned over efficacy, safety and a lack of vaccine take-up.
The Consequences of Working From Home
Next, the authors explore the monetary values of WFH. Using survey responses, they find that men, the college-educated, those with children, and individuals with greater earnings benefit most from remote working. Broken down by income, the benefits of WFH after Covid range from 1.7% of earnings for workers earning less than $50,000 to 6.8% for those earning $150,000+.
Higher-income earners benefit more because, in the survey, they place greater value on WFH. More residential space and nicer homes for high earners probably contribute to this positive relationship, but average one-way commute times also rise with earnings. On average, individuals on $30,000pa commuted half as long as an individual on $150,000.
Although commuter time savings are larger for high-income workers, there are substantial benefits across the income distribution. According to the 2018 American Community Survey, workers spent an average of 54 minutes per day commuting to and from work before the pandemic. During the pandemic, the authors estimate that 35% of time saved from commuting went towards individuals’ jobs.
If, as the survey suggests, 21% of workdays remain from home post-pandemic, there will likely be a drop in spending in major city centres. Indeed, the authors find that worker spending near employer premises rises with population density in the vicinity of the workplace (Chart 3). The more densely populated areas are also likely to see the greatest shift to WFH (Chart 4).
Overall, the authors estimate that the Covid-induced shift to WFH could increase average implied productivity by between 1.9% and 2.5%. In terms of total productivity gains, this could increase to between 3.6% and 4.6%. The gain comes from saved commuting time and self-assessed increases in efficiency. According to the authors, ‘This underscores how a persistent increase in WFH will bring a large, continuing flow of aggregate benefits in the form of reduced commuting time’.
Bottom Line
A big unknown is how employers and employees differ in their attitudes to remote work moving forward from the pandemic. This new NBER working paper suggests employees, on average, will want to work around twice as much from home as employers are currently planning on allowing. The reason is that workers have invested around 1.2% of their annual earnings into WFH. They also tend to believe they are more productive and are still concerned about lingering public health issues.
Allowing more WFH may not be detrimental for employers. The majority of employees see the remote working option as equivalent to a pay rise. This is even more so for higher earners, who tend to live farther from offices and have better remote working spaces. Less time commuting is also likely to translate into more time working. Regardless, if employers stick to just one day a week from home, total US productivity could increase by as much as 3.6-4.6%.
Citation
Barrero, J. M., Et Al, (2021), Why Working From Home Will Stick, NBER, Working Paper (28731), https://www.nber.org/papers/w28731
Sam van de Schootbrugge is a macro research economist taking a one year industrial break from his Ph.D. in Economics. He has 2 years of experience working in government and has an MPhil degree in Economic Research from the University of Cambridge. His research expertise are in international finance, macroeconomics and fiscal policy.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)