Why Some of the Shift to Telecommuting Will Stick

It seems to me that the tone of the discussion surrounding the pandemic-induced shift telecommuting has been changing. Last spring and early summer, a lot of the discussion was about about how well it was working, how much time it was saving, how much employees preferred it, and so on. But then the discussions tend to express more concerns. In the words of a recent Wall Street Journal article, "Companies Start to Think Remote Work Isn’t So Great After All Projects take longer. Collaboration is harder. And training new workers is a struggle. ‘This is not going to be sustainable.’" Bloomberg reported on the results from a study done on teleworkers by researchers at the Harvard Business School:  "The Pandemic Workday Is 48 Minutes Longer and Has More Meetings. A study of 3.1 million workers around the world found an uptick in emailing, too."

What factors will determine whether the shift to telecommuting sticks? Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis present some results from a series of nationally representative surveys of US workers done from May to October 2020, in "Why Working From Home Will Stick" (December 2020, University of Chicago Becker Friedman Institute Working Paper 2020-174). The authors argue that teleworking will remain substantially higher after the pandemic: they estimate a rise from about 5% of work-days were supplied from home before the pandemic, and it will be something like 22% even after the pandemic is done. Based on the survey data, they suggest five reasons why some of the shift to working from home will persist:

First, reduced stigma. A large majority of respondents report perceptions about working from home have improved since the start of the pandemic among people they know. With fewer people viewing working from home as “shirking from home,” workers and their employers will be more willing to engage in it.

Second, ... COVID-19 compelled firms to experiment with a new production mode – working from home – and led them to acquire information that leads some of them to stick with the new mode after the forcing event ends.

Third, our survey reveals that the average worker has invested over 13 hours and about $660 dollars in equipment and infrastructure at home to facilitate working from home. We estimate these investments amount to 1.2 percent of GDP. In addition, firms have made sizable investments in back-end information technologies and equipment to support working from home. Thus, after the pandemic, workers and firms will be positioned to work from home at lower marginal costs due to recent investments in tangible and intangible capital.

Fourth, about 70 percent of our survey respondents express a reluctance to return to some pre-pandemic activities even when a vaccine for COVID-19 becomes widely available, for example riding subways and crowded elevators, or dining indoors at restaurants. ...

Fifth, ... the massive expansion in working from home has boosted the market for working from equipment, software and technologies, spurring a burst of research that supports working from home, in particular, and remote interactivity, more broadly.

Here are a few reactions: 

1) More work-days happening from home would be bad news for dense urban areas. The authors write: "We estimate that 4 the post-pandemic shift to working from home (relative to the pre-pandemic situation) will lower post-COVID worker expenditures on meals, entertainment, and shopping in central business districts by 5 to 10 percent of taxable sales." 

2) The workers who are well-positioned to benefit from working form home often tend to have higher incomes and workplace status. Workers in retail or manufacturing or many other other jobs don't have a work-from-home option. For new workers getting hired, on-the-job learning and professional connections are almost certainly harder to create when you're one more face in a checkerboard of continual online meetings. In that sense, the additional perk of sometimes working from home is likely to create a separation between a more favored class of  workers that has access to this option and other workers who do not. 

3) There's a conflict in what workers and employers saying about productivity during the pandemic. In this survey data, workers typically report being more productive from home. But employers often report that productivity is lower when people are working at home (for example, see "What Jobs are Being Done at Home During the Covid-19 Crisis? Evidence from Firm-Level Surveys," by Alexander W. Bartik, Zoe B. Cullen, Edward L. Glaeser, Michael Luca & Christopher T. Stanton, NBER Working paper #27422 , June 2020). One possible reason for this gap is that many of those working from home are happy to be doing it, and they are overestimating their productivity. Another possible reason is that workerks tend to focus on their productivity in doing specific day-to-day tasks, but employers are also looking at activities like the benefits of training or brainstorming that may be facilitated by more informal face-to-face interactions. 

4) Finally, there's a lot of research on the "economics of density," which tends to find that workers who are grouped together have higher productivity. After all, there's a reason why cities and downtown areas with concentrated employment came into existence in the first place, and why they have been the engines of economic growth over time. The after-effects of the pandemic will test this connection. If those who work closely in a physical sense continue to have higher pay and productivity, then those who work from home are likely to gain flexibility but suffer some career slowdowns, because they aren't where the action is. Perhaps employers and firms have now learned how to gain the benefits of physical closeness via web-based conference calls. Or maybe not. 

For an overview of these arguments about the economics of density, the Summer 2020 issue of the Journal of Economic Perspectives has a useful Symposium on the Productivity Advantages of Cities: 

• "The Economics of Urban Density," by Gilles Duranton and Diego Puga (pp. 3-26)
• "How Close Is Close? The Spatial Reach of Agglomeration Economies," by Stuart S. Rosenthal and William C. Strange (pp. 27-49)
• "Tech Clusters," by William R. Kerr and Frederic Robert-Nicoud (pp. 50-76)
• "Internal Mobility: The Greater Responsiveness of Foreign-Born to Economic Conditions," by Gaetano Basso and Giovanni Peri (pp. 77-98)

For a previous post on this topic from last spring, see "Will Telecommuting Stick?" (May 26, 2020).