Remote work first invades the rich world

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IN FEBRUARY 2020 Americans spend an average of 5% of their working hours at home. By May, as lockdowns spread, the share had climbed to 60%, a trend that was mirrored in other countries. Many people, perhaps believing that working from home really meant running away from home, believed that office life would soon return to something like its pre-pandemic norm. To say that it didn’t happen that way would be a huge understatement.

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Most office workers stay resolutely “remote first”, spending most of their paid time away from the office. Even though a large portion of the population has no choice but to physically go to work, 40% of all American working hours are still spent at home today. As of mid-October, US offices were just over a third full, data from Kastle Systems, a security firm, suggests. From Turin to Tokyo, city shopping areas remain significantly quieter, by pre-covid standards, than residential areas. Economists are trying to figure out what all this means for productivity.

Perceptions about the future of office work are changing. British government ministers last year urged workers to return to office; now they are calmer. Wall Street banks, often the most enthusiastic advocates of office work, tone down the rhetoric. According to a monthly survey by Jose Maria Barrero, Nick Bloom and Steven Davis, three economists, bosses expect that in a post-pandemic world, an average of 1.3 days a week will either be worked from home or a quarter more than expected when asked the same question in January. Even that could turn out to be an underestimate in the long run. Workers expect to spend almost half of their working hours at the kitchen table.

A few factors explain why remote work initially remains dominant. Many people are still afraid of contracting covid-19, and thus wish to avoid public spaces. Another possibility is that workers have more bargaining power. In a world of labor shortage, it takes a brave boss to force people to take a sweaty commute five days a week (workers see being forced to be in the office full time equates to a 5% pay cut). There is, however, a more interesting possibility. Work that is largely done remotely can be more efficient than a desktop-focused model.

The past year has seen an explosion of research on the economics of home work. Not all articles find a positive impact on productivity. A recent article by Michael Gibbs of the University of Chicago and colleagues examines a THIS-Services Society. When the company switched to remote work last year, average hours increased, but production declined slightly. The authors attribute part of the decline in productivity to “higher communication and coordination costs”. For example, managers who had already stuck their heads at someone’s door may have had a harder time conveying precisely what they needed when everyone was working remotely.

Most studies, however, find more positive results. The surveys by Mr Barrero and his colleagues cover a large number of companies rather than just one. According to an article published by the team in April, only 15% of homeworkers believe they work this way less efficiently than they were in business premises before the pandemic. A study released this month by Statistics Canada reveals that more than half of ‘new’ remote workers (that is, those who normally worked outside the home before the pandemic) said they performed about the same amount of work per hour as before, while a third said they had done more.

Economists understand less why remote workers could be more productive. One possibility is that they can concentrate more easily on tasks than in an office, where the temptation to chat with a colleague is great. In addition, the trips are tiring. Another factor is related to technology. Remote workers, by necessity, rely more on tools like Slack and Microsoft Teams. This can allow bosses to coordinate teams more effectively, if the alternative to the office were word of mouth instructions that could easily be overlooked or misinterpreted. Patent applications for work-at-home technologies are skyrocketing, while U.S. private sector investment in THIS grows by 14% in one year.

Yet the popularity of remote work presents a puzzle. If this is so wonderful, then why is there little evidence of a move towards “fully remote” working, where companies completely close their offices? The companies that have chosen to do so are only a tiny minority. The number of people moving to cities like Tulsa, Oklahoma, which positions itself as the remote work capital of the world, remains low.

It may only be a matter of time before everyone who can walk away completely. A new study in Nature Human Behavior, however, suggests that companies have good reason to keep their office buildings, even if they are less frequently used. The paper studies the communications (including instant messages and video calls) of 60,000 Microsoft employees in 2019-2020. Remote working makes people ‘s collaborative practices more “static and siled”, he notes. People interact more with their closest contacts, but less with the more marginal members of their networks who can offer them new perspectives and ideas. It probably hurts innovation. The result is that fully remote teams may very well be successful in the short term, but will eventually suffer as innovation dries up.

What a way to make a living

How can we best collaborate, then, in a remote world first of all? Many companies assume that it is enough for everyone to come to the office a few days a week, as this will cause people to bump into each other and talk about ideas. Others, backed by stronger evidence, say managers need to be more intentional and bring people together for the express purpose of discussing new ideas. Companies will have to experiment as they get used to a new way of working, and the exact arrangement may vary depending on the type of job. What seems clear, however, is that offices will still have a role after the pandemic, even though they are mostly empty.

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This article appeared in the Finance & Economics section of the print edition under the title “The Pajama Revolution”


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