Even if the pandemic hadn’t happened, we would have all ended up working remotely

Working from home is a phenomenon we still associate with the pandemic. Some companies are trying to reverse its growth and get more people back into the office, but the debate about productivity has failed, so far, to yield conclusive results.

A fascinating and timely Stanford research paper, entitled “The evolution of working from home”, provides both a wider picture and some powerful insights. The authors, Nick Bloom of the Stanford economics department and Steven Davies of Chicago’s Booth School of Business, are distinguished scholars.

The opening sentence tells an important story: “Working from home has been rising in the US for many decades, driven by the continuing improvements in technology that enables remote working”.

In the 1960s, only 0.4 per cent of full paid days in America were done from home, basically in craft-based activities. By the 1990s, this had more than doubled to 1 per cent, driven by the spread of the personal computer. In the mid-2010s, the technology has improved and this percentage quadrupled, to 4 per cent.

So even before the pandemic, the data show a rapidly rising trend. The percentage working from home, whilst still small, doubled in three decades and quadrupled in just two. This type of growth is associated with technologies which are now ubiquitous.

Sure, there was a massive surge in the percentage of days worked from home when the pandemic first struck. Many who couldn’t work remotely, simply didn’t work. Bloom and Davies show, using two independent data sources, that by the summer of 2023 this has stabilised at around 25 per cent.

This was of course facilitated by improvements in technology which already existed. For example, video-call software like Teams and Zoom, cloud file-sharing packages such as Dropbox, and connectivity software like Gmail and Slack.

The authors note that, whilst obtaining high quality data across many countries is challenging, Northern Europe has shown a similar pattern to the US. They identify three groups of workers. The largest, which tends to be lower paid, cannot do their jobs from home. Hybrid workers are about 30 per cent of the workforce, and the smallest is those who work completely from home.

Fully remote work is associated with a productivity level between 10 and 20 per cent below fully in-person work. But with hybrid working, it is hard to identify any difference at all, although if anything it is very slightly positive.

Survey data shows that employees value the ability to work from home two or three days a week as being worth on average 8 per cent of their salary. Intriguingly, Bloom and Davies present evidence that this is being translated into actual pay. Many more graduates work from home than non-graduates, and overall graduate pay in the US relative to non-graduates has fallen by about 10 per cent since the start of the pandemic.

Like it or not, working from home is a phenomenon which is not just here to stay, but the actual quantity of work which can be done from home will rise. This prediction is based, in part, on growth before the pandemic, but also the speed at which technology has accelerated. In many ways, the pandemic compressed the growth over a decade or slightly more into the space of a couple of years. In the 2030s, up to 40 per cent of all working days will be done from home.

As published in City AM Wednesday 12th July 2023
Paul Ormerod
Image: Pexels

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