25 October 2021 (Paris, France) – In February 2020 Americans on average spent 5% of their working hours at home. By May, as lockdowns spread, the share had soared to 60%—a trend that was mirrored in other countries. Many people, perhaps believing that working from home really meant shirking from home, assumed that office life would soon return to something like its pre-pandemic norm. To say it has not turned out that way would be a huge understatement.
Most office workers remain steadfastly “remote-first”, spending most of their paid time out of the office. Even though a large share of people have little choice but to physically go to work, 40% of all American working hours are still now spent at home. In mid-October American offices were just over a third full, suggest data from Kastle Systems, a security firm. From Turin to Tokyo, commercial areas of cities remain substantially quieter, compared with pre-covid norms, than residential ones. Economists are trying to work out what all this means for productivity.
Perceptions about the future of office work are changing. Last year British government ministers exhorted workers to get back to the office; now they are quieter. Wall Street banks, often the most enthusiastic advocates for in-office work, are toning 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 be worked from home—a quarter more than they expected when asked the same question in January. Even that could in time prove to be an underestimate. Workers hope they will spend closer to half their working hours at the kitchen table.
A few factors explain why remote-first work remains dominant. Many people remain scared of contracting covid-19, and thus wish to avoid public spaces. Another possibility is that workers have more bargaining power. In a world of labour shortages, it takes a brave boss to make people take a sweaty commute five days a week (workers view being forced to be in the office full-time as equivalent to a 5% pay cut). There is a more intriguing possibility, however. Work that is largely done remotely may be more efficient compared with an office-first model.
The past year has seen an explosion of research on the economics of working from home. Not all the papers find a positive impact on productivity. A recent paper by Michael Gibbs of the University of Chicago and colleagues studies an Asian it-services company. When the firm shifted to remote work last year average hours rose but output fell slightly. The authors ascribe part of the decline in productivity to “higher communication and co-ordination costs”. For instance, managers who had once popped their head round someone’s door may have found it harder to convey precisely what they needed when everyone was working remotely.
Most studies, however, find more positive results. Mr Barrero and his colleagues’ surveys cover a large number of firms, rather than just one. Only 15% of home-workers believe they are less efficient working in this way than they were on business premises before the pandemic, according to a paper published by the team in April. A study released that month by Statistics Canada finds that more than half of “new” remote workers (ie, those who normally worked outside the home before the pandemic) reported completing about the same amount of work per hour as before, while one-third said they got more done.
Economists have less insight into why remote workers might be more productive. One possibility is that they can more easily focus on tasks than in an office, where the temptation to gossip with a co-worker looms large. Commuting, moreover, is tiring. Another factor relates to technology. Remote workers, by necessity, rely more on tools such as Slack and Microsoft Teams. This may allow bosses to co-ordinate teams more effectively, if the alternative in the office was word-of-mouth instructions that could easily be forgotten or misinterpreted. Patent applications for work-from-home technologies are soaring, while American private-sector investment in it is growing by 14% year-on-year.
Yet the popularity of remote-first work presents a puzzle. If it is so wonderful, then why is there little evidence of a shift towards “fully remote” work, where firms shut down their offices altogether? Companies that have chosen to do this are in a tiny minority. The number of people moving to cities such as Tulsa, in Oklahoma, which is positioning itself as the global capital of remote work, remains small.
Perhaps it is only a matter of time before everyone who can goes fully remote. A new study in Nature Human Behaviour, however,suggests that firms have good reason to hold on to their office buildings, even if they are used less frequently. The paper studies the communications (including instant messages and video calls) of 60,000 Microsoft employees in 2019-20. Remote work makes people’s collaboration practices more “static and siloed”, it finds. 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. That probably hurts innovation. The upshot is that fully remote teams might do quite well in the short term, but will ultimately suffer as innovation dries up.
How best to collaborate, then, in a remote-first world? Many firms assume it is enough for everyone to come into the office a few days a week, since this will lead to people bumping into each other and talking about ideas. Others, backed by stronger evidence, say that managers must be more intentional, and bring people together with the express purpose of discussing new ideas. Firms will have to experiment as they get used to a new way of working, and the precise arrangement may vary depending on the type of work. What seems clear, though, is that offices will still have a role after the pandemic—even if they are mostly empty.