Full-time office work is ‘dead,’ economist says

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Employees and companies see the benefits of remote work

In 2019, about 5% of full-time work was done from home. The proportion rose to more than 60% in April and May 2020, in the early days of the Covid-19 pandemic, said Nicholas Bloom, an economist at Stanford University who has studied remote work for two decades.

That’s the equivalent of almost 40 years of pre-disease growth almost overnight, his research shows.

The proportion of remote work has gradually declined (to around 27% today) but is likely to remain at around 25% – a fivefold increase compared to 2019, Bloom said.

“That’s big,” he said. “It’s almost impossible to find anything in economics that changes at such a fast pace, that goes up 500%.” “

Here's how a more permanent hybrid work equation will affect NYC

Initially, remote work was seen as a necessary measure to contain the spread of the virus. Technological advances—such as video conferencing and high-speed Internet—made the arrangement possible for many workers.

Both workers and companies found benefits beyond the immediate health impact, economists said.

Employees like having less travel, spending less time getting ready for work and having a flexible schedule that allows for doctor visits and picking up kids from school, Bloom said.

Some workers have shown reluctance to give up these benefits. Companies like Amazon and Starbucks, for example, recently faced a backlash from workers after announcing stricter return-to-the-office policies.

Employers enjoy higher employee retention and can hire from a wider pool of applicants, said Julia Pollak, chief economist at ZipRecruiter. They can save money on office space, by hiring from lower cost areas of the country or by raising wages at a slower pace because of the perceived value of employees in terms of the work-at-home advantage, she said.

It is almost impossible to find anything in economics that changes at such a rapid pace.

Nicholas Bloom

economist at Stanford University

For example, job seekers surveyed by ZipRecruiter say they’d be willing to take a 14% pay cut to work remotely, on average. The figure rises higher – to around 20% – for parents with young children.

Twitter recently closed its offices in Seattle as a cost-cutting measure and asked employees to work from home, reversing an earlier situation in which employees work together at least 40 hours a week in the office.

“The benefits to employers are huge,” Pollak said.

A hybrid working model is a ‘win-win’

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Most companies have turned to a “hybrid” model, with a work week split between perhaps two days from home and three at the office, economists said.

That arrangement has provided a modest increase in average worker productivity, Bloom said. For one, the average person saves 70 minutes a day commuting; about 30 minutes of that time is spent working more, he said.

“Hybrid is pretty much a win-win,” Bloom said.

About 39% of new hires have jobs with a hybrid work arrangement, and 18% of new jobs are completely remote, according to ZipRecruiter. Both categories are up compared to their pre-pandemic levels (28% and 12%, respectively).

“It’s still a growing trend, but the trend is very much toward more remote work,” Pollak said.

Of course, not all employees have the option to work remotely. About 37% of jobs in the US can be done entirely at home, according to a 2020 study by Jonathan Dingel and Brent Neiman, economists at the University of Chicago.

There are significant differences by occupation and geography. For example, jobs in retail, transportation, hospitality and food services are far more likely than those in technology, finance, and professional and business services to offer work-from-home arrangements.

Remote work can survive even in a recession

Not everyone agrees that the benefits of working from home outweigh the costs.

Evidence suggests that employee mentoring, innovation and company culture may suffer if jobs are completely remote, Bloom said. Employees cite face-to-face collaboration, social communication and a better work-life balance as the main benefits of in-office work, its research found.

Completely isolated companies often have in-person gatherings or retreats as a way to build company culture, Bloom said.

Four day work week: Are we going there?

Workers have had a high level of bargaining power due to a hot job market characterized by low unemployment and plenty of job openings. If the economy cools and bargaining power dissipates, it is unclear whether some employers will introduce stricter work-from-home policies, economists said.

For one, employers may see remote work as a useful way to cut labor costs in the face of a recession, Bunker said. The most likely scenario is on the margins: maybe three or four days in the office instead of one or two, he said.

The technology sector is a useful indicator, he said. Tech job postings have fallen this year amid industry struggles, but the share of Indeed job ads that offer the benefit of remote work has remained steady, Bunker said.

“He’s been very stubborn against recruiting withdrawals,” he said.

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