When the COVID-19 pandemic struck in March 2020, the remote workforce skyrocketed almost overnight, from just 7% of the workforce to almost 40% at the peak of the pandemic. Today, the pandemic is drawing to a close, but remote working is likely to remain there for many workers.
My research at the American Enterprise Institute this year explored the impacts of remote working on the American workforce. Recently, I had the opportunity to sit down and compare my notes with Dr Nicholas Bloom, professor at Stanford University and expert in remote work. We discussed different working arrangements, worker-employer negotiation on homework, and the future of remote work. Below are the highlights of the Q&A from our discussion which have been edited for length and clarity. You can find the full transcript here and listen to the audio podcast on Hardly Working.
Orrell: Talk about your own kind of professional background. How did you become a professor of labor economics?
Bloom: It’s a little strange path. Honestly, I never intended to be an academic. After doing a Masters at Oxford in Economics I found a job [with] the Institute for Fiscal Studies, a research think tank in London. When I was there I realized that a lot of people who do policy research try to use the economy to make the world a better place. So I thought I could get a PhD. And at that time, IFS had a lot of relationship with UCL, University College London. You could do a doctorate while continuing to work. So I basically had one day per week, for which I was not paid, and I took the opportunity to prepare for a doctorate. And so in the end I got a PhD and ended up at Stanford in 2005 almost by accident.
Your 2015 article on remote working in China has really been the key to thinking for a lot of people over the past year and a half. Can you tell us a bit about this paper?
So we developed a plan to set up what is called a randomized controlled trial. We took two divisions in one [online travel company] head office in Shanghai and asked them who wanted to work from home four days a week. Events got work from home and chances stayed in the office. We had 125 in the treatment group [working from home], and 125 people who were part of the control group [coming to the office]. These people make phone calls, take reservations. We have been tracking their performance, minute by minute, for the next 21 months and collected many more [data] on who quit, who got promoted, who did well, who gave bonuses, etc.
Contrary to expectations, surprisingly, home workers were 13% more productive than office workers [which amounts to] almost one day a week more. And when we deepened it, about 4% [out of the 13 percent] was because they were more productive per minute. And when we questioned them, they said, “Look, it’s quieter. At home, we can just work better.
The remainder of the increase in productivity (9%) was due to people at home simply working more. Their dropout rates were almost half because they were much happier. But see, the only big problem was that their promotion rates were almost half that of the office. So, you know, that’s a bit of a mixed blessing. For the company, on average, it was clean because it was more productive and saved office space. If you work from home as a team, when most of the other people around you are not, a promotion is definitely a success.
What new remote working research is being done on the experience of the past 18 months?
Certainly, you can expect a lot of papers. In terms of the performance impact, there are several ways to look at it. One, at a very, very macro level: GDP is currently above its pre-pandemic level. But we are still missing 5 million unemployed. So we have 5 million fewer people working today than two years ago, but we are actually producing more. So if you look at the productivity, we’re actually up dramatically. We’ve increased by about 5%, which suggests that given that half of Americans are currently working from home, it probably can’t be that bad, especially because the pandemic has been negative for productivity.
We surveyed 5,000 Americans per month. Since the start of the pandemic, let’s calculate, productivity is likely to be around 3-5% higher and will certainly be working from home in the long run. If we keep a largely hybrid model – three days after, two days – it will probably increase productivity by 3-5%. Much of this increased productivity comes from saved travel time. Saving on travel is a huge benefit, not only for productivity, but for us individually, because we just have more free time.
What do you think is the employer’s perspective on this now? Do you think the message has been sent to executives that flexible working arrangements are in fact in the best interests of their business?
Yes, completely. I’ve probably spoken to 500 managers already. Corporate America now understands that hybrid work – which is something like three in the office, two at home after the pandemic – improves productivity and is the right business decision. In terms of profit, the reason it’s so important is that it’s really valuable to the employees. Employees report that it’s worth something like a 7-8% pay rise to be able to work from home 2 days a week. If you try to force all of your employees to come back 5 days a week, we know from the survey data, you’re going to find 30 percent, 40 percent of them start quite actively looking for another job. .
In your opinion, are there other factors besides the happiness and productivity of workers? Are there any other savings or gains that come from flexible working arrangements?
It is very clear that we are going to have a long term residual fear of density. Specifically. I think 76% of people say they will be nervous after the pandemic – even people who have been vaccinated – to get on crowded elevators, crowded subway trains. I think I could get started. I’m not sure, you know, that I would feel totally comfortable in a crowded elevator with 50 people.
One of our academics, Scott Gottlieb, spoke about changing labor standards. If you have a cold or the flu, don’t come to the office.
I totally agree with Scott’s point of view on this, and working from home helps a lot. Because imagine you’re in hybrid mode, you’re working, you know, three days a week at the office, two days a week at home. You have of course the possibility of working from home, well installed and it is standardized. And so, if you’re not feeling well, you just take a day home.
For example, you published an article in May called “Don’t let employees choose their work at home”. I would just like you to summarize it and why you think it is important for employers to set ground rules for remote working.
One is the mixed mode problem, with some working from home and others in person. It turns out that it doesn’t work very well to have people in the office and others at home. So you initially imagine that those from the office are crowding into the conference room, but they’re on a small screen on Zoom, there are whispers, and you can’t really see what’s going on. Most businesses now have a rule that if there is one or more people at home on Zoom, everyone in the office should also join independently on their Zoom or teams, whatever they are. Second problem, if you look at the survey data that we collected, you know, the thousands of people every month, you ask them: What days would you like to work from home? Brent, what two days would you guess?
I guess Friday and Monday. . .
Yeah, exactly. Everyone basically says Friday and Monday. So the second problem with choice is that if you want to use your office space efficiently – or if you want to keep your office space as it is, but reduce the density – then you probably don’t want to allow full choice. . And then the last problem which is the most difficult to explain, but it is potentially the most problematic in the long run. There are two things you need to think about. So one is, who wants to work from home is not random. In the survey data, people with disabilities report a much higher preference than non-disabled people. You see among college graduates with children under 12, women report a significantly higher preference than men. We see that it varies by breed. Thus, black and Asian workers report significantly higher preferences than white and Latinx workers. People living farther from the office are more likely to work from home than those living close by, and they tend to have lower incomes. The problem is that this comes up against the second fact, which is that if you work from home, in a team where other people arrive more days than you, you may suffer from promotions. People randomized to work from home after 21 months had a 50 percent lower promotion rate.
My advice was to try to limit it both ways. So you want to make sure people are in the office two days a week, say, because it’s important to get in, but you also want to make sure people are working from home two days a week because it’s the classic prisoner’s dilemma.
The central business districts have been hit hard, not just by the people who own the buildings and rental spaces, but also by all the businesses that support commuters’ food, clothing, bars and restaurants. Have you watched this?
Yeah, I mean with Jose Barrero and Steve Davis, we watched. I would say it’s really substantial. We estimate that New York, San Francisco, those downtown areas can lose something like, in the long run, 5-10% of spending. I have another post with Arjun Ramani, where we actually pulled the address change dates from the US Postal Service, and you can break it down for residences and businesses. There has been an approximately 15% drop in the number of people, businesses and city centers during the pandemic. From a commuter perspective, cities have emptied and have yet to recover.
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Original author: Nicholas Bloom, Brent Orrell
Original location: The Future of Remote Working: Highlights from my Conversation with Nicholas Bloom