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The bright future of working from home

May 2020
Essay
By  Nicholas Bloom

There seems to be an endless tide of depressing news in this era of COVID-19. But one silver lining is the long-run explosion of working from home. Since March I have been talking to dozens of CEOs, senior managers, policymakers and journalists about the future of working from home. This has built on my own personal experience from running surveys about working from home and an experiment published in 2015 which saw a 13 percent increase in productivity by employees at a Chinese travel company called Ctrip who worked from home.

So here a few key themes that can hopefully make for some good news:

Mass working from home is here to stay

Once the COVID-19 pandemic passes, rates of people working from home will explode. In 2018, the Bureau of Labor Statistics figures show that 8 percent of all employees worked from home at least one day a week.

I see these numbers more than doubling in a post-pandemic world.  I suspect almost all employees who can work from home — which is estimated at about 40 percent of employees ­— will be allowed to work from home at least one day a week.

Why? Consider these three reasons:

Fear of crowds: Even if COVID-19 passes, the fear of future pandemics will motivate people to move away from urban centers and avoid public transport. So firms will struggle to get their employees back to the office on a daily basis. With the pandemic, working from home has become a standard perk, like sick-leave or health insurance.

Investments in telecommuting technology: By now, we have plenty of experience working from home. We’ve become adept at video conferencing. We’ve fine-tuned our home offices and rescheduled our days. Similarly, offices have tried out, improved and refined life for home-based work forces. In short, we have all paid the startup cost for learning how to work from home, making it far easier to continue.

The end of stigma: Finally, the stigma of working from home has evaporated. Before COVID-19, I frequently heard comments like, “working from home is shirking from home,” or “working remotely is remotely working.” I remember Boris Johnson, who was Mayor of London in 2012 when the London Olympics closed the city down for three weeks, saying working from home was “a skivers paradise.” No longer. All of us have now tried this and we understand we can potentially work effectively — if you have your own room and no kids — at home.

Of course, working from home was already trending up due to improved technology and remote monitoring. It is relatively cheap and easy to buy a top-end laptop and connect it to broadband internet service. This technology also makes it easier to monitor employees at home. Indeed, one senior manager recently told me: “We already track our employees — we know how many emails they send, meetings they attend or documents they write using our office management system. So monitoring them at home is really no different from monitoring them in the office. I see how they are doing and what they are doing whether they are at home or in the office.”

This is not only good news for firms in terms of boosting employee morale while improving productivity, but can also free up significant office space. In our China experiment, Ctrip calculated it increased profits by $2,000 per employee who worked from home.

Best practices in working from home post pandemic

Many of us are currently working from home full-time, with kids in the house, often in shared rooms, bedrooms or even bathrooms. So if working from home is going to continue and even increase once the pandemic is over, there are a few lessons we’ve learned to make telecommuting more effective. Let’s take a look:

Working from home should be part-time: I think the ideal schedule is Monday, Wednesday and Friday in the office and Tuesday and Thursday at home. Most of us need time in the office to stay motivated and creative. Face-to-face meetings are important for spurring and developing new ideas, and at least personally I find it hard to stay focused day after day at home. But we also need peaceful time at home to concentrate, undertake longer-term thinking and often to catch-up on tedious paperwork. And spending the same regular three days in the office each week means we can schedule meetings, lunches, coffees, etc., around that, and plan our “concentration work” during our two days at home.

The choice of Tuesday and Thursday at home comes from talking to managers who are often fearful that a work-from-home day — particularly if attached to a weekend — will turn into a beach day. So Tuesday and Thursday at home avoids creating a big block of days that the boss and the boss of the boss may fear employees may use for unauthorized mini-breaks.

Working from home should be a choice: I found in the Ctrip experiment that many people did not want to work from home. Of the 1,000 employees we asked, only 50 percent volunteered to work from home four days a week for a nine-month stretch. Those who took the offer were typically older married employees with kids. For many younger workers, the office is a core part of their social life, and like the Chinese employees, would happily commute in and out of work each day to see their colleagues. Indeed, surveys in the U.S. suggest up to one-third of us meet our future spouses at work.

Working from home should be flexible: After the end of the 9-month Ctrip experiment, we asked all volunteers if they wanted to continue working from home. Surprisingly, 50 percent of them opted to return to the office. The saying is “the three great enemies of working from home are the fridge, the bed and the TV,” and many of them fell victim to one of them. They told us it was hard to predict in advance, but after a couple of months working from home they figured out if it worked for them or not. And after we let the less-successful home-based employees return to the office, those remaining had a 25 percent higher rate of productivity.

Working from home is a privilege: Working from home for employees should be a perk. In our Ctrip experiment, home-based workers increased their productivity by 13 percent. So on average were being highly productive. But there is always the fear that one or two employees may abuse the system. So those whose performance drops at home should be warned, and if necessary recalled into the office for a couple of months before they are given a second chance.

There are two other impacts of working from home that should be addressed.

The first deals with the decline in prices for urban commercial and residential spaces. The impact of a massive roll-out in working from home is likely to be falling demand for both housing and office space in the center of cities like New York and San Francisco. Ever since the 1980s, the centers of large U.S. cities have become denser and more expensive. Younger graduate workers in particular have flocked to city centers and pushed up housing and office prices. This 40-year year bull run has ended.

If prices fell back to their levels in say the 1990s or 2000s this would lead to massive drops of 50 percent or more in city-center apartment and office prices. In reverse, the suburbs may be staging a comeback. If COVID-19 pushed people to part-time working from home and part-time commuting by car, the suburbs are the natural place to locate these smaller drivable offices. The upside to this is the affordability crisis of apartments in city centers could be coming to an end as property prices drop.

The second impact I see is a risk of increased political polarization. In the 1950s, Americans all watched the same media, often lived in similar areas and attended similar schools. By the 2020s, media has become fragmented, residential segregation by income has increased dramatically, and even our schools are starting to fragment with the rise of charter schools.

The one constant equalizer — until recently — was the workplace. We all have to come into work and talk to our colleagues. Hence, those on the extreme left or right are forced to confront others over lunch and in breaks, hopefully moderating their views. If we end up increasing our time at home — particularly during the COVID lock-down — I worry about an explosion of radical political views.

But with an understanding of these risks and some forethought for how to mitigate them, a future with more of us working from home can certainly work well.