From the Pandemic, a Phenomenon That’s Here to Stay

Working from home is one of the most profound ways the Covid pandemic changed the world, and it’s “here to stay,” researcher Nick Bloom told a packed event at UVA Batten this week.  

Bloom was the guest speaker at this year’s Merrick Lecture, hosted in partnership with the UVA Department of Economics. A leading expert internationally on the work-from-home phenomenon, he is the William Eberle Professor of Economics at Stanford University. His talk was titled “The Glorious Future of Working From Home.” 

Bloom delivered three major takeaways during his lecture: 

• The work-from-home (WFH) landscape will continue to stabilize around hybrid work for many professions;
• Managing WFH dynamics presents challenges, particularly coordinating office space and doing performance reviews; and 
• The economic impacts of post-pandemic WFH environments is vast, from decreasing urban density to shifts in transportation patterns to weekday spikes in golfing activity.

“So where are we going? If we look five years out, I think work from home is only going to take off,” Bloom said, noting that the market for WFH technologies has increased fivefold in the last four years. “In the long-run, technology will only get better, so if I could predict 10 years out – work from home will be higher…”

Currently, WFH is relatively stable at about 25% of days. Meanwhile, office occupancies are also stabilizing at about 50% of 2019 levels, Bloom said. “People are only going in three days a week, so much so that the London Underground is off-peak on Fridays,” Bloom said. “The office market is not great, let’s put it that way.”

Notably, the state of working from home varies considerably by industry, with tech and finance seeing the largest number of remote days-per-week, and hospitality and food services the least. Wealthier nations such as the U.S. and United Kingdom are also more likely to have higher rates of remote work as they likely have better access to broadband technologies.

Bloom focused on two key factors driving WFH choice in this post-pandemic economy: happiness and productivity. The former corresponds with recruitment and retention rates, and he highlighted a study showing that employees value hybrid work environments about as much as 8% more pay.

“People hate commuting even more than they hate working,” he quipped, noting that it is also cheaper for companies to hire from lower cost-of-living communities — someone from Michigan versus the San Francisco Bay area, for example.

As for productivity, Bloom highlighted a randomized control trial that found no difference in performance between hybrid and in-office work among marketing, engineering and finance professionals, while showing a 35% decrease in quit-rates. Generally, Bloom said, studies find productivity rates among fully remote workers to be as low as -30% (which may indicate the difficulties of capturing productivity from afar) to roughly 13%.

Managing hybrid and remote working conditions can be difficult, in part due to the wide variation post-pandemic in the number of WFH days workers want. There are notable, mostly social, benefits to being in the office, Bloom said, including idea-sharing and face-to-face collaboration (although he noted that “face time with manager” was not one of the top reasons study participants listed as reasons to return to the office). People want to be in-office primarily for mentoring and innovation impacts, he said, but “it’s a different issue if you’re a new grad, versus being 38 with three kids.”  For managers, the job of performance reviews has shifted considerably as measuring inputs is now secondary to outcome-oriented perspectives.

The research suggests that the WFH phenomenon has increased the labor market overall, which is helping drive down the deficit and inflation. By far the biggest group seeing increased employment are those with a disability that impair their ability to work, Bloom said. Before the pandemic, about 6 million of the 20 million people in the U.S. with disabilities were employed; that rose to 8 million since 2020. “Commuting is really hard and sitting in an office 8-10 hours a day is really uncomfortable” for some people, he said as an example.

Another labor market shift is that compared to men, women are working at higher rates post-pandemic, due to WFH policies. “Women will take a 50% pay cut to work from home rather than go into the office,” Bloom said. “Working from home is here to stay.” 

Slide deck from Bloom’s presentation: