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How the COVID-19 crisis is reshaping remote working

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How the COVID-19 crisis is reshaping remote working

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Alex Bartik, Zoe Cullen, Edward Glaeser, Michael Luca, Christopher Stanton 19 July 2020

The COVID-19 crisis has necessitated a rise in remote working, but many challenges to its broader adoption remain. This column uses survey data from thousands of small businesses representing a wide set of industries, firm sizes, and regions across the US to understand how businesses are adjusting to the crisis. It finds that transition to remote working is uneven, with businesses in industries with higher income and better educated employees more likely to transition to remote working. Productivity effects are also uneven, with many firms becoming less productive as a result of the transition.

For decades, technologists have trumpeted the potential for the internet and personal computers to transform the modern workplace, leading to widescale working from home and a reduction in the need for office space. Building on these observations, a growing body of research has also explored the potential benefits of remote work to employers and employees alike. 

In some situations, remote working has in fact been shown to improve employee productivity. For instance, in a recent experiment the Chinese travel website Ctrip had call centre employees volunteer to have the opportunity to work from home. A randomly selected subset of the volunteers was allowed to work from home, while the rest served as a control group. In the experiment, those that were allowed to work from home were more productive and reported higher satisfaction (Bloom et al. 2015, Bloom 2014). Remote working has also been raised as a way to create more inclusive workplaces. Mas and Pallais (2017), for example, suggest that women with young children place a higher premium on flexibility associated with remote working. 

Yet, while there has been a rise in remote working, there are many challenges to broader adoption – ranging from workplace norms and stigma, to the need for effective management of remote teams (Neeley 2015, 2020), to more general productivity benefits of in-person work that are difficult to replicate remotely (due to unplanned physical workplace interactions, for example). Moreover, there are important logistical constraints and remote working is simply not feasible for some jobs. In a recent paper, Dingel and Neiman (2020) construct an occupation-level classification of the feasibility of doing different jobs from home. They find that overall, roughly 37% of jobs have the potential to be done from home – but considerable variation exists across occupations. In practice, many businesses that could implement remote working policies still choose not to.

The COVID-19 crisis has led to renewed interest in remote working, as businesses face a bleak set of options: continue business as usual but with the risk of grave illness, shut down the business, or transition to working from home. To understand exactly how businesses are adjusting to the crisis, we have been surveying thousands of small businesses – representing a wide set of industries, firm sizes, and regions across the US. In one paper (Bartik et al. 2020a), we find (among other results) that 43% of small businesses had temporarily shut down even just a few weeks into the crisis. 

In another paper (Bartik et al. 2020b), we look directly at decisions about working from home across thousands of businesses, both large and small. One sample comes from surveys conducted via Alignable, the largest network of small businesses in North America.  A second sample comes from  the  National Association for Business Economists (NABE), the leading association of economists in business and government.  We find that roughly 45% of small businesses had at least some of their employees move to remote work during the crisis, where working remotely is defined as working from home at least two days a week. The NABE sample shows qualitatively similar increases  or larger firms.  Findings in related work with employees as the unit of analysis by Bick et al. (2020) and Brynjolfsson et al. (2020) are broadly consistent with these large increases in working from home during the COVID-19 pandemic. This suggests that many businesses did in fact have at least some capacity to transition to remote working. However, we find that the transition to remote working is uneven, with considerable variation in how businesses have been able to transition to remote working across industries.  

To assess the variation, we draw on Dingel and Neiman’s index of suitability for remote work, which was constructed using attributes of the occupation (such as whether you need to have face-to-face interactions). We find this does a remarkable job of predicting which industries adopted remote working during the crisis. 

Figure 1 Probability of reporting a switch to remote work in March/April (Alignable survey) and the share of industry employees capable of working remotely (Dingel and Neiman 2020)   

How the COVID-19 crisis is reshaping remote working 2

This suggests that feasibility was a real constraint and that businesses that were more able to go remote did in fact choose to do so. In other words, the question isn’t just whether businesses can transition to remote work, but which businesses can. Our results also suggest the ways in which this transition may exacerbate inequality: businesses in industries with higher income and better educated employees were more likely to transition to remote work.

We then analysed the productivity of businesses, looking at the reports of owners (in the Alignable survey) and of economists working in businesses (in the NABE survey) about productivity changes. Our results suggest that the productivity effects are also uneven, with many firms also becoming less productive as a result of the transition. Looking at a sample of thousands of small businesses, this variation can also be predicted by an a priori classification of suitability for remote work, with more productivity losses among firms that were a priori classified as having less capacity for remote work. 

Lastly, we analyse businesses expectations about the future of remote work at their companies and the extent to which they expect higher levels of remote work to persist even after the COVID-19 crisis. Among NABE survey respondents, roughly 36% believe that more than 40% of workers who had switched to remote working during the COVID-19 crisis would continue working remotely after the crisis ends. Among the Alignable respondents, roughly 40% of firms thought that 40% of more of their workers that switched to remote working during the COVID-19 crisis would continue working remotely after the crisis ends. Despite the uneven productivity effects in the short run, this suggests that remote work is likely to remain at higher levels even after the crisis, and that the COVID-19 crisis may have a persistent impact on the nature of work.  

References

Bartik, A, M Bertrand, Z Cullen, E Glaeser, M Luca and C Stanton (2020a), “The Impact of COVID-19 on Small Business Outcomes and Expectations, The Proceedings of the National Academy of Sciences.

Bartik, A, Z Cullen, E Glaeser, M Luca and C Stanton (2020b), “What Jobs are Being Done at Home during the COVID-19 Crisis? Evidence from Firm-Level Surveys”, Working paper.

Bick, A, A Blandin and K Mertens (2020), “Work from Home After the COVID-19 Outbreak”, Working paper.

Bloom, N (2014), “To Raise Productivity, Let More Employees Work from Home”, Harvard Business Review.

Bloom, N, J Liang, J Roberts and Z J Ying (2015), “Does Working from Home Work? Evidence from a Chinese Experiment”, The Quarterly Journal of Economics 130(1): 165–218.

Brynjolfsson, E, J Horton, A Ozimek, D Rock, G Sharma and H Y T Ye (2020),  “COVID-19 and Remote Work: An Early Look at US Data”, Working paper. 

Dingel, J and B Neiman (2020), “How Many Jobs Can be Done at Home?”, Covid Economics 1: 16-24.

Mas, A and A Pallais (2020), “Alternative Work Arrangements”, Annual Review of Economics.

Mas, A and A Pallais (2017), “Valuing Alternative Work Arrangements”, American Economic Review 107(12): 3722-3759.

Neeley, T (2015), “Global Teams That Work”, Harvard Business Review. 

Neeley, T (2020), “15 Questions about Remote Work, Answered,” Harvard Business Review.

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