The outbreak of the 2019 novel coronavirus is threatening the economy worldwide. To contain the spread of the coronavirus and curb contagion, a new organisational model of work, known as ‘smart working’, is becoming increasingly important: workers can work outside their workplace and with a flexible time schedule, thanks to the use of technology. Flexibility over where and when to work is being used to continue with work-related activities and avoid the collapse of the economy.
Despite the massive increase in recent weeks, we still know very little about the economic effects of smart working in normal times. Previous research has studied the use of the traditional practice of working from home under the same wage conditions and under the control of the employer (‘telecommuting’). In an experiment with Chinese call-centre employees (a routine job), Bloom et al. (2014) show that telecommuting can be beneficial for employees’ productivity and their work-life balance, although at the cost of feeling isolated, which, in the long run, may reduce the benefits and the desirability of this practice.
However, telecommuting is only one way and one dimension of work flexibility. It is mainly based on replacing the workplace with the home, maintaining the rigid control of the employer over the location of the work and the precise hours. Telecommuting is compatible with only a limited number of (mainly routine) jobs.
New and more complex forms of flexibility have begun to spread, including flexible location and flexible work times, based on the removal of the constraints on the space and time of work. This new flexibility is highly appreciated by workers and plays a major role in their decision to take or leave a job: approximately 37% of the 195,600 US employees surveyed by Gallup in 2017 declared they would change their job for benefits related to flexible working location (for part of their working week), and more than half of office workers (54%) said that they would leave their job for one that offers flexible work time (Gallup 2017). Among millennials, these reported percentages increased to 50% and 63%, respectively. Similarly, in Europe, more than 20% of the workers (men and women) interviewed by the Sixth European Survey on Working Conditions carried out by the European Foundation for the improvement of Living and Working Conditions reported that their working hours did not fit with their family and social commitments (Eurofound 2017). Having some freedom to set one’s start and finish times and arrange breaks during the working day increases the perception that one’s working hours fit in with family and social commitments by approximately 20% (Eurofound 2017).
Smart working comes with a trade-off. On the one hand, there are potential gains from the flexible work locations and hours: workers reduce their commuting costs and firms optimise their costs (lighting, heating or air-conditioning, canteens, cleaning, etc.). Moreover, removing the fixed daily start and finish times allows employees to better manage their time according to their preferences. They can enjoy long or short breaks for personal or family reasons, and they can adapt their work hours to changes in life circumstances without altering their compensation. This increases their satisfaction and work-life balance, which ultimately makes this arrangement desirable to workers. In parallel, firms may optimise by rewarding these employees based on effective productivity rather than on the particular hours worked. Firms may also gain from the retention of talent and the reduction of days of absence, thus increasing their competitiveness. Additionally, time flexibility in the labour market for all workers (men and women) contributes to reducing the rewards for long hours, working at particular hours and inflexible schedules, which are considered a major driver of gender pay gaps (Bertrand 2018). Such flexibility may thus represent a step towards the “last chapter of the grand gender convergence” (Goldin 2014).
On the other hand, smart working raises several concerns. Working outside the workplace may reduce the commitment of workers. Moreover, by reducing interactions between workers and between workers and supervisors, there is a risk of a reduction in productivity, particularly in jobs with high interactions. Finally, blurring the boundaries between work and home may increase the hours of overtime and the levels of employee stress and may worsen the work-life balance.
In a recent paper (Angelici and Profeta 2020), we examine empirically how the introduction of smart working addresses this trade-off. We design a randomised experiment to study the causal effects of the introduction of smart working in a large, traditional company in the multi-utility sector in Italy. The company has never used any flexible working before. Following the methodology of randomised control trials (RCTs), we select a sample of 310 workers (containing both white- and blue-collar workers) and randomly divide it into two groups: the workers in the first group (the treatment group) have the option to work ‘smart’ (i.e. with no constraints on the place or time) one day per week for nine months, in agreement with their supervisors; the workers in the second group (the control group) continue to work traditionally.
We are interested in three major outcomes along three dimensions: productivity, wellbeing and work-life balance. We use objective measures of workers’ performance calculated monthly by the firm (e.g. the number of dossiers processed during the month) and the number of days of leave taken by each worker. We complement this information with questionnaires administered to each worker and their supervisor both before and after the treatment. The questions capture several dimensions of self-assessed productivity, wellbeing and work-life balance. Given the randomisation of the two groups, we are able to identify the causal effect of the treatment on our outcomes of interest.
Our results show that, for the same number of hours of work, workers who engage in smart working increase their productivity compared to workers who continue working traditionally. This outcome holds whether productivity is captured by an objective measure or measured according to several specific productivity traits (e.g. compliance with deadlines) either self-reported by the worker or reported by the supervisor.
Figure 1 shows the evolution of days of leave for the treatment and the control groups during the experiment. Workers in the treatment group take fewer days leave than those in the control group, and the difference increases after the first three months of the experiment. This suggests that the effects are not simply a positive reaction to the new work organisation.
Figure 1 Days of leave taken during the nine months of the experiment
Smart workers are also more satisfied with their social life and with life in general. They claim to be more able to focus, make decisions, appreciate their daily activities, overcome problems and experience reduced stress and loss of sleep. The magnitude of the most interesting results is summarised in Table 1.
Table 1 The effects of smart-working (average treatment effect)
Note: The average treatment effect is obtained from OLS estimates which include individual controls: age, squared age, being a law 104 worker, having law 104 relatives (Law 104 gives the right to reduce the number of hours worked in presence of special care needs) having a child, having a young child (less than 3 years old), distance from home to the workplace in km, working in a team and the level of the dependent variable pre-treatment. See Angelici and Profeta (2020) for details.
There are also interesting gender effects. First, men are found to spend more time engaged in household and care activities. This implies that, although not a gender policy, smart working helps increase the balance of roles within the family, which is an essential step towards gender equality. Second, some of the results are stronger for women: the reduction of days of leave is driven by women, as well as the higher satisfaction of smart workers with their working hours.
Our results suggest that promoting smart working is an effective way to increase productivity and improve wellbeing and work-life balance. Moreover, we provide evidence that by removing the rigidity related to particular hours of work, smart working may contribute to the reduction of gender gaps in the labour market (Goldin 2014).
Our study based on smart working for one day per week cannot be generalised to the current situation under the coronavirus pandemic, where workers are forced to work from home every day for a prolonged period. Interestingly, the current massive levels of unplanned, full-time use of smart working reveals that it is feasible both for routine and non-routine tasks and can be useful in emergency periods. It is, however, likely to produce consequences different from our study, especially on the sense of isolation of workers and their productivity. Yet we suggest that in normal times (for example, after the crisis), the use of smart working for a limited period of the work week can be beneficial.
Angelici, M and P Profeta (2020), “Smart-working: Work flexibility without constraints”, Dondena Working Paper 137.
Bertrand, M (2018), “Coase lecture: the glass ceiling”, Economica 85(338): 205–231.
Bloom, N, J Liang, J Roberts and Z J Ying (2014), “Does working from home work? Evidence from a Chinese experiment”, The Quarterly Journal of Economics 130(1): 165–218.
Eurofound (2017), Working anytime, anywhere: The effects on the world of work.
Goldin, C (2014), “A grand gender convergence: Its last chapter”, American Economic Review 104(4): 1091–1119.
Gallup (2017), “State of the American workplace”.