Work From Home Will Stick, and It’ll Be Great For Employees and The Economy: NBER

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The pandemic is almost over, but things aren’t going back to the way they were. A new working paper called Why Working From Home Will Stick was recently published by the US-based National Bureau of Economic Research (NBER). They found more employers are planning on adopting WFH as a regular part of operations, and it […]

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The pandemic is almost over, but things aren’t going back to the way they were. A new working paper called Why Working From Home Will Stick was recently published by the US-based National Bureau of Economic Research (NBER). They found more employers are planning on adopting WFH as a regular part of operations, and it has huge benefits to employees, employers, and the economy. Almost all of these benefits are related to the elimination of commute times. Who knew it was such a drag? 

Work From Home Is Here To Stay, With A Lot More Companies Planning To Make It Permanent

Interviewing tens of thousands of Americans, many will continue to WFH post-pandemic. The researchers found 20 percent of full workdays will permanently be WFH. This is up from 5% before the pandemic, so the telework force will increase four-fold in terms of days. The reason this is in days is due to a number of companies adopting hybrid models — where some days are in office. The last point being largely due to companies being locked into long-term leases, but that’s a different discussion for another day. 

The researchers found the WFH trend is likely to stick for five reasons:

  • Better-than-expected experiences, with many people pessimistic about WFH finding they actually like it;
  • New investments into physical and human capital to accomplish work from home. That infrastructure wasn’t cheap, and companies are going to use it;
  • The diminished stigma of being an “at home worker,” which was perceived by many to be a low-income job prior;
  • Lingering concerns about crowds and contagion risks;
  • and a pandemic-driven surge in tech innovation to support remote work. You now have an army of companies with salesforces, developing ways to get your boss to approve sending you to work from home.

They find this will lead to three huge changes that will boost the quality of life and economy. 

Most Employees Will See Big Benefits Working From Home

Most employees will see huge benefits from working remotely. The main reason is due to the elimination of the worst part of people’s days — the commute. They found highly educated and well-paid employees see this as the largest benefit. Their research shows they tend to have the longest commutes. While that may not have been the case in Canada prior to the pandemic, it might be now

Higher paid workers are more likely to feel the benefits of not having to commute often, or ever. They explain this is due to the opportunity cost per minute. The more you make, the more likely you are to perceive commuting as a waste of time. Do you want to commute 3 hours to do a one-hour meeting, or do you want to not commute and get 4 one-hour meetings done? Exactly.

Cities That Have Large Commuter Inflow Will Lose Up To 10% of Spending To Other Regions

Cities that benefit from large amounts of inward commuting are going to take a hit. Fewer days working in an office, means less time around the office. This means lower expenditures on meals, entertainment, personal services, and shopping in city centers.

They estimate this will lead to a 5 to 10 percent drop in pre-pandemic spending in city cores. Fortunes of cities like San Francisco, which have a large inward flow of commuters will be “diminished.” How many times have you gone for a beer after work that you didn’t plan on doing before work? That kind of spending is gone.

On the flip side, just like we’re seeing during the pandemic — it will bring new life to regions further out. Small cities and towns have seen a huge boost in activity since the pandemic, as people relocated. Those big-city incomes are going to benefit local economies. Especially in regions where housing didn’t just adjust to consume any saved funds. 

Work From Home Will Boost Productivity By 4.6%

WFH arrangements will lead to a huge boost in productivity. They estimate re-optimized work plans will lead to 4.6 percent growth. One of the primary contributors here is, once again, commute times. Just by dropping commutes, years of productivity gains are being realized in a short period of time.

The researchers say this has been largely underestimated by traditional models. Using conventional models, productivity only increased by 1 percent. Almost 80 percent of the gains were not being captured.

There’s plenty of research to back this assertion as well, with the paper using a number of examples. One Chinese study found a 13% increase, with people needing fewer fatigue breaks at home. Another US study found call center workers had an 8% increase in productivity. The US Patent Office also found a boost of 4% when they started to adopt WFH as well. There is little evidence that WFH produced lower productivity, despite the many times your boss has probably repeated the claim. 

Some companies have resisted the WFH arrangements, and insist on everyone coming back to the office. Which is kind of funny, considering that means they’ll be competing with more productive companies, no?  

Post-pandemic life is about to see more than quadruple the amount of WFH compared to less than two years ago. This is going to lead to some big changes, and most of them are great. Just don’t expect things to roll back to normal. Many people and companies got a taste of an improved quality of life and productivity, and they aren’t going back. 

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