Hybrid work is here to stay
Recent estimates suggest that, on average, employees would be willing to give up 5% of their pay to work from home 2-3 days per week
By Pinelopi Koujianou Goldberg
Published: Tue 31 Jan 2023, 10:20 PM
There is no shortage of hyperbole in the debate about whether companies should demand a full return to office work. According to Citadel’s Ken Griffin, the hedge fund owes its record-breaking $16 billion haul last year to its staff’s full-time presence in the office. But such sound bites ignore all the benefits that remote work offers to employers, employees, and the economy more broadly.
Naysayers dismiss employees’ preference for remote work as a manifestation of entitlement or “quiet quitting” (doing the bare minimum to remain employed). But that snap judgment is far too crude. A recent study by Harvard University economist Raj Chetty’s Opportunity Insights lab estimates that there are around 2.6 million people in the United States who should be working, but are not. At a time when many employers cannot fill vacancies, offering greater flexibility both increases the applicant pool and contributes to higher retention rates, easing the pressure on hiring.
Happier employees also tend to be more productive. Survey data on attitudes toward remote work from multiple countries show that many employees were surprised by their own productivity during the pandemic. Remote work saved them hours of exhausting commutes, and they were able to tailor their days to do their work when they felt most productive. Women and parents of young children especially came to appreciate – and make the most use of – this newfound flexibility.
More broadly, remote work offers greater opportunities for labor-market participation to talented individuals who had been previously disadvantaged by time or mobility constraints (including not just women and parents but also people with disabilities). Research by Harvard’s Claudia Goldin shows that the need to work long hours outside the home at prescribed times is one of the most important challenges that women (especially those with a college education) face in the labor market.
Remote work thus could help eliminate some of the tension between career and family. But as the pandemic taught us, leveraging remote work to the fullest requires complementary policies, especially adequate childcare. Otherwise, remote work will not spare women from the double duty of full-time employment and managing household and childcare responsibilities.
If broadly implemented and accompanied by the right policies, remote work would deliver far-reaching benefits for the overall economy. It would reduce labor costs and thus inflationary pressures, because employees could move to cheaper locations. And these relocations could in turn lower congestion costs, making commutes easier and less expensive for those who still need to be physically present in the workplace.
In real-estate markets, rents and house prices would be more evenly distributed geographically. Though this might raise prices in some previously low-cost locations, it would eliminate the extraordinarily high rents and house prices found in highly congested areas such as the New York City metropolitan area or the San Francisco Bay Area.
Of course, there are also some disadvantages to consider. In some sectors, employers worry that a lack of structure, office “culture,” or the ability to monitor employees’ progress will drive down lower productivity. And since remote work is not an option in many industries – from restaurants to health care – its uptake might add another dimension to labor-market inequality.
Still, even those workers who need to show up every day would benefit indirectly from remote work, through the reduction in commuting costs, rents, and house prices. Moreover, if markets are functioning properly, there should be a compensating differential for workplace labor. Employees already seem to recognize this tradeoff. Recent estimates suggest that, on average, employees would be willing to give up 5% of their pay to work from home 2-3 days per week.
Critics of remote work also often argue that personal interaction (at the proverbial water cooler) fosters creativity and innovation, as if to suggest that new ideas never emerge from a Zoom screen. And, of course, many employers and employees (especially younger cohorts) cherish a good office culture. But most of these needs can be met through hybrid models, whereby employees are physically present on a few pre-determined days of each week or month.
Finally, it is true that the widespread adoption of remote or hybrid work would have serious implications for the future of city centers, particularly those that are deemed less appealing or competitive. Many local jobs, especially in services and entertainment, would be lost, contributing to a vicious cycle of urban decline. And yet the advantages of remote, and especially hybrid, work seem to outweigh the disadvantages, especially if such work is supplemented by complementary policies to provide childcare and support urban development.
The Covid-19 pandemic was horrible for everyone. But like every crisis, it taught us some valuable lessons and accelerated innovation in certain sectors. Remote and hybrid work are a silver lining of a prolonged tragedy. We should cling to it.
- Pinelopi Koujianou Goldberg, a former World Bank Group chief economist and editor-in-chief of the American Economic Review, is Professor of Economics at Yale University