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Nick Bloom: Will work-from-home keep growing?

published11 days ago
4 min read

In this issue: An exclusive interview with Stanford economist Nick Bloom on remote work

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Will work-from-home keep growing?

This week is a little different. Nonrival is collaborating with the Stanford economist Nick Bloom who studies remote work.

The forecast question concerns a survey from Nick's research which asks US workers what percentage of full, paid days of work they did from home. Will the share of days worked from home rise or fall in September?

Rather than me teeing up this topic with the usual email format, I asked Nick to explain the state of remote work and the case for it increasing or decreasing going forward.


Q&A with Nick Bloom

Nonrival: Briefly, what's the story of remote work so far?

Nick Bloom: Remote work was something we should have adopted far earlier. While most people don’t want to work remotely all the time, employees are generally happier and more productive working at home two or three days a week. The shift to remote work induced by the initial lockdown in 2020 has led to a mass realization that remote work works, and is here to stay. This is changing everything from working patterns, to property markets, to cities, to the growth of technology. The explosion of remote work after 2020 is probably the largest shock to US labor markets since mass mobilization in World War II.

What's the case for remote work becoming more common post-Covid? And how big could remote work get?

Remote work makes firms more profit, so they want to adopt this. Why is remote work profitable for firms? There are four reasons. First, it makes employees a lot happier, with valuations of about 5% to 10% of salary. So firms offering hybrid work from home can improve recruitment and retention. Second, well organized remote working improves productivity by about 5%. Third, it supports DEI initiatives since diverse employees have slightly higher preferences for remote work. And finally it can save on space costs. In a capitalist economy when you have something that majorly improves firms' profitability you find rapid adoption due to market pressures, particularly when this has been kick-started by government lockdowns.

What's the case for remote work declining as the pandemic eases?

There are two time trends going on with remote-work over the next 10 years. In the next one or two years we have an economic slowdown and possible recession. This may lead to a small reduction in the number of days worked from home. This was 5% pre-pandemic, 60% at its peak in May 2020, and has now flatlined at about 30%. I could see this possibly dropping as low as 25% in a recession, but that is still way above the 5% levels pre-pandemic.

In the long-run, the trend for remote work is upwards because of technological progress. If you track the level of remote work back to 1965 when our data starts, it has been continuously increasing, doubling every 15 years from a very low base. It was about 0.4% in 1965, 1% in 1990, 3% in 2010, and 5% in 2019. The reason for this growth was improving technology – telephones, the internet, computers, video calls, cloud storage etc. The pandemic has kicked-up the rate of technological progress supporting working-from-home since the market for hardware and software to support this has just increased six-fold. So every software and technology company and startup is pouring billions of dollars into better products to support remote workers. As such, the long-run trend of remote work is upwards, with innovations around things like holograms, virtual and augmented reality, audio-visual and software driving this higher.

How does your survey measure remote work?

Two ways. The main one is the share of full-paid days worked from home, as this impacts commuting and office space. On this basis, we are currently at 30% of full paid days worked from home, having been at about 5% pre-pandemic. The other is the shares of people in three groups – fully remote which is about 15% in the US, hybrid-working from home which is about 30%, and fully in-person which is about 55%.

Any short-term data considerations forecasters should know about when predicting the September numbers?

September 2022 numbers are a critical gauge of the success of post Labor-Day return-to-office push. Dozens of high-profile firms and managers publicly announced they were pushing employees back to the office after Labor Day, but the big question is did this succeed? The Labor Day return-to-office pushes in 2020 and 2021 were remarkably unsuccessful with no noticeable reduction in work-from-home levels, so I am not holding my breath for 2022. The battle between employees and employers on work from home so far is 2-0 to employees. It feels like a match between Manchester United as the employees and Grimsby town as the employers. Anyone following the premier league knows the unexpected can happen with Leicester City winning the premier league in 2016 on 1000-1 odds, but my money is with employees and little reduction in working from home in September 2022.


Indicators


Forecast

How likely is it that the share of full, paid US work days done from home is 29% or higher in September? (In August it was 29.5%)

Deadline: Make a forecast by 9am ET Wednesday, 9/21

What do you think?

~10% chance​ ​​

​~30% chance​ ​​

​~50% chance​ ​

​​~70% chance​ ​​

​~90% chance​​

Fine print

The data in the charts above and for this week's forecast come from Nick's research with colleagues. Since spring 2020, they've surveyed Americans about their working from home. You can read more about that survey here. The data is for Americans earning $20,000 a year or more and is re-weighted to be nationally representative on several dimensions. The pre-Covid data charted comes from various existing government surveys.