To put a spin on a favorite British saying: I’ve been asked about productivity and working from home more times than I’ve had hot dinners. So it’s time to review all the evidence and serve up one big answer to the question: Does working from home work?
In a nutshell, that answer is “yes.” But it’s important to understand why. And this is where the data come in.
The numbers paint a picture of small, positive productivity gains for hybrid work. The savings in commuting time more than offset the losses in connectivity from fewer office days. In contrast, the impact of fully remote working on productivity is typically mildly negative. Fully remote workers can struggle with mentoring, innovation and culture building. However, it appears this can be reversed with good management. Running remote teams is hard but done well can deliver strong performance.
But this is about more than just worker output. Firms care about profits — not productivity.
Working from home massively reduces overhead. It drives down recruitment and retention costs, as employees value working from home. Fully remote companies also slash office costs, and cut wages bills by enabling national or global hiring. Indeed, the widespread adoption of working from home has been a triumph of capitalism. Higher profits have led millions of firms to adopt this, generating the five-fold increase in home working many of us now enjoy.
Looking at micro economic studies on working from home productivity, the classic is “The Stanford Study” I helped oversee in 2010-2012. We randomized 250 employees in a large multinational firm into those who would work from home and those who would report to the office. The expectation, of course, was that home-based employees would goof-off, sleeping or watching TV rather than working.
So, we were shocked to find a massive 13 percent increase in productivity.
The productivity boost came from two sources. First, remote employees worked 9 percent more in minutes per day. They were rarely late to work, spent less time gossiping and chatting with colleagues, and took shorter lunch breaks and fewer sick days. Remote employees also had 4 percent more output per minute. They told us it’s quieter at home. The office was so noisy many of them struggled to concentrate.
Other pre-pandemic studies found similar results. For example, Raj Choudhary found US Patent officers gained 4 percent productivity from greater remote flexibility.
More recently, a spate of studies has studied the impact of firms moving to fully remote during the pandemic. Papers by Natalia Emanuel and Emma Harrington and by Michael Gibbs and co-authors find large and negative impacts on productivity. Most recently David Atkin and co-authors randomized data entry workers between office and home locations, finding a striking 18 percent drop to productivity from home working.
These recent studies highlight major productivity costs from remote working. But they also reflect the importance of good management. Firms that adopted home working at speed in the pandemic often lacked planning, organization and control processes. Remote teams were led by office-based and office-trained managers who provided little support or structure. Remote work is different from office work, and needs managers, software and hardware that can support it.
Now for the macro data. Let’s start by celebrating the triumph of the post-2020 U.S. productivity acceleration. In the five years before the pandemic, U.S. labor productivity growth was 1.2 percent; since 2020, this picked up to 1.5 percent. Given the state of the world, that acceleration was miraculous.
What could have caused this? Perhaps rising government expenditure and easy monetary policy? Possibly, but greater government activity traditionally is associated with lower, not higher, productivity growth. Perhaps an acceleration in technology and computerization? Possibly, but the pandemic did not witness any pickup in technological progress. Perhaps the five-fold surge in working from home post-pandemic. Maybe cutting billions of commuting hours, replacing millions of business trips with Zoom meetings, increasing the labor supply of Americans with disabilities or child-care commitments, and saving millions of square feet of office space increased productivity? It is honestly hard to say.
But we can say just as working from home jumped five-fold, U.S. productivity growth accelerated, reversing decades of pre-pandemic decline.
Perhaps the most persuasive data are from the markets. Economists believe firms strive to increase efficiency, profits and growth. Individual firms and managers do make mistakes. But, when millions of firms around the world are adopting hybrid and remote work, there has to be something there. I have spoken to many hundreds of managers and firms over the last three years and I repeatedly hear they use home working as a key part of their recruitment and retention strategy. Indeed, another recent experiment on 1600 employees found hybrid reduced employee quit rates by 35 percent.
The work-from-home conversation needs to shift from big-name CEO anecdotes and stories to data and research. When it comes to making decisions impacting millions of employees and firms, we deserve better. The data and research show well-managed work from home can raise and maintain productivity, while cutting costs and raising profits.
It keeps employees happy, reduces pollution by cutting billions of commuting miles, and supports millions of employees with care and disability challenges in work. Indeed, what is not to like?
Nick Bloom is the William Eberle Professor of Economics at Stanford University; a senior fellow at the Stanford Institute for Economic Policy Research; and co-director of the Productivity, Innovation and Entrepreneurship program at the National Bureau of Economic Research.