Analyzing the Pandemic’s Big Shift in Working from Home: Productivity, Innovation, Working Arrangements, Pay

By Christopher Mahon, LexisNexis Insights Contributing Author

In 1965, less than 0.5% of American workers worked from home. Due to technological innovation in the late twentieth century, that 0.5% rose to 7% by 2019. By June of 2023, 28% of full working days were being worked from home. This big shift, made possible by technology, was catalyzed by the pandemic.

Researchers are now analyzing how the big shift has changed the working life of employees, and, specifically, how it has changed the proportional use of the three possible working arrangements (at home, at the company’s site, or a hybrid combination); how the changes are distributed across industries, geographical areas, age, gender, and education groups; and how the big shift has affected productivity.

In an article titled “The Evolution of Work from Home,” published in the Fall 2023 issue of Journal of Economic Perspectives, José María Barrero (Assistant Professor of Finance at Instituto Tecnológico Autónomo de México), Nicholas Bloom (Professor of Economics at Stanford University), and Steven J. Davis (Senior Fellow at the Hoover Institution) explore these issues and more.

Research Methodology

Much of the data and analysis presented in the article by Barrero et al., are taken from the authors’ own study, the U.S. Survey of Working Arrangements and Attitudes (by Barrero et al., 2020-2023), in which working arrangements across fifteen industry sectors and several employee demographics (age, gender, education level, geographical location, and parent status) were studied. 

However, the article also reports on other studies as well. For example, it reports on a previous study by Barrero, Bloom, and Davis in 2021, where tens of thousands of workers across many countries were surveyed, and a study called “Working from Home Around the World,” published in August 2022 by Aksoy et al. in the Brooking Papers on Economic Activity, where the researchers sampled work experiences in 27 countries. The 2018 American Heritage Time Use Study sampled work experiences for six separate years running from 1965 to 1998. A separate 2023 American Time Use Survey analyzed data from 2003-2019. When discussing how the big shift has affected productivity, the authors also refer to seven separate studies that are different from their own. These other studies are helpful to understand the long-term background to the pandemic and the big shift while the authors own main study is concerned with the years 2020-2023.

Findings

The findings report on working arrangements across employment sectors. They discuss the impact the big shift has had on pay, productivity, and innovation. They analyze rates of working from home according to industry, population, and other demographics. The authors of the study also look toward the future.

Working Arrangements Across Employment Sectors by Percentage of Workers

In their own survey, Barrero et al. measured the full-time working arrangements in the United States as of 2023, identifying the percentage of employees who work fully onsite, fully remote, and those who have a hybrid arrangement. For example, 55.9% of all workers work fully onsite each day, 28.6 of all workers work in hybrid arrangements, and 15.5% work remotely. The complete percentages are as follows:

Fully Onsite Workers:

• All workers: 55.9%.
• Self-employed workers, excluding contractors and gig workers: 24.9%.
• Contractors and gig workers: 32.9%.
• For corporate firms with 1 to over 5,000 employees, the overall percentage was 59.3%.
• Percentages ranged from 50.7% in firms with 500 to 4,999 employees to 68.3% for firms with 10 to 49 employees, although firms with more than 5,000 employees also had a high percentage at 63.5%.
• Government employees, excluding the armed forces: 59.7%.

Hybrid Arrangement

• All workers: 28.6%.
• Self-employed workers, excluding contractors and gig workers: 26.8%.
• Contractors and gig workers:22.7%.
• For corporate firms with 1 to over 5,000 employees, the overall percentage was 29%. although percentages ranged from 17.6% for firms with 1 to 9 employees to 37.7% with firms with 500 to 4,999 employees.
• Government employees, excluding the armed forces: 27%.

Fully Remote

• All workers: 15.5%.
• Self-employed workers, excluding contractors and gig workers: 48.3%.
• For contractors and gig workers: 44.4%.
• For corporate firms with 1 to over 5,000 employees, the overall percentage was 11.8% with a low percentage of 7.6% in firms with 10 to 49 employees and a high percentage of 17.8% in firms with over 5,000 employees.
• Government employees, excluding the armed forces:13.3%.

Pay, Productivity, and Innovation During the Time of the Big Shift

Wage patterns have been affected by the big shift because companies may recruit people who can work from home in areas of the country marked by lower wages. Also, labor supply may expand when there are more opportunities to work from home, and changes in labor supply can change wage patterns. One long-held belief in economics is that workers will exchange a higher wage for a valued amenity (like working from home). This amenity is often more attractive to college-educated employees and those who work in industries where remote work is more available. Competition from workers who can work remotely in other countries can also affect the wages of those who do the same job in America.

Measuring how the big shift has affected productivity is difficult to ascertain because so many factors are involved, and working arrangements vary widely across industries and even within industries. The one thing that seems certain is that managers and workers often have different perceptions about the workers’ productivity. This is true because workers often consider commuting time as part of the job but managers don’t consider commuting time when measuring productivity. That said, the article indicates that, overall, hybrid working arrangements increase productivity.

People often assume that on-site work can lead to more innovation since it allows for more serendipitous meetings among colleagues. However, the research indicates that the early stages of innovation—the brainstorming phases—are best supported when employees are in the same physical location, but the later stages—selecting the best ideas and developing them—can be accomplished when employees are working remotely. Serendipitous encounters among employees at one worksite may foster innovation, but, at the same time, remote technology offers the opportunity to form specialized, purpose-driven teams across wide geographical areas.

Rates of Working from Home by Industry, Population, and Demographic Characteristics.

The amount of time spent working remotely depends on the industry:

• Information, Finance and Insurance, Professional and Business Services, and Arts and Entertainment (2-3 days per week).
• Utilities, Health Care and Social Assistance, Wholesale Trade, Government, Construction, and Real Estate (1-2 days per week).
• Education, Manufacturing, Retail Trade, Transportation and Warehousing, and Hospitality and Food Services (about 1 day per week).

It also depends on education. These are the percentages of full-time work days worked from home by Americans aged 20-64 years according to education levels:

• 20% for those with only a high school education.
• 26% for those with some college.
• 34% for those with a four-year college degree.
• 36% for those with a graduate degree.

Also, the higher the population density of an area, the larger will be the rates for working from home, perhaps because high-quality internet services are more available in densely populated urban areas.

Across all age groups, about 27% to 33% of full-time work days are worked at from home. Employees between the ages of 30-34 have the highest rate at about 32%. Employees between the ages of 20-24 have the lowest rate at about 27%. Other workers in their 30s and early 40s also have about a 32% rate, and older workers in their 40s, 50s, and 60s, share a rate of about 28%.

Women and men work from home at similar rates, although the rates for women is slightly higher (29.3% of paid workdays for women against 27% of paid workdays for men), and higher levels of education increase the rate for women even more. Parents are also more likely to work from home than employees without children. Parents are especially willing to work from home if they have children under 14.

The Future

The big shift is likely to endure. Executives predict remote and hybrid working arrangements will grow modestly during the next five years. Technologies that allow remote work will improve and grow in market share. Organizations will continue to learn how to manage remote and hybrid workers more effectively. Fully remote jobs may not grow as much as hybrid working arrangements. Some fully remote jobs, such as call those in call centers and which relate to routine administrative tasks, may be replaced by automation. And if those same job occupations, or others, are hit hard by an economic downturn, that may significantly affect the percentage of employees who work remotely.

Takeaways

• The traditional work arrangement of completing employment duties at a company office to which workers must commute have now evolved into three types of working arrangements: (1) traditional, i.e., at the office or particular job site, (2) at home, i.e., remotely, and (3) a hybrid working arrangement where part of the weekly work is completed at home and part is completed at the company site.
• The percentage of full-time working days worked from home grew from less than 0.5% in 1965 to 7% in 2019 and then to 28% in 2023.
• It’s difficult to exactly determine how working remotely affects productivity because much of the data can be not only job-specific but also company-specific within a certain industry, but, overall, hybrid working arrangements increase productivity.
• Managers differ about how remote work affects productivity. Workers often feel they are more productive. This can be because the amount of time they devote to their jobs is reduced when they do not commute. The type of job often determines whether workers are more productive at home or in the office.
• Several studies suggest hybrid working arrangements—working from home one or two days a week—not only increase productivity but also result in happier employees.
• Working from home across geographical areas, especially those with lower cost of living and lower wages, can mitigate any loss of productivity by decreasing labor costs.
• Education level often determines who will work from home, but the type of job (for example, working in a call center) can also be a determining factor.
• Highly educated employees and parents with children under 14 are more likely and often more willing to work from home than those with less education and those with no children.
• The U.S. has a higher work from home rate than Asia and Europe.
• The pandemic catalyzed the big shift to remote work, and the big shift is likely to endure. Technological innovation continues to make remote work more convenient and effective, and managers are learning how to manage remote work more effectively.

 Commentary

The main limitation of the article is that the big shift occurred over roughly four years, from 2020 through 2023, and data gathered from that period may not provide an accurate view of the working landscape in the next five, ten, twenty, or fifty years and beyond. Still, the amenity-value of working at home may provide a constant into the distant future, technological tools will continue to be available and improve, organizations will continue to refine their management of remote work, and the benefits of remote work apply to both workers and corporate organizations. What the study lacked in number of years studied may be ameliorated by the depth and breadth of the study itself across industries and worker demographics.

Although the article offers great insight into changing working arrangements brought about by new technologies and the experience of working through a pandemic, it does not explore how the big shift will affect workers’ compensation policy. Much of that research still needs to be done. However, the article under consideration here, “The Evolution of Work from Home,” by Barrero, Bloom, and Davis, does provide a good description of the landscape in which evolving workers’ compensation policies will exist. The lines between work and home have been blurred by the big shift. Children, pets, family obligations, and nonwork-related electronic communications have migrated into the remote work space. It will be the job of workers’ compensation policymakers to clarify those lines. New technologies and new working arrangements create new questions, the answers for which will create the new policies and laws for workers’ compensation.

Interestingly, an article by Hon. Susan V. Hamilton, “Working from Home May Have Negative Health Consequences,” published in the February 4, 2024, LexisNexis Workers’ Compensation Newsletter, began to explore these workers’ compensation policy issues. That Newsletter article reported that a study using data from 2021 California Health Interview Survey (CHIS) concluded that employees working from home during the early stages of the pandemic suffered more negative health outcomes than employees not working from home. Health outcomes studied were related to smoking, alcohol consumption, diet, and mental health. As cogent and helpful as this analysis is, one must remember that the 2021 data came from what perhaps was the most stressful time of the pandemic and so, again, future research on health outcomes related to working remotely, and how they affect workers’ compensation claims, is needed and welcome.

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