COVID resurgence means more working from home – but offices still aren’t going away

CHAPEL HILL – At the start of the COVID-19 pandemic, a sea change occurred in the number of people working from home. And with the recent surge of the Delta variant, many employees who began returning to the office this spring and summer have returned to work from their kitchen tables, garages and home offices to comply with efforts to curb the resurgence of the virus. .

Employers and employees have grown accustomed to this new arrangement, with both groups now expecting a permanent increase in working from home (WFH) after the pandemic subsides.1.2

Although COVID-19 has accelerated the shift to remote working, change has been underway for over 30 years. From the introduction of affordable computers in the early 1990s to the subsequent development of email, high-speed Internet, smartphones, video conferencing technology and cloud computing, the widespread adoption of technological advances allowed us to work more efficiently from home.

Our recently conducted research3 examines how the widespread acceptance of technology has accelerated the transition of highly skilled workers to working from home. We also explore the productivity gains made by stay-at-home workers and what the telecommuting trend means for homes, offices and municipalities.

We start with a model that uses pre-pandemic data to estimate the elasticity of substitution between working from home and working in the office. Substitutability, in this case, refers to the extent to which work done from home (largely through technology) is able to replace similar work done in the office context. For example, a videoconference can easily replace an in-person meeting at the office.

In our model, highly skilled workers choose how to divide their time between working from home and working in the office. We measure the extent to which, in the pre-pandemic period, workers in the same industries and occupations, but with different commuting times, made different choices about the frequency of working from home. The rate at which workers choose to work from home as travel costs change is indicative of the substitutability of telecommuting for office work.

What we find is that working from home is an imperfect substitute for working in the office. This has important implications for understanding the future of the post-pandemic workplace. If the two are not perfect substitutes, most workers in the future will continue to divide their time between home and the office.

In addition, historical evidence (in this case from the European Union [Fig. 1]) shows that the largest increase in working time at work in the pre-pandemic years, in which technology improved substitutability, was in the share of workers who sometimes, rather than always, worked from home.

Similarly, a 2021 PwC study4 reports that most employers are planning a post-pandemic hybrid office model in which employees work in the office between one and four days a week, rather than one in which employees can work entirely remotely or only show up to the office only a few times a month.

In addition to examining the prevalence of post-pandemic telework, we also analyzed the impact of the pandemic on the adoption of telework technology and the implications for worker productivity. Our simulation studies a pre-pandemic period in which college-educated workers work from home less than a full day per week, and a post-pandemic period in which these workers double or triple their working hours at home. residence. Finally, we study the pandemic period itself – a period during which we assume that office productivity fell by 50%, reflecting the impact of social distancing on office productivity.

The model implies that widespread adoption of WFH technology increased work-from-home productivity relative to work-in-office productivity by 30-50% between the onset and end of the pandemic.

For comparison, we also simulate what might have happened if the COVID-19 pandemic had occurred in 1990, before many telecommuting technologies existed. In this model, workers continue to work in the office at the same pace, but office productivity drops by 50%, just like during the current pandemic. The model suggests that, even if incomes and prices fall, working from home is not a practical alternative to working in the office in 1990, implying that the pandemic would have had more serious consequences on income and mortality. household if it had happened in 1990 than it has today.

What does this mean for workers?

As previously reported, the widespread adoption of work-from-home technology increased work-from-home productivity relative to office work productivity by 30-50% between the onset and end of the pandemic. . Because of this increase in productivity, the pandemic will likely lead to an increase in white-collar lifetime earnings. The dilemma is that it will also lead to greater income inequality, as most non-white-collar jobs cannot be done from home, and these workers will not be able to take advantage of productivity gains from technology.

What does this mean for the office?

Because telecommuting is an imperfect substitute for working in the office, office space is not going away. But you will have to adapt. The higher productivity of telecommuting and the subsequent doubling of hours worked from home during the pandemic will persist as the virus becomes controllable, driving office rents in central business districts (CBDs) down by around 15-20% short and long term. , if office supply cannot be reduced from pre-pandemic levels.

Additionally, the model suggests that an increase in hours worked from home will lead to a slight decline in office productivity due to a decrease in agglomeration economies.

What does this mean for cities?

The short-term shock to office productivity will have lasting effects on the structure of the city.

Residential rents will rise in the short term, especially in the outer crowns, due to increased demand for home offices. As highly skilled workers increasingly move to more distant suburbs, CBD office rents will drop, along with prices and property taxes, which will strain budgets in central cities.

The net effect of increasing MHF on sustainability and the environment is less clear. Although workers move around less, which reduces their carbon footprint, home offices are generally less energy efficient than offices in large, well-constructed buildings.

In conclusion, the transition to the WFH may be permanent, but it will not be exclusive. The desk will still be needed for some tasks. And while the increased telecommuting productivity experienced by white-collar workers through the learning and adoption effects will lead to higher lifetime earnings, workers whose jobs prevent them from telecommuting will not experience the same benefit. Finally, the pandemic-fueled acceleration of remote working will have substantial short- and long-term impacts on housing trends, sustainability, and municipal budgets.

(C) Kenan Institute of Private Enterprise

This story is reproduced with permission. It was originally posted on https://kenaninstitute.unc.edu/kenan-insight/dont-shut-the-office-door-yet-why-technology-and-work-from-home-wont-displace-the-workplace/


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