Yves here. Readers may wonder about the finding that the productivity when working from home is markedly lower than in the office. Of course, if meetings are considered productive, that explains much. Regardless, the fall in contributions explains why CEOs almost to a person in a recent Wall Street Journal survey want their employees back in the offices as soon as it is feasible.
By Masayuki Morikawa, President, Research Institute of Economy, Trade and Industry (RIETI). Originally published at VoxEU
Working from home has become much more prevalent across advanced economies during the Covid-19 pandemic. This column uses survey data from Japan to explore how widely working from home has been adopted across industries and how productive employees are at home. It finds that the overall contribution of working from home to labour input is surprisingly small. Even where firms adopted the practice, many employees did not exploit it; and even those who did work from home did not necessarily do so throughout the week. The firm survey responses suggest that across industries, the average productivity of employees when working from home relative to at the workplace is 68.3%, which is similar to the findings from an employee survey. The results suggest that there is room for improvement to make working from home more feasible.
Since the onset of the Covid-19 pandemic, working from home (WFH) has been increasingly implemented in major advanced countries. Before the crisis, the percentage of workers participating working from home was approximately 10% in major advanced countries. The number of workers who conduct their jobs at home increased suddenly in March 2020. But productivity at home compared to the usual workplace – which is a key parameter in assessing the impact of WFH on the economy – has not been well understood.
Working from Home in the Epidemiology Models
Epidemiological models that incorporate the economic behaviour of individuals have been developed, and simulation analyses of the effects of social distancing measures (such as a shelter-in-place orders and mandatory shutdowns of service industries) have been conducted in many countries (Avery et al. 2020). These studies indicate that stringent social distancing policies are effective in mitigating the spread of the pandemic, but have large negative impacts on economic activity. This means that there is a trade-off, at least in the short run, between public health and the severity of the recession.
Some of the simulation models explicitly take into account people working from home (e.g. Akbarpour et al. 2020, Aum et al. 2020, Bodenstein et al. 2020, Brotherhood et al. 2020, Jones et al. 2020, Fujii and Nakata 2021), because the feasibility of working from home practices can mitigate the trade-off between health and economic activity arising from social distancing policies.1 However, in addition to the feasibility of home working, its productivity relative to working at the usual workplace also affects how well WFH mitigates the negative impacts of social distancing policies on the economy. In the simulation studies, the percentage of jobs that can be performed at home is often taken from task-based estimates such as Dingel and Neiman (2020). By contrast, because estimates of working from home productivity have been scarce, simulation studies have assumed arbitrary figures for home productivity, such as 50% or 70% relative to working at the workplace.
How Productive Is Working from Home During the Covid-19 Pandemic?
A small number of studies have presented evidence on productivity when working from home based on individual or firm surveys during the Covid-19 pandemic. Etheridge et al. (2020), using data from a survey of individuals in the UK, show that, on average, productivity at home is not significantly different from that in the workplace. Barrero et al. (2020), based on a survey of individuals in the US, indicate that the majority of respondents who have adopted home working practices report higher productivity than their expectation before the start of the pandemic. Using data from a survey of individuals in Japan, in Morikawa (2020) I show that the productivity of employees adopting the home working arrangement during the Covid-19 pandemic is, on average, 30–40% lower than that in the office. Bartik et al. (2020), using data from a survey of small and medium-sized firms in the US, report a decrease in productivity of about 20% on average.
However, despite its importance, quantitative evidence on WFH productivity during the pandemic has still been limited and inconclusive. In this respect, I designed an original survey of Japanese firms in order to deepen our knowledge (Morikawa 2021). The Survey of Corporate Management and Economic Policy (SCMEP) was conducted from August to September 2020. The survey questionnaire was sent to 2,498 firms, and 1,579 firms (approximately 63%) responded.2
The main topics of inquiry in the survey regarding home working were (1) whether the home working practice has been implemented; (2) the percentage of employees who have used this workstyle; (3) the mean working from home frequency of teleworkers); (4) the mean productivity of working from home relative to the workplace; and (5) factors that affect the adoption of the home working system and productivity of employees using this workstyle. Many of the questions are aligned with the employee survey (Morikawa 2020). Hence, the two surveys can be compared.
Working from Home iIntensity: Contribution to Total Labour Input
The percentage of firms that adopted the home working system is 49.6% (Column 1 of Table 1). Across industries, the information and communications industry is the highest (96.4%), and the retail industry is the lowest (29.8%). However, even for firms that have adopted a home working system, not all employees exploited this workstyle. In this regard, the survey asks: “What percentage of your employees used the WFH practice after the spread of COVID-19?” The result is presented in Column 2 of the table. The mean percentage of firms adopting home working is 30.7%. Across industries, the information and communications industry (59.6%) is the highest, and the manufacturing industry (18.8%) is the lowest.
Table 1 Adoption and intensity of WFH
Note: Columns (2) and (3) indicate figures for firms adopting WFH practice.
Even for employees who exploited this workstyle, they were not necessarily full-time teleworkers (i.e. working at home on all working days). As a result, the survey asks: “What was the average number of WFH days per week for employees who implemented the WFH practice?” The results are summarised in Column 3 of Table 1. The mean frequency of home working implementation is 3.67 days per week. Assuming that the normal number of working days is five days a week, teleworkers have spent more than 70% of their work hours at home during the pandemic.
Next, I calculate the intensity of working from home at the firm level as the share of employees using home working multiplied by the frequency of working from home per week (converted into percentages). This measure indicates the contribution of hours spent working from home to the total labour input. Column 4 of Table 1 shows the weighted average of the working from home intensity, using the number of employees of a firm as weight and including the home working non-adopters (whose intensity is regarded as zero). The average working from home intensity across all industries is 10.9%. The contribution of working from home to labour input is surprisingly small, even during the period when home working peaked. Even if a firm adopted this workstyle, many employees did not exploit it; and even those who used home working did not necessarily work at home throughout the week. Hence, the macroeconomic contribution of working from home to total labour input was limited. Across industries, the information and telecommunications industry is the highest at 44.6%, while the retail industry is extremely low at 3.9%. This is an unsurprising result, as more than 70% of firms in the retail industry did not adopt home working.
Productivity of Working from Home and Its Determinants
The question about working from home productivity evaluated from the employer’s viewpoint is: “Suppose that employees’ productivity at the workplace is 100, how do you evaluate their productivity at home? Please answer the mean productivity by considering all tasks covered by the WFH system”. The questionnaire also noted that, “[if] the WFH system is more productive than the workplace, please answer a figure over 100”. Respondents were thus given the chance to suggest that, in their experience, working from home is more productive than the workplace.
The simple average for firms adopting home working is 68.3% (Figure 1). According to a survey of employees, the mean subjective productivity of working from home is 60.6% (Morikawa 2020). As the firms surveyed in this study only included those with at least 50 employees, we should be careful in comparing the figures simply, but the figure is similar to employees’ subjective assessments of their productivity at home. Across industries, the mean productivity when working from home is highest in the information and telecommunications industry at 80.3%, with the figures for the rest of the industries ranging from 62.6% to 69.5%.
Figure 1 Mean productivity of WFH relative to the workplace
Note: I&C stands for the information and communications industry.
The survey asked multiple-choice questions about factors negatively affecting the adoption and productivity of home working. The specific question is: “Were there any obstacles or limitations in adopting or expanding the WFH practice or matters that negatively affected WFH productivity?”.
A large number of firms chose, in descending order (Table 2), “Some tasks cannot be conducted at home although these are not required by the rules and regulations” (76.1%), “Poor telecommunication environment at home relative to the workplace” (60.8%), “Rules and regulations that require some tasks to be conducted in the office” (57.7%), and “Loss of immediate communication that is only possible through face-to-face interactions with colleagues at the workplace” (46%). Although the percentages are different, these four reasons occupy the top positions in the employee survey reported in Morikawa (2020).
Table 2 Factors affecting adoption and productivity of WFH
Note: Multiple answers were allowed for this question.
Implications
In summary, the findings from a firm survey on the prevalence, intensity, and productivity of working from home are generally consistent with the results obtained from an employee survey. The results suggest that the feasibility of home working has room for improvement and that productivity at home can be enhanced by improving the ICT environment and by revising existing laws, regulations, and internal company rules that currently inhibit working at home. For the foreseeable future, however, the existence of types of work that must be performed at the workplace, together with the difficulty of efficient, face-to-face communication from home, are both likely to restrict the diffusion of working from home.
Editor’s note: The main research on which this column is based (Morikawa 2021) first appeared as a Discussion Paper of the Research Institute of Economy, Trade and Industry (RIETI) of Japan.
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The organisation I’ve worked for has had various working from home schemes for close on 20 years. The feedback has been quite complex. A ‘formal’ working from home system adopted about 15 years ago proved unworkable for a variety of reasons (although at the time, there was a major issue with some research material not being available in a useable form online). However, more informal arrangements proved very successful – a possible reason being that those who availed of it felt under more pressure to hit output targets so they could justify their non-appearance at the office.
The last year has seen a measurable increase in outputs, despite major issues with junior staff not having access to laptops and so on. A lot comes down to fewer time wasting meetings and the jettisoning of a lot of pointless form filling. As an organisation, we were fortunate that a horrible new IT system was finally getting its bugs ironed out when covid hit – had it hit a year earlier when the system was at its worst, it would have been catastrophic.
A key issue – and I’ve heard this recently from a friend who works for a major bank – is that its proving very difficult for new graduate staff. My friend has been tasked with training in young graduates and she says its proving very stressful for both trainers and the staff, and she suspects that as a result many of them will be useless for some time. A similar problem has arisen in my organisation, although it is less a case of a productivity hit than the new staff feel under enormous stress when they don’t have someone in a desk next to them to answer simple queries.
On your last point, new employees, I’m also hearing that from people, especially those in finance and accounting. There’s a much steeper learning curve with remote work.
That said, like anything, the difficulties likely vary from person to person which is why your example of informal arrangements working best is the best way to handle this.
Some workers cannot handle working from home. Let the ones that can, do it.
What a load of hooey. Have these unfortunates never heard of chat and email? I have extended conversations with my colleagues every day. We also pop in for quick questions. I suspect people (newbies or otherwise) who can’t be bothered to use chat would be useless and unproductive in any setting. Some people will only accept face-to-face interactions as valid; these people are the problem, not WFH.
Sorry for being ruppig, as they say here, but I am sick and tired of hearing that we should all be in the office because poor young Jimmy [mumble mumble mumble]. To hell with poor young Jimmy and his ilk, ok?
Also, right now many parents are burdened by the extra job of homeschooling their children. No wonder productivity suffers! That wouldn’t be an issue in more normal times. Children are a prodigious time sink.
I myself have been working from home on and off the last 20 years and I prefer it personally. As a software architect it allows me to concentrate at levels I could never do at an office.
That said I don’t see how people with little or no experience make it work. The more technical nature of your job the more experience you need to make working from home feasible. At the early stages of a career it really helps to be around people to soak up that knowledge and gain that experience.
My experience working from home has been more, not fewer, time-wasting meetings, trying to cover those myriad little points that are done informally with people sitting nearby.
And I have less opportunity to concentrate, because of the increased level of chat interruptions, not to mention that electronic chat tends to be very slow and truncated compared to face to face chat.
And I do feel sorry for the new staff, who are indeed struggling, and some of our mid-level management has had to deal with depression and panic due to the isolation brought about by this.
I’m in finance, by the way.
I can only imagine what that must be like having to go through a digital medium instead of face to face where a lot is exchanged just through body language. Maybe those meetings need a time cap on them or something. Not to make light of your situation, here is a video that shows that it is not only us ‘muggles’ having to deal with this. Enjoy!-
https://www.youtube.com/watch?v=B18ss3dbRAI (8:25 mins)
The enthusiasm of CEOs for getting workers back into the office is better explained by the boss’s desire for control and micromanagement than by any objective measure of productivity.
My old boss, who had worked as an engineer in the good old days used to say that all his bosses wanted to see was “a*ses and elbows” by which he meant long rows of workers bent over drafting tables, scribbling away.
Given the sociopathy that drives folks to the top of the management chain, little has changed.
Most organizations for whom I worked defined productivity naively, and didn’t measure it effectively (or at all).
Thus the real problems with remote work are much more about satisfying the psychological control needs of those at the top than they are about any real performance improvements.
Thank you for this comment. I think no more than this needs to be said on the reasons why CEOs want workers back in the office.
In my organization (software and hardware engineering), we are hitting release targets with WFH even better than when working in the office. The IT infrastructure is performing reasonably well, and we are even given extra days off.
I have to say also that working in the office was A LOT more distracting from me (even though I have young kids at home) due to a culture of chattiness that annoyed the hell out of me. Im now able to reach anyone I work with on MS Teams virtually around the clock (due to 1/2 of team being in India) within minutes — without having to endure the loud and prolonged chatting I was subjected to in the office. Not to mention that I almost never could find someone I needed in their cube — with interminable meetings, break room hanging out, or plainly just sitting in the toilet and reading their phone – when are we going to see a study on wasting time in the bathroom at work??. Thank god for getting rid of that (I hope it is permanent).
Have you heard of those new fangled toilets that slope downwards? Bosses are installing them in work places so as to discourage long toilet breaks. :)
I see the chart showing mean productivity of WFH relative to the workplace being lower across the board but perhaps this is a first generation problem. I will have to explain this one. When computers were first making their way into the workplace, they were an unknown quantity and managers at the time were working out how to use them in the workplace. In fact, I read that it took a generation for businesses to fully integrate computers into companies and by then a new generation of managers had come into the scene who grew up with computers themselves.
So perhaps this effect may be more of the same. A lot of companies will ask why waste so much revenue on office buildings and the like when a large part of the workforce can do their work at home. So right now, this is how it was like with the first computers. We are still feeling our way and adapting and it may be years before working from home is fully integrated into the working environment. There will be bumps along the road and all sorts of difficulties encountered while people adapt but adapt they will.
It wasn’t too long ago that I had senior mgmt that could not type and would still dictate long ‘memos’ to their admins to type up for them to send out.
Not everything can be done remotely, but I’ll say pharma is thinking about which employees get to sit in their buildings in ultra high cost centers like Cambridge MA. Many are considering repurposing other functions square footage and having IT, HR, legal etc going fully remote. They’ve seen no drop off in productivity and it frees up more R&D space and will likely waste less conference and meetings rooms dedicated to sales people. The scientists have barely left the lab during this whole pandemic.
I work for a pure SaaS software company that has gone fully remote and as of yet has no office space to return to. We’ve hit all time highs for revenue and hired and on boarded 200+ new employees during this time. By any metric we’ve had our biggest and best year being fully remote. And I have to say that I’ve developed great working and personal relationships with people I’ve only met working on zoom.
Working in sales has its own motivators for productivity as I have several client facing meetings per week that I must be prepared for. So I’m also working more than ever.
While I appreciate the study, it is not representative of all firms and industries.
You said: “And I have to say that I’ve developed great working and personal relationships with people I’ve only met working on zoom.”
Me too! And I feel like the people that insist they cannot create meaningful relationships with people over telecom are probably unable to make them anyway.
If you’re a jerkoff in face to face you’re probably a jerkoff over the internet too.
As Rev Kev is saying above, it’s a comfort thing too. Knowing how to make remote friends is something I grew up with, frequenting message boards in my youth.
Yes. I have a great working relationship with a contractor in India (also WFH) who I havent even seen on video – for years we’ve used only chat, voice and screen sharing. Never missed a beat.
For the jobs that can be done from home, if an org can’t make it work, it is the org’s fault, and not the fault of the mode of work.
And, I suspect, countries.
Some issues that come to mind to me are:
– How to avoid cross-talk in multi-adult homes with all having Zoom calls at the same time in a confined space.
-How to avoid proprietary secret leakage when family members (and their friends) may be in unpredicted ear shot.
-Ramifications from offensive blurtations by family members (particularly elderly) or others nearby “what the %@#%@ are those @#$#@ doing on my lawn!”
I’m all for lowered “productivity.” A measured pace is way more preferable to a balanced reasoning on things…
I say we start a company, kgw. It would quickly become The Place Where People Think.
And, IMHO, there are many times when it’s better to think than do.
WeThink?
Wobbly, want to be our third cofounder? I like your style.
I’m wondering about the lowered “productivity” as well. Other than for restaurants, leisure and amusement, how is this determined in the midst of a covid pandemic where everyone self isolates or is forced to isolate; everyone changes the way they live and consume? And is productivity in the old sense ever put into an analysis of all the costs for achieving this “productivity,” like the cost of time and pollution involved in commuting for work. The cost of building and maintaining an enormous building. Maybe productivity is just another word for hallucination. Productivity is a genie that pops out of the whole confusing mess and proclaims itself to be something totally positive like growth or profit that somehow floats to the top and is skimmed off by accounting techniques designed specifically to validate the necessity for making sufficient profits to stay in business and bribe managers to keep up the charade. Or something like that. Call me skeptical.
For most office workers, regardless of industry, it’s difficult to measure and compare individual productivity. This is one of the reasons why the stack ranking that some employers do is an absurdity.
I haven’t a clue how the average office worker can measure productivity. If your job is to be available to accomplish a task set by a manager, there are so many factors out of your control that determine your productivity, most especially including what tasks a manager has for you to do
I’ve been working from home for the past year and only having to go to the worksite to work on an airplane or get drug tested due to being involved in safety-sensitive employment. When the department I am in was set up several years ago it was anticipated that we would be doing some work-from-home. Most of my activity is developing system monitoring, checking reports against engineering data and databases, and checking databases for missing report items. The other side of my job position is helping others get the best practices in using the available programs.
WFH pluses: My home network has better screens and faster data transfer than my cubicallette at work so I can do my research faster. No distractions by inane office chatter. No 20 mile/40 minute commute in stressful rats-on-fire traffic. Only about 1/3rd of my work phone calls are local so my location doesn’t much matter. Could haul junior to school when school had classes.
WFH minuses: Unable to sit side-by-side with new users of the programs to get them up to speed due to social distancing requirements and the new users are too shy to call me so we can share screens. Missing some of the professional hallway chats where often one person’s odd piece of the puzzle matches up with my puzzle pieces to help solve problems for either of us. Cat chewed through the keyboard cable. Wife thinks I am a bum for sitting in front of the computer all day.
Odd stuff: Members of some of the program development team are in Europe and were also working from home. I would tease them that because we are enthusiastic about our program our companies where getting a lot more work out of us than our official 30 hour (when we were on reduced hours) should get. I think a lot of development work were people avoiding boredom and cabin fever. Development pace did go faster with everyone working from home, but I can’t tell if it was due to no distractions and better focus or a team shake-up as the pandemic started. Also with some of the pluses of WFH, if something popped up after hours most of us always treated it as the ebb and flow of a nonstop operation. It is a lot easier having a desktop setup at home to work from than trying to provide support from a laptop.
My hope for the future is to go in for one day a week to work with people and work from home for the other days. I think I got lucky that I had a few years of working and socializing with my European teammates and US teammates before the pandemic began and we are all comfortable in informally communicating.
“Missing some of the professional hallway chats where often one person’s odd piece of the puzzle matches up with my puzzle pieces to help solve problems for either of us.”
Many times I’d sit down to lunch with a colleague from another department, or even another site and hear “We’re seeing some strange behavior out of X” and have it click as to solving one of my own problems.
But then my job troubleshooting complex electromechanical systems was never going to be amenable to WFH
About 25 years ago, I had to go to incredible lengths to get authorization from a rather controlling boss to get authorized to work at home for 1 or 2 days per week. I made a point of scheduling those days within the Tuesday-Thursday slot because I knew that The Boss would be suspicious if I was not in the office on Mondays or Fridays. And I had to present a laundry list of the tasks that I planned to complete, and report back on progress.
But it was worth this bother just to escape the really crappy working conditions at the office. I was in a small research group in a government ministry, and we had one of those horrible open-plan-with-Dilbertian-cubicles layouts. My cubicle was next a section which had most of its staff on the phone for much of the day, and it was impossible to get any peace and quiet to enable thinking and writing.
I left that organization almost 20 years ago, and since then they have moved to new premises where they’ve been subjected to the latest fad in workplace layout: “hot desking”. (It’s another example of how fads that get tried and fail in the private sector inevitably migrate to the public sector.)
During the pandemic, all of my former colleagues have been working from home. It will be interesting to see if that arrangement lasts after “normal” returns.
In my current job, I enjoy the greater autonomy that comes with academic employment, so the pandemic has made very little difference to how I divide my time between home office and workplace.
More and more businesses have distributed workforces to take advantage of labor arbitrage. My employer has moved many jobs offshore to such an extent that the majority of my work colleagues are remote from me and i from them. So issues with working from home productivity are largely moot.
Before the Pandemic I would never have chosen to work from home because the expectation was that you had to double your workload/output to justify the arrangement. Obviously that was an unappealing arrangement even when factoring in the lack of a commute.
What changed was that when the Pandemic hit my boss, his boss, and so on.. also realized that the existing work from home arrangement meant they too would have to double their workload as well. Well they didn’t like that either and as a result they cut us some slack.
In their defense, cutting us some slack wasnt done purely out of self interest. Doubling the workload amongst all people at all levels would harm our projects as critical information would quickly get lost it the sheer volume of relatively unimportant reporting.
We tend to treat ‘productivity’ as if it were a holy grail. One benefit of less productivity is that it takes more people to do the same work, which is not a bad thing when you have a lot of unemployment.
I would trust the findings better here if their data didn’t come from Japan during the pandemic. Certainly in my case the pandemic on its own is having a big effect on my productivity. The prolonged stress of it is exhausting and it has sapped my ability to concentrate. I have two young children home with me full time as well, and my work processes have not been designed to accommodate this situation. Considering those factors, things are going pretty well, but I would certainly get a lot more done if it was just me and some peace and quiet.
As for using Japanese data, that may well be useful in the Japanese context, but the culture around work in Japan has its differences from most other places. If every country was rated on its approach to work on a scale from “relaxed” to “intense”, Japan would be near the “intense” end of that scale. I mention that not to offer a judgement, but rather to point out that Japanese workers and workplaces may have had a more productive or less productive adjustment to WFH than other places, and that it probably isn’t a great idea to base one’s thoughts and opinions on this one study.
If you are operating what I would label as an “open / pull” environment for information acquisition and distribution It is incumbent on leadership to define and provide deterministic feedback processes, enforce strict governance, and reassure associates of mandates. Unfortunately, it seems that their is a significantly larger issue. Most people do not love what they do; productivity these days is horrible across most industries because people who would rather be at the pool then at the office. The way I see it some roles just have to be in an office and some don’t. I agree with the piece in that any role that can be done from the home should be As Long As it is in alignment with the firm objectives. – there opportunities for the firm to invest here
State worker here. Our HQ administrative function has transitioned extraordinarily well and by all Mngt accounts productivity is up. Word on the chats is permanent telework is on deck. Biggest con is new recruits and getting up to speed WFH. Colleagues who want to return to office are generally those who don’t want to spend so much time with family or extroverts who need in person socialization to feel ok. My productivity is the same as before WFH started. They pay me for what I know and financial reporting and don’t want to mess with a trusted known quantity. I know my job inside out and it will take a new person 2 years to learn. I don’t like micromanagement and they don’t micro-manage me. I am much, much, much happier. So much so that I’ve floated continuing to do the same job on a smaller scale as a retired annuitant after I start collecting the pension.
Japanese people have smaller homes than Americans. Studio or one bedroom apartments are common. They would have a harder time working from home than Western employees.
Though, a lack of children might be to their benefit. They likely require the social interaction. In China, some Ctrip employees prefer going to the office knowing it would lower their productivity for that necessary connection.
Sitting in your home/apartment all day does make you feel unemployed/underutilized even if you’re being paid to do it.