Woman working from home

"Let’s try to shed some light into a heated debate." Paul Johnson writes for the Times on the evidence on working from home and hybrid working.

Opinions and prejudices are easy. We all have them, me as much as anyone. Take working from home. I rarely meet anyone without a strong opinion. Politicians enjoy pronouncing. But what do we actually know?

Luckily, the answer is quite a lot — and much of what we know is down to the remarkable work of Nick Bloom, a British professor of economics based at Stanford University in the heart of California’s Silicon Valley. Having started working on the topic even before the pandemic struck, he is now the leading authority on what is happening, why and what its effects might be. So let’s try to shed some light into a heated debate.

The first thing to say is that the majority of employees, about 60 per cent, are fully at their place of work. That’s mostly because a lot of jobs can’t be done from home. Working from home is not an option if you work in customer-facing roles in retail or hospitality, nor if you drive a cab or work in a factory or on a building site. It’s an option for the generally more privileged group of us who work in offices.

Those who can, and do, work from home are much more likely to be graduates than those who cannot. There are exceptions, of course — call-centre workers on the one hand, doctors on the other — but the general point stands. It’s another gap between the graduate and non-graduate classes. Of the remainder, about 10 per cent are now working almost entirely from home. They might be self-employed contractors or working in software engineering and similar professions.

The rest of us, about one in three, have some form of hybrid working, typically a couple of days at home and three in the office, or three and two, though other combinations are available. The amount of working from home, which peaked during lockdown, has settled at about a quarter of all working days, a fivefold increase on pre-Covid levels.

Is working from home here to stay? Almost certainly yes. The pandemic has changed our working patterns dramatically and permanently. In contrast, our shopping patterns (online versus in-person) are pretty much back to the pre-pandemic trend.

One reason that hybrid working is here to stay is that workers rather like it, with an average preference to be about half at home and half in the office. Bloom estimates that, on average, people value the ability to work from home two or three days a week about the same as they would an 8 per cent pay rise. With a shortage of workers and pressure on pay, it is not surprising that employers offer it. Given these preferences, it may be that concerns over people leaving the workforce will soon be allayed. For many, work looks more attractive now than it used to.

There can be direct benefits to the employer, too. In one carefully designed trial, flexibility to work from home reduced quit rates from jobs by a third, a big saving for the company concerned. If organised well, it can be good for productivity, in part because a fraction of the time saved on commuting goes into more time spent working.

Note, this is not about working from home every day. Most employees don’t want that. And fully remote working often does lead to lower levels of productivity, less training and less creativity. The trick is to organise a flexible workplace to get the benefits of on-site working — mentoring, networking, learning from one another — for part of the week and the benefits of working from home — focused concentration — for the other part.

Many companies find that ensuring everyone is in the office for the same two or three days a week is an important part of making hybrid working effective. All that said, there may be some groups of workers where employers are willing to take the hit on productivity from them never coming to the office. If you can move some back-office staff to fully remote working, you may lose 20 per cent of productivity, but savings on office costs and from moving jobs to cheaper locations, either in the UK or more widely, may make that loss in productivity worthwhile.

One thing the research does suggest is that an effective performance management system, based on outputs, not on whether someone is at their desk, is crucial. That might be one reason why ministers seem to worry so much about the civil service. Output can be genuinely hard to measure and performance management systems are not always the best.

There are knock-on effects of all this throughout the economy. People really are taking advantage of additional flexibilities to spend more time on the golf course or at the gym during the week — with some, but perhaps not all, making up the hours in the evenings and weekends. Then there is the drop in commuting on the rail network and the loss of season-ticket revenue. Behavioural change is partially stranding a huge physical asset. Are we going to settle for greater public subsidy or a reduction in services?

There is one other consequence that government really has to pay attention to. If it is the case, as Bloom estimates, that the flexibility associated with hybrid working is worth about 8 per cent in pay, what about those in the public sector workforce who cannot benefit from such flexibility? You can’t teach or nurse or care for people remotely. It seems more than likely that to continue to attract the teachers and nurses and care workers that we need, we will have to increase their pay a bit more than is happening in other comparable professions. And, of course, we are doing precisely the opposite.

This article was first published in The Times and is reproduced here with kind permission.

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