The Future Is…Remote?
A large segment of the U.S. labor force was pushed into a massive remote work experiment in March 2020. The extent to which we remain a remote or hybrid workforce has implications for everything from restaurant locations to city tax revenues to housing demand. Economically, we wonder about the future of commercial real estate, the viability of downtown retail and restaurants, the long-term prospects for local tax revenues, and the implications for the distribution of economic activity or the productivity of the U.S. economy. As employers, we wonder how to maintain culture and innovation while competing for talent across the country and the world. Personally, we wonder if we can move farther from our office building to care for aging parents, buy our dream house, or lower our cost of living.
To continue to understand how Fifth District employers are engaging in remote or hybrid work, the Richmond Fed once again asked our panel of manufacturing and service sector firms. We found that although fully remote work continues to decline, firms have a much higher share of hybrid workers than they had prior to the pandemic, and they anticipate that share to remain high. Although most firms do not find remote work challenging, the biggest concerns are maintaining work culture, upholding productivity, and continuing training or mentorship programs. Finally, although the Delta variant might be increasing COVID-19-related protocols and causing many firms to cancel in-person gatherings and events, as of September, the majority of firms are moving forward with their planned return to on-site work.
How Much More Remote Are We?
For the last few decades, there has been a steady, but slow, increase in working from home. As late as 2018, the Bureau of Labor Statistics (BLS) American Time Use Survey (ATUS) indicated that workers supplied less than 5 percent of full workdays from home. COVID-19 induced a huge jump: According to the BLS, the percent of employed people working at home nearly doubled from 2019 to 2020.
As we discussed in an earlier post, the Fifth District business survey panel reported a notable increase in remote work from pre-COVID-19 to March 2021. Before COVID-19, firms reported that, on average, 5 percent of their workforce was fully remote. In September, the average was 21 percent of employees — down from the 24 percent in March but well above the pre-COVID-19 average. Meanwhile, firms reported that the average share of the workforce that was hybrid went up from 2.4 percent pre-COVID-19 to almost 6 percent in March and then up to 11 percent in September. (Even if we limit the sample in September to those firms that also responded in March, the average percentage hybrid in September was still well above that in March.) In other words, while remote work might be falling, hybrid work is rising.
If we think of remote as 100 percent off-site, and we think of hybrid as 50 percent off-site, then we end up with about 25 percent to 30 percent of employee work time remote in September. Meanwhile, a Richmond Fed economist recently wrote that in July, the BLS estimated 13 percent of workers were working from home for pandemic-related reasons on an average day, and the Survey of Working Arrangements and Attitudes estimated that in August, the percentage of paid full work days from home was 40.5 percent. Of course, the questions asked by the BLS in the Current Population Survey, the BLS in the ATUS, economists Nick Bloom, Steve Davis, and Jose Barrero in the Survey of Working Arrangements and Attitudes, and the Richmond Fed survey team in Fifth District business surveys are different. Nonetheless, the idea of slowly declining remote work and slowly increasing hybrid work — with both leveling out far above where they were pre-pandemic — is consistent across analyses.
Have Expectations Changed Since March?
What about firm expectations for a post-COVID-19 environment? Even here, the expectation for remote work after the end of COVID-19 increased from March to September. In March, the average firm anticipated that 11 percent of its workforce would be remote post-COVID-19. In September, that number moved to 13 percent. The expected share of remote work in both March and September were well below the average share of remote workforce that firms report today. However, firms expect to maintain today’s level of hybrid work for the foreseeable future — thus, firms are not only experiencing a more hybrid workforce in September than they had in March, they expect that increase to be maintained. (Again, the results change very little if we restrict ourselves to the sample of 165 firms that responded in both March and September.)
If we take our firms’ September expectations and we assume that hybrid is 50 percent remote, then we end up with about 20 percent of the workforce working off-site. These expectations are reasonably consistent with the Survey of Working Arrangements and Attitudes’ data suggesting that 24.9 percent of full paid working days will occur from home post-COVID-19.
What Else Can We Learn?
The remote work challenges that firms face will undoubtedly affect their intentions going forward. In fact, almost three-quarters of our panel reported no challenges with more remote or hybrid workers. The biggest challenge, as discussed in the speech by Richmond Fed President Tom Barkin, is maintaining culture, yet some firms also reported concerns about the challenges of maintaining productivity and continuing training/mentorship programs.
With the rising Delta variant and increasing concerns about the spread of COVID-19, we wanted to know if firms had changed their plans about returning to onsite work. In fact, although about 20 percent of firms reported delaying their full reopening for on-site work, the most common actions were requiring (or continuing to require) COVID-19-related protocols and canceling in-person gatherings or meetings. This rise in cancelations is continually being reported by firms engaged in event planning, conference space, or other recreation/accommodation/food service activities.
What Are the Implications?
The implications of an increasingly remote or hybrid workforce are even more far-reaching than how employers maintain culture and negotiate differing state tax regulations. How much can cities expect their downtown revenue to rebound if fewer and fewer people are taking lunch breaks to walk to lunch or, picking up something at the pharmacy? Furthermore, the difference between hybrid and remote can be notable with respect to housing. A remote worker can live in Norton, Virginia, while working for a firm in New York City. A hybrid worker would need to stay, at the very least, in the suburbs. At the Richmond Fed, we have spent the last few years trying to understand the challenges and opportunities facing rural or small town areas. If high-speed internet becomes universally accessible, will we see population growth in the more remote parts of the country? Finally, any benefits of working from home are most likely to accrue to the highly educated and higher-wage workforce — what does this mean for the inequality that has already been rising for decades? These are questions we will continue to ask — and try to answer — as we begin to negotiate a post-pandemic world.
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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.
