Remote work and productivity: mixed evidence so far

Initial evidence from the US on productivity and remote work

In this paper, Fernald and Li find that COVID, according to data as of mid-2022, appears to have affected the overall level of labor and total factor productivity in the U.S. only modestly. They look at industry data and find considerable heterogeneity across industries. After adjusting for variations in utilization and pandemic-related hours mismeasurement, industries where it is easy to work from home have grown somewhat faster than they did pre-pandemic. In contrast, industries where it is hard to work from home have performed extremely poorly.

[W]e note that our analysis takes the current data as given. But there are important questions in this regard. Most obviously, income-side measures of output have grown much more strongly than expenditure-side measures. Future data revisions may shed light on this discrepancy.

The Impact of COVID on Productivity and Potential Output
Authors: John Fernald, Huiyu Li
From: Federal Reserve Bank of San Francisco

Different methodology, stronger evidence on remote work boosting productivity

This paper, Gordon and Sayed argue that positive pandemic-era productivity growth can be entirely explained by a surge in the performance of work-from-home service industries, while goods industries soared and then slumped, while contact services recorded strongly negative productivity growth throughout 2020-2022.
They use a new data file on quarterly productivity levels and changes in 17 industries for the period 2006-2022 and look at the behavior of deviations of productivity growth from its statistical trend, what they label as “the gap change.”  Their methodology implies that hours of work adjust gradually to short-run output changes, and productivity growth is determined as a simple residual: output growth minus hours growth. Because hours adjust only partially in the current quarter
and adjust further in subsequent quarters, productivity growth is characterized by a sharp positive response to output changes followed by subsequent negative changes.

A New Interpretation of Productivity Growth Dynamics in the Pre-Pandemic and Pandemic Era U.S. Economy, 1950-2022
Authors: Robert J. Gordon, Hassan Sayed
From: Northwestern University, Princeton University

Productivity will suffer if remote work became permanent

In this commentary Glaeser and Cutler discuss how many businesses, have raised concerns that remote work has lowered productivity:

Some amount of teleworking will continue forever; it is just too convenient to go away entirely. But 21st-century companies compete by deploying knowledge and creativity, and these things are sparked more readily when people are in the same room. Video can help us muddle through for a while, but to soar again, we’ll need to get back into the office.

You may get more work done at home. But you’d have better ideas at the office
By: Edward Glaeser, David Cutler – Harvard University