While the Covid pandemic was a pretty universally horrible experience, one of the few positives to emerge from it was the rise of working from home. For a great many people, no longer having to commute into the office five days a week has been a great boon.
However, there are a certain number of people who seem to think this was a terrible development, and is at root of many of the economic problems the UK now faces. Take Nigel Farage, yesterday at the Reform UK conference in Birmingham, claiming that: ‘People aren’t more productive working from home, it’s a load of nonsense. They’re more productive being with other fellow human beings.’
For a supposed populist, this is an interesting claim to make, particularly when you realise that calling for an end to working from home means advocating for going back to everyone having to commute into the office five days a week. Given the evidence is pretty overwhelming that commuting is deeply unpopular and having to do it every day pre-pandemic was a real drag on wellbeing for most people, that doesn’t sound like much of a vote winning strategy to me.
But setting aside the politics and just looking at the facts, the claim that working from home is a significant contributor to the productivity problems the UK faces just doesn’t stand up to scrutiny. For one thing, low productivity growth began just prior to the 2008 global financial crisis, not with the pandemic. For another, it hardly seems likely that WFH would be close to the top of a list of factors causing low productivity. Chronic under investment, the planning system, the surge in labour market inactivity, skill mismatches and policy uncertainty over the last decade are just a few of the factors much more likely to blame.
Overall, there’s little evidence that working from home is acting as a drag on productivity at the aggregate level. In fact, there are good reasons to think that it may act as a boost. By reducing the number of times a week that a worker needs to be present in the office, location becomes less important and the pool of potential workers for a job expands. Commuting 3 hours every day might be unbearable, but if you only have to do it a couple of days a week, you might be fine with it. Expanding the pool of workers to choose from is strongly associated with higher productivity.
Working from home has reallocated workers’ time away from commuting to other, more useful activities. If anything, this has likely been beneficial for employers, with the evidence suggesting that 40% of the time workers save by not commuting is spent on work. In other words if a worker saves an hour of commuting time, they’ll spend 20 minutes of it working. That’s 20 minutes of work that the employer would otherwise lose every time that worker has to commute in.
It’s true that at the level of an individual firm, the empirical evidence is rather mixed. Studies looking at jobs where constant collaboration is less important find productivity gains from the move to working from home, driven by fewer office distractions and better focus time. Conversely, in sectors like manufacturing and roles where lots of collaboration and on the job learning is necessary, more working from home often hits productivity.
As so often in the labour market, flexibility is key. Friedrich Hayek long ago demonstrated that no central planner (whether an elected politician or an ‘independent’ quango) has the requisite knowledge to efficiently plan the economy. This is most true when a dynamic adjustment is underway – just as we are witnessing with working from home. Different workers will want different amounts of working from home and will be willing to sacrifice different amounts of income to get it. And different businesses will be able to offer different amounts of working from home. Some firms looking to save on paying for office space may offer maximum flexibility, whereas for a manufacturing business, all hands on deck everyday may be what’s required.
These differing preferences of workers and employees will then be sorted via the labour market. Workers who want lots of working from home will be attracted to jobs that offer those conditions, and those who don’t mind coming into the office five days a week may opt for jobs where that is the case, and likely earn a wage premium to compensate for the costs of commuting.
If any of the critics of working from home, such as Farage, were to read this article, I imagine they’d say that the above was all well and good, but too many people were abusing their ability to shirk rather than work from home. Undoubtedly, this is an issue, but rather than trying to end working from home, why not simply make it easier to fire those people. Having worked in the Civil Service for several years, I know a persistent complaint of all competent civil servants was the inability to get rid of anyone not pulling their weight.
At the end of the day, as others have highlighted, the underlying trend to more working from home (driven by the high costs, both welfare and financial, of commuting for employees, cost of renting office space for the business and the maturing of technology necessary for working outside the office, such as video calls) was already at play. What the pandemic did was deliver a shock to the system which made people realise a different future was possible where they didn’t have to endure the misery of commuting into the office every single day. Politicians and government should stop thinking they know what’s best and leave it up to workers and businesses to work out for themselves how much or how little working from home they wish to do.
