Welcome to What Happens Next. My name is Larry Bernstein.
What Happens Next is a podcast which covers economics, finance, history, and politics.
Today’s session will be on the future of work.
Our speaker will be Nick Bloom who is a Stanford Professor of Economics. Nick is a leader in the research on working from home. Nick will explain the growing dominance of hybrid work for certain segments of our economy. It turns out that hybrid work increases productivity for some employees, and it makes them happy.
Technologists are aware that work from home has changed the nature of employment, and substantial R&D is being to improve the zoom experience with dozens of cameras to make it seem like we are together.
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Today’s podcast was recorded at Stanford in conjunction with an event to honor my old boss and close friend Myron Scholes, the Nobel Prize winner in Economics. He will join us in this podcast with some very provocative questions.
Ok, let’s start the session with Nick Bloom.
Topic: The Future of Work
Bio: Professor of Economics at Stanford University
I'm going to talk about work from home. I'll talk about three things. One is where we currently are, two is the impact of working from home, and three the future.
Where are we? 1965 is the first data we have in America, about a half percent of days, were work from home.
Work from home levels went up about tenfold between 1965 to 2019. In 2019, on the eve of the pandemic, 5% of days in America were work from home. The pandemic happens, it goes from 5% to 60%. I'm guessing everyone in this room probably is working from home in 2020. It's then fallen back down and asymptoting at about 30%. The two critical numbers are for 5% in 2019 to 30% now.
Sixfold increase and sticking. The past four months have been about 30%.
Well, there are three groups of Americans, 55% cannot work from home at all. The folks working in Chipotle or McDonald's or in the university cleaners, catering, security, et cetera. There's another group at the other extreme which are full time remote. They're about 15%, mostly like call centers, payments processing, HR.
The remaining groups about a third is basically professionals, managers. They're almost entirely hybrid: Monday, Friday you work from home.
Globally, America, Canada, Northern Europe look very similar about 30%. If you go to Asia, Australia, New Zealand levels are lower. In South America, Africa are lower still, but the increase is very large.
So, work from home was very low, surged up to 60% and has dropped to 30%. It's probably the largest change to US labor markets since World War 2 when you had a big increase in female labor force participation.
The donut effect is the impact of work from cities. We've got data from the United States Postal Service change of address and from Zillow transactional data, what you see is a lot of people have moved out from city centers into the suburbs. So, give an example, you're some techy. You are living in Central San Francisco in 2019. You're going into work every day.
Suddenly I'm only going to be going to the office two maybe three days a week. I'd really like a bit of space for a home office, maybe a backyard for my kids. You move out to the suburbs.
If you own property in Tahoe or East Bay, you've probably done very well. If you own property in the center of San Francisco, you're probably about flat.
It's been even more extreme for retail. I've worked with a few retailers, and they've seen sales collapse in the city center like Panera Bread or Starbucks, Chipotle, no one's going in every day, particularly Monday, Friday sales plummeted, but out in the suburbs they're doing really well. A lot of activity is just moved out of the suburbs. Impact number two is on firms and organizations. Employees, they're much happier. We've surveyed tens of thousands of people. People really like hybrid. If you ask people, how much would you value being able to work from home two, three days a week?
You typically get numbers at about a five, 10% percent. Why is that? Well, you save on commute, it's less stressful. You have two days a week, you can work from home. Most people don't want to work from home five days a week only about 25% of people do. Most people want to come in two, three days a week, work from home two, three days a week.
We find clearly in the data is well organized hybrid, which is when everyone comes in on the same two or three days a week and works from home on the same two or three days a week, seems to improve productivity.
If you come in Tuesday, Thursday and everyone comes in, having meetings, presentations, lunches, training events, mentoring, et cetera. Monday, Wednesday, Friday at home. The evidence is productivity is up.
And the big reason is on your home days, you save a lot of time. The average American saves 70 minutes a day by working at home, of that about 30 minutes more work, 40 minutes more leisure. If you're an employer, your employee works about 30 minutes more a day. And if they get it right, they're doing quiet stuff, they're just more effective at it. It's doing concentrated work. It's a win-win economically.
The third thing that's interesting is around globalization. Going back to the eighties is a big globalization of trade and China joining the World Trade Organization in 2001. Over the 20 years after, it was a huge surge in global trade in manufacturing. It's running out of steam. What I think is going to happen for the next 20 years is globalization and services. I must have talked to 300 organizations since the beginning of the pandemic.
Firms all say the same thing, which is there are some individuals or some tasks that have been fully remote for the last two years and they've been really good. We maybe just don't need them in the organization or maybe don't need them in the state or in the country. The next 20 years there's going to be a big surge of outsourcing. Like take Stanford, our IT department or payroll. They're fully remote, they just don't need to be in California.
I talked to a lot of tech firms and they are swiveling hundreds of millions of dollars of R&D budget towards making technology to support work from home.
What that means is if you look five or 10 years out, the technology's going to be way, way better to support this. Bigger screens, lots of little microphone, lots of little cameras.
When you watch a football game on TV, there isn't one camera, there's like 10 cameras and they keep changing. Holograms, there's a whole set of technology.