Remote work is here to stay, argues economist

Will working from home become the new normal? Yes, according to The Case for Remote Work, a new report from think tank, The Entrepreneurs Network, by innovation economist, Dr Matt Clancy. Reviewing a wide range of research from across economics and social science, it argues that the business case for remote work has improved significantly over the past decade.

Remote work offers two key advantages for employers. First, businesses hiring remote workers are able to access a significantly larger pool of talent. Instead of being limited by geography, they are able to hire workers from across the UK and beyond, increasing the likelihood that they will find a good match.

Second, remote workers may not require office space in expensive cities, may reside in regions with lower living costs, and may also value the freedom to live anywhere. As a result, remote work can create significant cost saving opportunities. In some cases, businesses may pass on the savings to remote workers in the form of higher wages, so as to attract better talent.

At the same time, the costs of remote work in terms of reduced productivity are overblown. A range of studies from the US, UK, and China lend support to the idea that workers may be more productive when they are spared the distractions of the office. Employees that switch to remote work do not become less productive in general; in fact, they are frequently more productive after the switch.

The study highlights three key trends that have made a shift to remote work more common. More workers are using the internet to find jobs. At the same time, algorithms have made it easier to identify and assess remote workers allowing for better matches between employers and employees. Most workers, however, find their jobs through personal connections. For such workers, social media has been a boon helping younger workers to have larger personal networks than past generations.

A major justification for returning to the office is that workers being exposed to new ideas and fresh perspectives from other nearby colleagues boosts productivity. Such knowledge spillovers have been a key driver of the UK’s geographically uneven economic performance. But new technology is reducing the importance of spillovers and allowing innovators to collaborate effectively. Data on patenting and academic collaboration suggest it's less important than ever to work physically near other people to access their expertise and ideas.

Even before COVID-19, remote work was on the rise. The prevalence of remote work in the UK was stuck just under 3.0% from 1994 to 2010, but then climbed steadily to 4.7% in 2019. However, these numbers understate the overall increase in remote work by omitting those who work from satellite offices, co-working spaces, coffee shops, and other alternatives. It also fails to factor the number of workers working remotely some of the time. In the US, once these alternatives are factored in, the proportion rises from 5% to 36%.

There are major economic benefits from increased levels of remote work. The importance of agglomeration effects over the last several decades led to economic prosperity for cities in the South and economic decline elsewhere, at significant social cost. While remote work is not a panacea, by decoupling where people live and work it spreads economic activity more equitably and may reverse the tendency for economic activity to cluster in a few cities. This will reduce regional inequality and deliver the promise of levelling up. It will also mean graduates will no longer have to leave friends and family behind to move for work.

A rise in remote work may also contribute to a reduction in carbon emissions by reducing commuting, therefore making it easier to meet the 2050 Net Zero Target.

To access these benefits, the report argues that policy makers should actively promote remote work by granting tax relief for home office expenses, improving digital infrastructure, and investing in online education and training.

Dr Matt Clancy, author of The Case for Remote Work, said: “In the midst of the COVID-19 global pandemic, the case for short-term remote work is obvious. What other choices do organisations have to keep the lights on when their workers are isolating themselves? But the case for long-term remote work is also much stronger than is typically thought. Remote work does not have to be merely an emergency response, to be discarded when the pandemic subsides. For many industries, it can be the new normal.“

Praise for the Case for Remote Work

Stian Westlake, Chief Executive at the Royal Statistical Society, and author of Capitalism without Capital said: “The Case for Remote Work is an incredibly timely and rich piece of analysis. It sets out a clear, intuitive model for how to think about remote work from an economic point of view, and a clear explanation for why a shock, like COVID-19, might change things permanently. What's more, it provides a superb survey of what existing economic research says on the pros and cons of remote work. If you read one economic paper in 2020, make it this one!”

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The Entrepreneurs Network

The Entrepreneurs Network is a non-partisan think tank designed to bring entrepreneurs to the forefront of political discourse and more.

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    London, UK
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    Philip Salter
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