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In simple descriptions of the labor market, people work for pay.
This isn’t wrong, but it is incomplete. A job also involves a wide array of other costs and understandings. For example, commuting to work is a cost, and in many jobs so is dressing for work. Jobs can have greater or lesser flexibility about when they start in the day, whether you can extend a lunch break when needed, or when you are done. Some workplaces may have a subsidized lunchroom, or just some occasional free doughnuts. For a given employer, co-workers can be pleasant or alienating, and customers can be businesslike or obstreperous. Some jobs can expose workers to additional health risks. Managers can encourage input and offer what flexibility they can, or they can be mini-tyrants.
In short, a job is not just hours-for-pay, but is also a set of background characteristics and rules. In a happy workplace, both workers and employers will go beyond the minimum necessary courtesies and try to help each other out; conversely, an unhappy workplace is a sort of cold war of animosities and provocations.
In almost every job, the COVID pandemic changed a substantial number of non-pay characteristics. Working from home, for example, is a shorthand for changes in commuting costs, flexibility, level of managerial oversight, the co-workers, benefits of what used to be available near the on-site location, and so on. Those who couldn’t work from home found, as a result of the pandemic, that the health risks and day-to-day patterns of in-person work had changed. Unemployment rates have come back down in the last couple of years, but the wide array of disrupted non-pay job-related arrangements is still working its way to new agreements and arrangements.
Cevat Giray Aksoy, Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Mathias Dolls, Pablo Zarate look at some aspects of this transition in “Working From Home Around the World,” written for the most recent Brookings Papers on Economic Activity (Fall 2022, paper, comments, and video available online). Much of their paper looks at surveys on the prevalence of work-from-home across a number of countries, and the hopes and expectations about what future work-from-home patterns will look like. From the abstract:
The pandemic triggered a large, lasting shift to work from home (WFH). To study this shift, we survey full-time workers who finished primary school in 27 countries as of mid 2021 and early 2022. Our cross-country comparisons control for age, gender, education, and industry and treat the U.S. mean as the baseline. We find, first, that WFH averages 1.5 days per week in our sample, ranging widely across countries. Second, employers plan an average of 0.7 WFH days per week after the pandemic, but workers want 1.7 days. Third, employees value the option to WFH 2-3 days per week at 5 percent of pay, on average, with higher valuations for women, people with children and those with longer commutes. Fourth, most employees were favorably surprised by their WFH productivity during the pandemic. Fifth, looking across individuals, employer plans for WFH levels after the pandemic rise strongly with WFH productivity surprises during the pandemic. Sixth, looking across countries, planned WFH levels rise with the cumulative stringency of government-mandated lockdowns during the pandemic.
These results suggest that a collision of expectations about work-from-home is on its way. Workers would like a little more work-from-home than they experienced in the pandemic; employers would like substantially less. One can imagine a future where some companies offer more work-from-home, and attract workers who place a high value on this aspect of the job, and other companies don’t. Workers would then need to reshuffle between these companies, and the market would then sort out how they compete against each other. Some employers had good experience with unexpectedly high work-from-home productivity during the pandemic; some did not. Some organizations and workers have made substantial investments in facilitating work-from-home; others did not.
The authors also point out, without taking a strong position, some of the broader issues raised by a shift to work-from-home. For example, it’s one thing for an experienced worker with a well-defined job to work from home, but for young adults just entering the workforce and looking for on-the-job training and support, it may look quite different. There is a well-supported belief that physical interactions in the workplace are often important for innovation and the spread of knowledge. Interactions in the virtual workplace have become much easier, but in terms of supporting innovation, will they be able to substitute for a decline in live in-person interactions?
For cities, perhaps the biggest short-term effect of a rise in work-from-home is less urban activity and a lower tax base from commercial real estate and sales taxes.
As an earlier example, the waves of suburbanization after World War II imposed high costs on cities, and on those who were not able for whatever reason to relocate to the suburbs. But economic forces can also cut in unexpected directions. As the authors write: “If older and richer workers decamp for suburbs, exurbs and amenity-rich consumer cities, the resulting fall in urban land rents will make it easier for young workers to live in and benefit from the networking opportunities offered by major cities.” With this kind of change, cities and those who run them would need to rethink the sources of their economic vitality and attractiveness, along with the mix of taxes and services they currently provide.
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.
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