Federal Reserve Study: Remote Work Does Not Affect Productivity

Remote work has negligible effect on productivity, recent research from the Federal Reserve Bank of San Francisco found.

In their introductory paragraph, the four researchers—John Fernald, Ethan Goode, Huiyu Li, and Brigid Meisenbacher—wrote, "An enduring consequence of the COVID-19 pandemic is a notable shift toward remote and hybrid work. This has raised questions regarding whether the shift had a significant effect on the growth rate of U.S. productivity. Analyzing the relationship between GDP per hour growth and the ability to telework across industries shows that industries that are more adaptable to remote work did not experience a bigger decline or boost in productivity growth since 2020 than less adaptable industries. Thus, teleworking most likely has neither substantially held back nor boosted productivity growth."

The researchers stated that that a surge in productivity growth in 2020 led to optimistic views about remote work’s benefits, but that surge ended, and growth has returned to its pre-pandemic trend. They wrote that this pattern was explained by “a predictable cyclical effect from the economy’s downturn and recovery.”

Much of the previous research on this question used very specific occupations with quantifiable outputs, such as call center workers, where output could be easily measured. the researchers stated. "Because of the narrow scope of the empirical evidence, we turn to industry data to provide more insight," the wrote.

The researchers measured industry productivity by output, using value added per hour, focusing on data from 43 private-sector industries, including chemical manufacturing, retail trade, and accommodation and food services. For each industry, they calculated the average annualized growth in quarterly productivity to measure changes in industry productivity over the pandemic.

“After controlling for pre-pandemic trends in industry productivity growth rates, we find little statistical relationship between telework and pandemic productivity performance,” they wrote, concluding that the “shift to remote work … is unlikely to be a major factor explaining differences across sectors in productivity performance” and that, “despite the important social and cultural effects of increased telework, the shift is unlikely to be a major factor explaining changes in aggregate productivity.”   

The researchers found that “shift to remote and hybrid work [having] reshaped society in important ways, and these effects are likely to continue to evolve." Yet they also found “little evidence in industry data that the shift to remote and hybrid work has either substantially held back or boosted the rate of productivity growth.”

The researchers did caution, however, that their findings “do not rule out possible future changes in productivity growth from the spread of remote work” and that the “future of work is likely to be a hybrid format that balances the benefits and limitations of remote work.”

Source: https://nysscpa.org/, S.J. Steinhardt, January 25, 2024