Stanford University shares outcomes of working from home

The massive surge in the number of people working from home may be the largest change to the U.S. economy since World War II, says Stanford scholar Nicholas Bloom.

And the shift to working from home, catalyzed by the pandemic, is here to stay, with further growth expected in the long run through improvements in technology.

Looking at data going back to 1965, when less than 1% of people worked from home, the number of people working from home had been rising continuously up to the pandemic, doubling roughly every 15 years, said Bloom, the William D. Eberle Professor in Economics in the School of Humanities and Sciences and professor, by courtesy, at Stanford Graduate School of Business.

Before the pandemic, only around 5% of the typical U.S. workforce worked from home; at the pandemic’s onset, it skyrocketed to 61.5%. Currently, about 30% of employees work from home.

“In some ways, one of the biggest lasting legacies of the pandemic will be the shift to work from home,” said Bloom.

Bloom shared his research on working from home at the Stanford Distinguished Careers Institute’s “The Future of Work” Winter 2023 Colloquium, which focused on how the ways we work are changing.

DCI Director Richard Saller moderated the event, which featured scholars from Stanford and beyond discussing working arrangements and attitudes, challenges to office real estate, learned lessons about the power of proximity, and more.

Below are seven takeaways from Bloom’s discussion:

The employees. About 58% of people in the U.S. can’t work from home at all, and they are typically frontline workers with lower pay. Those who work entirely from home are primarily professionals, managers, and in higher-paying fields such as IT support, payroll, and call centers. The highest paid group includes the 30% of people working from home in a hybrid capacity, and these include professionals and managers.
The move. Almost 1 million people left city centers like New York and San Francisco during the pandemic. Those who used to go to the office five days a week are now willing to commute farther because they are only in the office a couple days a week, and they want larger homes to accommodate needs such as a home office. This has changed property markets substantially with rents and home values in the suburbs surging, Bloom said. Home values in city centers have risen but not by much.
The commute. Public transit journeys have plummeted and are currently down by a third compared to pre-pandemic levels. This sharp reduction is threatening the survival of mass transit, Bloom said. These are systems that have relatively fixed costs because the hardware and labor, which is largely unionized, are relatively hard to adjust. A lot of the revenues come from ticket sales, and these agencies are losing a lot of money.
The office. Offices are changing, with cubicles becoming less popular and meeting rooms more desirable. As some companies incorporate an organized hybrid schedule in which everyone comes in on certain days, they are redesigning spaces to support more meetings, presentations, trainings, lunches, and social time.
The startups. Startup rates are surging, up by 20% from pre-pandemic numbers. The reasons: working from home provides a cheaper way to start a new company by saving a lot on initial capital and rent. Also, people can more easily work on a startup on the side when their regular job offers the option to work from home.
The downtime. The number of people playing golf mid-week has more than doubled since 2019. People used to go before or after work, or on the weekends, but now the mid-day, mid-week golf game is becoming more common. The same is probably true for things like gyms, tennis courts, retail hairdressers, ski resorts, and anything else that consumers used to pack into the weekends.
The organization. More and more, firms are outsourcing or offshoring their information technology, human resources, and finance to access talent, save costs, and free up space. There has been a big increase in part-time employees, independent contractors, and outsourcing. “After seeing how well it worked with remote work at the beginning of the pandemic, companies may not see a need to have employees in the country,” Bloom said.