According to data from the U.S. Bureau of Labor and the American Community Survey, the rise in remote work since the pandemic has significantly impacted productivity.
In 2019, just 6.5% of private-sector employees worked from home. However, the pandemic and associated safety measures triggered a significant increase in remote work adoption across industries.
This shift has raised questions about the impact of remote work on employee productivity. Is WFH leading to decreased output, or are employees performing better than before?
Randomized experiments and case studies from individual firms on remote work yielded mixed results.
Some studies showed a slight increase in individual productivity, as reflected in metrics such as email volume, video calls, and new work outputs. Additionally, remote work was linked to higher employee satisfaction and lower turnover, potentially leading to reduced hiring costs.
However, other studies reported a short-term drop in worker productivity early on in the pandemic. An aggregate study by the Federal Reserve Bank of San Francisco across 43 private-sector industries found minimal correlation between overall labor productivity growth and remote work, suggesting that working from home neither significantly hindered nor improved productivity.
Meanwhile, data from the Census Bureau reveals that remote work boomed across almost all industries between 2019 and 2021. After the pandemic restrictions were eased, a small reduction occurred in 2022.
Remote work levels remain above pre-pandemic levels in most sectors, except for agriculture, forestry, fishing, and hunting, which have returned to 2019 figures. WFH expanded across 21 major industries, with the top four seeing an increase of over 30% in remote workers.
In 2021, sectors such as professional, scientific, and technical services; information; finance and insurance; and company management saw nearly 39% of their workforce working remotely, up from less than 17% in 2019. While the figure dropped to 33% in 2022, it signals that remote work could remain a permanent shift for these industries.
The Bureau of Labor Statistics analyzed the rise in remote work alongside total factor productivity (TFP), which measures output relative to the combination of inputs used in production across 61 private sector industries. Input is essentially the total cost of doing business, including payroll, office space, energy consumption, materials, and other operational expenses.
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There was a substantial reduction in input costs related to energy, rent, utilities and service costs, with each percentage-point increase in employees working remotely linked to decreases of 0.2 to 0.4% points in these secondary expenses (such as energy and office space). In other words, for every 1% of a company’s workforce working from home, the company’s secondary operational expenses were reduced by between 0.2–0.4%.
Some industries, like broadcasting and telecommunications, achieved over 20% reductions in unit office costs while new businesses emerged, taking advantage of the lower fixed costs that come with prioritizing work-from-home operational models.
Even without increased productivity among individual workers, the reduction in non-labor related expenses increased the comanpy’s bottom line.
The data reveals a positive correlation between remote work and TFP growth, with each 1-percentage-point increase in remote workers associated with a 0.08 to 0.09% increase in TFP growth from 2019 to 2022.
This trend remained consistent even when accounting for pre-pandemic productivity patterns, indicating that remote work likely played a role in driving productivity growth during the pandemic.
An analysis of the top three industries—computer systems design, internet publishing, and data processing—where remote work grew the most from 2019 to 2022—revealed that output increased significantly, while the amount of labor required to produce that output stayed relatively flat.
This suggests that many industries were able to increase output with the same number of employees.
Interestingly, although remote work was linked to increased productivity, no significant relationship was found between the growth in remote work and an increase in hourly compensation, suggesting that employers pocketed most of the gains. Nevertheless, workers benefited from reduced commuting time, child care, and food related expenses.
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Overall, the rise in working from home across sectors averaged 14.9% points between 2019 and 2021, contributing to an estimated 1.2% point increase in TFP.
“This suggests that the increase in remote work substantially contributed to productivity growth during the pandemic,” the Bureau of Labor Statistics surmises.
