Return to office? How COVID-19 and remote work reshaped the economy

Return to office? How COVID-19 and remote work reshaped the economy

By Scott Fulford

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The last great battle of the COVID-19 pandemic is not over masks or vaccines or big government policies. It’s over remote work. Several big companies, including Apple, JPMorgan Chase, and Amazon, recently announced new pushes to “return to office” after previous attempts foundered. Maybe these attempts will be more successful. But the pandemic showed it was possible for many jobs to be done remotely, while a tight labor market and successful pandemic policy gave employees the confidence to push for better working conditions.

Before the COVID-19 pandemic, remote work was rare. About five percent of work days were fully remote in 2018 based on one estimate. But only a small minority of workers could ever do their work fully remotely, and the privilege of working from home was highly concentrated among educated white professionals.

But remote work became the default work experience as offices across the country closed in March and April 2020. Approximately sixty percent of paid days were fully remote by May 2020. The share working remotely fell over the next year as people who were furloughed or unemployed because their jobs had to be done in person went back to work. But since 2021, the share has been remarkably constant at just over 30 percent.

The transition to remote work was surprisingly easy for most people. Office workers already did most of their work on the computer anyway, and laptops made it easy to do that work anywhere with a wireless signal. The only part missing was how to collaborate. But over the previous twenty years, the technology to work remotely had evolved, even if most workplaces hadn’t caught up yet. The emergence of Zoom, Slack, Teams, and the ability to co-edit documents meant that sitting next to someone was no longer necessary to collaborate. Pandemic surveys regularly showed that a large majority of the new remote workers had the equipment they needed and had adequate workspace.

Of course, for the people who did not have adequate workspace or child care, the transition was not always easy. People got creative, setting up makeshift offices in the kitchen, a child’s bedroom, and even the spare bathroom. As remote work continued and people learned to use the new tools and bought better desks, noise-cancelling headphones, and better cameras, the experience improved.

Despite gloomy predictions, remote workers were generally just as productive. Partly, having given up their commutes, remote workers spent more time working, including at off hours such as in the evening and weekends. People find their morning commute the most unpleasant time spent during their day—much worse than child care, housework, shopping, and even working—so it is perhaps not a surprise that without a commute, one of the things people did with their time was work a bit more.

Fewer hours wasted commuting opened other exciting new opportunities. After declining for years, new business registrations surged in 2020 and stayed high. Some of that newly found economic dynamism comes from remote work’s flexibility and time saved not commuting.

And fully remote work offers even more tantalizing possibilities for economic growth. Remote work allows employers to hire the best person for the job, not just the local person. It means that trailing spouses might no longer be stuck in jobs they hate, and caregivers might no longer have to choose between a career they love and moving back to their hometown to take care of aging parents. Fully remote work even has the potential to reshape regional inequality—it’s not an accident that the Bay Area lost population, while Boise, Idaho had a real estate boom.

The return to office pushes started in earnest in 2021 after vaccines became widespread. Yet plan after plan to bring workers back failed. Apple has repeatedly changed its return to office plans in the face of virus surges and employee revolts. Other big companies faced similar pushback. And it’s not just the Bay Area that has had trouble convincing people to come back. Finding it difficult to hire in a tight labor market, New York City mayor Eric Adams had to walk back his hardline stance on remote work.

After productively working remotely for nearly two years, many people resisted return to office demands. Remote workers felt that they had shown they could be productive, and senior executives pushing them back had not made convincing arguments for why they should give up their new flexibility. Workers organized petitions. Others ignored mandates. And with a tight labor market, others left for more flexible companies. As one Wall Street Journal article put it, “Remote Work Is the New Signing Bonus.”

As a result, remote work has been largely stable since 2021, with office occupancy down by about half from before the pandemic and around 30 percent of work days spent entirely remote, six times the pre-pandemic rate. Not everyone prefers remote work, but a new consensus on hybrid work seems to have emerged at many companies, with many employees coming in two to three days a week for collaboration, while others coming in rarely, if at all.

Similar forces have shaped the lower wage labor market for the better where most work must be in person. Wage gains have been largest among the lowest paid workers as people quit for better paying jobs that treated them better. Union organizing, while still hard, has had a string of notable successes.

These trends share a common thread: a tight labor market meant people were confident that they could find another job, and effective pandemic policy meant that they were financially secure and could afford a period of unemployment. This confidence gave workers the courage to demand better from their employers.

This moment may not last. Return to office pushes may succeed this time, or rising unemployment may reduce worker power. But that workers were able to push back, at least for a while, shows that a tight labor market and government policy that improves financial health can reshape the economy in surprisingly positive ways.

Scott Fulford is a senior economist at the Consumer Financial Protection Bureau. He has a PhD in economics from Princeton University and he taught economic and international studies at Boston College before joining the CFPB. His academic and policy research examines the economic problems individuals and households face and how they use financial products to help deal with them. He lives in Washington, DC, with his wife and two young children.

Scott Fulford is the author of The Pandemic Paradox: How the COVID Crisis Made Americans More Financial Secure. The views expressed here and in the book are his and not necessarily the views of the Consumer Financial Protection Bureau or the United States.