The Unintended Consequences of Working From Home | Freakonomics Radio | Episode 520

The last two years have radically changed the way we work — producing winners, losers, and a lot of surprises. In this episode of Freakonomics Radio: the present and future of remote work, the challenges (and perks) of the hybrid workplace, and the big question: Has working from home changed the way we work for good? This episode was originally published October 26, 2022. For a full transcript, resources, and more, visit: https://freak.ws/3johYhW Photo credit: Audrey Bernstein FOLLOW FREAKONOMICS RADIO: YouTube: https://freak.ws/3yIl6dl Apple Podcasts: https://freak.ws/3yAvQh0 Spotify: https://freak.ws/3TsdCmV ABOUT FREAKONOMICS RADIO: Discover the hidden side of everything with host Stephen J. Dubner, co-author of the Freakonomics books. Each week, Dubner speaks with Nobel laureates and provocateurs, intellectuals and entrepreneurs, and various other underachievers to uncover things you always thought you knew (but didn’t) and things you never thought you wanted to know (but do) — from the economics of sleep to the future of education, from markets for marriage to the surprising utility of wolves. ABOUT THE FREAKONOMICS RADIO NETWORK: Freakonomics began as a book, which led to a blog, a documentary film, more books, a pair of pants, and in 2010, a podcast called Freakonomics Radio. Hosted by Stephen J. Dubner, it’s one of the most popular podcasts in the world, with a reputation for storytelling that is both rigorous and entertaining. Its archive of more than 500 episodes is available, for free, on any podcast app, and the show airs weekly on NPR stations. Freakonomics Radio is now the flagship show of the Freakonomics Radio Network, which includes the podcasts No Stupid Questions, People I (Mostly) Admire, and The Economics of Everyday Things. FREAKONOMICS RADIO NETWORK PODCASTS: Freakonomics Radio: https://freakonomics.com/series/freakonomics-radio/ No Stupid Questions: https://freakonomics.com/series/nsq/ People I (Mostly) Admire: https://freakonomics.com/series/people-i-mostly-admire/ The Economics of Everyday Things: https://freakonomics.com/series/everyday-things/ Special series: https://freakonomics.com/topics/ CONNECT WITH US: [email protected] https://twitter.com/freakonomics https://www.instagram.com/freakonomics/ https://www.facebook.com/freakonomics/ https://www.tiktok.com/@freakonomicsradio https://www.linkedin.com/company/freakonomics-media Subscribe to our newsletter: http://eepurl.com/bKm0cf

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:05Stephen J. Dubner?

  You may have been hearing this debate about where you should be working.

• 0:09Speaker 01

  It's not in your best interest to work at home. If you're just sitting in your pajamas in your bedroom, is that the work-life you want to live?

• 0:18Speaker 02

  I love the freedom of not having a commute in the mornings, of being able to set my own hours.

• 0:22Speaker 03

  It does not work for younger people. It doesn't work for those who want to hustle.

• 0:27Speaker 01

  Don't you want to feel part of something?

• 0:30Speaker 02

  I love that I can work from anywhere. I can go work in Buddy Florence if I want to.

• 0:37Stephen J. Dubner?

  You too may have strong feelings about the work from home debate. This man certainly does.

• 0:42Speaker 04

  Yes, I mean, work from home is a real wild west.

• 0:46Stephen J. Dubner?

  A real wild west, meaning there may be rules and protocols, but they're not widely understood or followed, and they seem to change all the time. This has led to a lot of shouting and speculation.

• 0:58Speaker 04

  I get frustrated when you read in the media, thrown against work from home, and they're comparing extreme positions.

• 1:06Stephen J. Dubner?

  That is Nicholas Bloom, an economist at Stanford. He gave us some numbers on where Americans are doing their jobs these days. About 55% are working fully in person. Think about jobs in manufacturing, retail, transportation, service and hospitality, many medical workers and some office workers. About 15% of US workers are fully remote. In a normal week, they never go to a workplace. And about 30% of us are doing what has come to be called hybrid work. We're in person some days and working at home or remotely the others. And if you want to understand how things have changed since the pandemic, hybrid work is where you should be looking.

• 1:47Speaker 04

  Yes, this is the biggest change to hit labor markets in many decades.

• 1:52Stephen J. Dubner?

  Today on Freakonomics Radio, how is the new flexible hybrid model working out?

• 1:57Speaker 05

  Flexible work is a double-edged sword.

• 1:59Speaker 06

  One thing that we're concerned about is this possibility of an urban doom loop.

• 2:04Stephen J. Dubner?

  An urban doom loop?

• 2:06Speaker 05

  I just figured I can't be the only one having these struggles.

• 2:10Stephen J. Dubner?

  The winners and losers of working from home and the many unintended consequences.

• 2:16Speaker 04

  It was a huge surprise certainly to me, but I initially didn't believe the data.

• 2:21Stephen J. Dubner?

  We'll hear about all that and much more. And if you are working from home, hey. Nobody's listening. Come on. Womp it with me.

• 2:40Speaker 07

  This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner.

• 2:55Speaker 08

  We definitely need to do another take.

• 2:58Speaker 08

  Yeah.

• 3:00Stephen J. Dubner?

  You can't have a serious conversation about working from home without speaking with Nick Bloom. He has been studying remote work for over 20 years, and he recently co-founded a work from home research group.

• 3:12Speaker 04

  Yes, and we've been using it to collect tens of thousands of survey responses from Americans since the pandemic began, and what they're doing, what they think of working from home, how they like it, how they don't like it, and interestingly, what their employers have told them about the future.

• 3:27Stephen J. Dubner?

  Bloom discussed his earlier research in a 2018 episode of ours called, Yes, the Open Office is Terrible, But It Doesn't Have to Be.

• 3:35Speaker 04

  Freakonomics was far ahead of the curve. Pre-pandemic, he had that fantastic piece on working from home.

• 3:40Stephen J. Dubner?

  In that fantastic episode, his words, not ours, Bloom described a study of his that analyzed remote work at a Chinese travel agency.

• 3:50Speaker 04

  So the firm is called Trip.com. They're one of the world's big three travel agents. They were founded in Shanghai. My connection to them is the founder, or co-founder at least, was a guy called James Liang, who's currently the chairman and was back then the original CEO. He was my student. He was very Stanford, about a third of the way through the class. Someone pointed out, there's this person sitting at the back of the class that founded this massive tech company.

• 4:16Stephen J. Dubner?

  So Bloom collaborated with Liang and two other economists to study more than 100 Trip.com call center employees who were working from home four days a week. What'd they learn?

• 4:27Speaker 04

  We found working from home raises productivity by 13%, which is massive. That's almost like an extra day a week. So massively more productive, way more than anyone predicted. And they seemed a lot happier. Their attrition rates are how frequently they quit. Part of this was they didn't have the commute and all the uncertainty. But the other big driver is it was just so much quieter at home.

• 4:51Stephen J. Dubner?

  So that was some interesting evidence, pre pandemic, of course. And then in the summer of 2021.

• 4:58Speaker 04

  In the summer of 2021, I actually had dinner with James when I was back in London visiting family. And he said, we're doing another big experiment. Would you like to be involved?

• 5:08Stephen J. Dubner?

  This time, trip.com took 1,600 employees and randomized them into two groups. People with even numbered birthdays would continue to come into the office every day, while people with odd numbered birthdays worked at home on Wednesdays and Fridays.

• 5:23Speaker 04

  When you run experiments, it's so easy for them to go wrong. It's like the Anna Karenin thing that, you know, there's only one way to go right and there's 100 ways to go wrong. And so the aim was to keep it as simple as possible.

• 5:35Stephen J. Dubner?

  But wait a minute. Trip.com had already run one experiment, which found that remote work was successful. Why'd they need another?

• 5:42Speaker 04

  A couple of things are very different about the old and the new experiment. The old experiment was on people that work in a call center. That is not a team job and is not really a creative job. And the other thing is it tested close to fully remote. These were folks that were working from home four days a week.

• 5:59Stephen J. Dubner?

  This new experiment had employees working at home just two days a week and included people in the company's engineering, marketing, and finance divisions.

• 6:08Speaker 04

  So there are 1,600 employees in the experiment, all grads. A third of them had a post grad degree. They're high end professional jobs that have a lot of creativity, a lot of mentoring, the types of things people worry about.

• 6:20Stephen J. Dubner?

  Worry about, meaning you'd worry that the mentoring and creativity might suffer if people weren't in the office together.

• 6:28Speaker 04

  I was kind of testing what's currently happening in America. We have thousands, millions of firms, organizations, you know, research labs, hospitals, local city councils that are allowing folks to work from home, typically two, three days a week. And the big question is, you know, is that good for productivity? Is it good for them? Is it good for the business?

• 6:46Stephen J. Dubner?

  In other words, Bloom wanted to test the hybrid work model, a couple of days at home, a couple of days in the office. I asked whether these findings from one Chinese firm could be generalized to US firms.

• 6:59Speaker 04

  I think it's pretty generalizable. So just to explain, these people are writing code, they're coming out of advertising campaigns, doing accounts. A lot of them have actually been educated in the US and then returned back to China. The China location thing is interesting. If anything, it biases against work from home because it's pretty rare to have work from home in China. Apartments are small. It's not a normal thing to do. And so there is much more of concern amongst employees that somehow be looked down upon or left out. My sense is if it works there in a setup that's not well structured for working from home, it's likely to work even better in Europe and the US.

• 7:36Stephen J. Dubner?

  Okay. So what did Bloom find in this new experiment? There were four key results.

• 7:44Speaker 04

  The first is, the most important result for the firm is employees were dramatically happier being allowed to work from home two days a week. You can see this in surveys, and maybe more convincing, you see it in quit rates, they fell by a third. They liked the ability to work from home on Wednesday and Friday, particularly Friday. A lot of feedback was look, it enables us to go back sometimes to visit parents and relatives in our home village, maybe get out of the city for a bit. And that is really valuable for some. And you can see your parents in a way you probably couldn't. If you're leaving at 7pm out of Shanghai, the roads are gridlocked, the trains are full. If you're leaving at 2pm, you can get away and get back Sunday night.

• 8:19Stephen J. Dubner?

  Score one for work from home. Finding number two?

• 8:24Speaker 04

  The second finding was that it also changed the structure of hours. If you're working from home, it's much easier to go to the dentist, maybe go pick up your kids from school, maybe go out for a jog. You know, if you play tennis, the tennis courts are free or golf. So what we saw is folks that were working from home worked on average a couple of hours less a week on their home days, but made up for it on other days on the weekends.

• 8:48Stephen J. Dubner?

  Okay. And here is the third finding from Bloom's study of employees working from home.

• 8:54Speaker 04

  They end up sending many more messages to coworkers. Now, the fact that they're messaging people more on their work from home days is hardly surprising, not in the office. What was striking is even on Monday, Tuesday and Thursday, days in the office, they're significantly more likely to message people. When you interview them, they say basically got used to just a different way of communicating. It's more written, less walking over to somebody's desk and tapping them, and they just carry that into the office. It's hard to know if that's good or bad. People have different views on that. There's certain levels of discrimination issues that come with always doing stuff face to face, and some people find it's a bit of a leveler if you're quiet or shy.

• 9:29Stephen J. Dubner?

  All right. And what was the fourth key fact?

• 9:33Speaker 04

  Fact four was productivity went up a bit. It wasn't enormous. It was less in some ways than we expected. There were four different measures of performance and productivity. Promotions, performance grades, a self-assessed measure, and then finally, how many lines of code they wrote. Promotions and performance grades were about flat, but self-assessed and lines of code were up. And in particular, lines of code, if you think of that as maybe the hardest measure, that went up by eight percent, which is a pretty large increase.

• 10:03Stephen J. Dubner?

  So in the midst of the noisy and sometimes contentious work from home debate, Nick Bloom has provided some actual evidence. It turns out that the flex or hybrid model, a couple of days at home, a few in the workplace, seems to boost employee happiness and productivity.

• 10:21Speaker 04

  Yes. Oddly enough, individual employees right from the get go said, we love working from home.

• 10:27Stephen J. Dubner?

  Bloom knows this from the surveys he's been running as part of his new work from home research group.

• 10:32Speaker 04

  What individuals want has been kind of flat at two and a half days, right back since the beginning of the pandemic. If you look at what firms are offering, it started off at about one day, beginning of pandemic, this huge gap, a massive gap. And now they're up to about two and a half days. That gap is almost completely closed. And in some ways, look, it's not surprising. This is the biggest change to hit labor markets in many decades. The fact has taken managers and firms two years to come to this conclusion. You know, you could say it's slow. I don't think it's slow. This is such an enormous change. In some ways, it feels very rapid. Just to put numbers on it, working from home was doubling roughly every 15 years before pandemic, and it's now gone up threefold in the space of two years. That's almost 50 years of change compressed into two years.

• 11:14Speaker 04

  So I'm not that surprised. It's taken a number of managers 10, 15 months to get comfortable with it.

• 11:22Speaker 04

  What we've seen is that more and more firms have said, look, work from home is here to stay. It's going to be a permanent thing. We are now in, you know, the post pandemic world in terms of the future of work. And work from home is here to stay and it's roughly half time for professionals and managers. The problem is for the other half of the population, folks that, you know, work in frontline jobs, they also want to work from home about two and a half days a week and they're getting more like half a day a week.

• 11:50Speaker 04

  I feel like by late fall 2022, we are in the new normal. Anyone out there that's thinking suddenly everyone's going to come back, cities are going to totally revive. You know, at this point, you're dreaming.

• 12:03Stephen J. Dubner?

  Okay, so it's not a dream, but could the new world of hybrid work be a nightmare for our cities? Yeah, this is something I'm really concerned about. That's coming up after the break. I'm Stephen Dubner. This is Freakonomics Radio.

• 12:32Stephen J. Dubner?

  As The Economist Nick Bloom told us, roughly 15% of US employees are working remotely full-time, with another 30% on hybrid schedule, some days remote, some days in person. The work-from-home numbers in Western Europe are similar, and in Asia, they're slightly lower.

• 12:51Speaker 04

  One of the reasons saying China and Japan work-from-home levels are lower is it's not as appealing to be at home if you're in a very high-density Asian city because your apartment is small. And in developing countries, you go to Africa, South America, it's a lot lower because the industrial structure isn't amenable. It's much more agriculture, manufacturing, but the change is very high. So even in Africa, if it's gone from 1% to 5%, it's still an enormous increase in levels.

• 13:15Stephen J. Dubner?

  And how about our little company, the Freakonomics Radio Network? We are firmly in the hybrid and work-from-home categories. None of us go to an office every day. I am 100% remote, although I have been since before COVID. I just like working on my own, and I find it super productive. Right now, as I speak to you, I am being recorded by our technical director, Greg Rippon, working from his home, and the producer of this episode, Alina Coleman, is working from her apartment, although both Alina and Greg do sometimes go into our office. And it's a nice office, right on Bryant Park in midtown Manhattan. It is one of four New York City offices run by our producing partner, Sirius XM. And

• 14:00Stephen J. Dubner?

  how crowded is our office?

• 14:03Speaker 09

  When I came here, there was nobody here at about 9 o'clock in the morning.

• 14:07Stephen J. Dubner?

  That's Julie Kanfer. She is the producer on one of the other podcasts in our network, Freakonomics MD.

• 14:13Speaker 09

  My host, Babu, is in the Boston area. Our engineer, Nellie, is also in the Boston region. I don't ever see them. It doesn't matter. We talk all the time.

• 14:28Stephen J. Dubner?

  Most days, Julie works at home. Before joining the Freakonomics team, she worked in live radio, also for Sirius XM.

• 14:36Speaker 09

  And there was always tons of people in the office. I always liked being in the studio. I like being around people. So it's been a big change. I don't know that I will ever have a job again where I'm going into the office every day.

• 14:48Speaker 10

  You walk into the office and the only other person who's in the office most days works for Sirius XM Security.

• 14:54Stephen J. Dubner?

  And that is Ryan Kelly, a producer on Freakonomics Radio.

• 14:58Speaker 10

  I'd say I come into the office the most out of everyone at the Freakonomics Radio Network. Recently, I've been coming into the office three to four days a week. And I'd say three of those days, the office is completely empty, which on one hand is depressing, on the other hand is awesome, because I have a whole office to myself.

• 15:20Speaker 11

  We were, you know, pretty much in office entirely prior to the pandemic. So all of our spaces were fully utilized.

• 15:26Stephen J. Dubner?

  And that is Jessica Fox. She runs the Employee Experience Team at Sirius XM, and she helped design the company's hybrid work plan.

• 15:36Speaker 11

  Of course, no one wants to spend a lot of money on real estate if we're not using it. But we do also find importance in offering a space for employees to come and collaborate or just get head down focus time.

• 15:48Stephen J. Dubner?

  So the space is there, but it is deeply underused, as are a lot of offices in New York City. The city's office space is still only about half occupied, way up from the depths of the pandemic, of course. But still, that is a lot of real estate sitting empty.

• 16:06Speaker 10

  I think we should all be concerned.

• 16:08Stephen J. Dubner?

  That is Arpit Gupta.

• 16:10Speaker 06

  I'm an associate professor of finance at the NYU Stern School of Business, and I research real estate.

• 16:15Stephen J. Dubner?

  And why is he concerned?

• 16:17Speaker 06

  Because it turns out that the centers of cities, the central business districts, are actually the linchpins holding together urban areas in many ways. And the impacts that we're seeing from remote work are impacting the commercial office owners, but they're also having broad spillover effects on how cities function more broadly. The most direct channel has to do with potential losses in property tax revenue. Cities fund themselves very heavily for property taxes. And so declines in office real estate values have a direct impact on the functioning of city budgets.

• 16:49Stephen J. Dubner?

  Gupta and two other economists, Stan Van Nureberg and Vrinda Mittal, recently published a paper called Work From Home and the Office Real Estate Apocalypse.

• 17:01Speaker 06

  So we're estimating a decline in value of 45% in the short run for New York City office space and 39% in more of a long-term perspective for the decline in value for that New York office real estate. One thing that we're concerned about is this possibility of an urban doom loop.

• 17:19Stephen J. Dubner?

  Did you say an urban doom loop?

• 17:21Speaker 06

  That sounds bad, and it's not something we're predicting will necessarily happen, but it's a concern about the functioning of cities when one of those linchpins of value has been taken away. The basic chain of events that we're worried about is as city governments have more constrained budgets, as they're faced with declining revenue, they're going to have to either raise taxes or cut services. And we've already seen over the last couple of years, a lot of challenges in providing city services in areas like education, where there have been a lot of debates about remote education, or in policing. And so cities are going to have to make difficult choices about whether to cut back on those essential services, or on the other hand, raise taxes on residents. Whichever way you choose leads to the potential of some of these people leaving the city, thereby lowering the tax base further.

• 18:05Speaker 06

  We've seen some episodes of this historically, cities like Detroit, cities like New York in the 1970s and 80s, had a little bit of this destructive spiral going on.

• 18:13Stephen J. Dubner?

  How safe is it to extrapolate from the New York City numbers? We're always told that New York City is an outlier in real estate in a number of ways.

• 18:20Speaker 06

  Well, on the one hand, New York has actually seen not as strong of an impact as some markets, particularly those on the West Coast like San Francisco. A lot of these markets have actually seen even greater impacts on the office because they have so many tech tenants, right, that are even more likely to move remote. At the same time, it's probably not as stark as what you see in some booming Sunbelt markets, places like Miami, that have had a relatively more robust recovery since the pandemic. But on balance, when we look across cities over the United States, we do observe a lot of similar patterns like increased office vacancies.

• 18:52Stephen J. Dubner?

  Can you put that in some kind of total dollar figure?

• 18:56Speaker 06

  Across the entire United States, the office real estate sector is worth over $1 trillion. If we take our estimate for the value decline in New York City and extrapolate that to the entire country, we would estimate a long-term impact of $453 billion.

• 19:14Stephen J. Dubner?

  Good God. So half a trillion dollars almost in what you call value destruction, yes?

• 19:22Speaker 06

  Value destruction from the standpoint of the office, but another way you could think about it is it's probably partially a value transfer to residential real estate, which has seen an increase over the same period.

• 19:35Stephen J. Dubner?

  As for that value transfer to residential real estate, a recent report from the Federal Reserve Bank of San Francisco found that the shift to remote work accounts for more than half of overall house price growth over the pandemic. What about the transportation sector? We take it for granted when it works well, but ridership is down so much in so many places. So what are the long-term effects of the office vacancies on public transportation?

• 20:04Speaker 06

  Yeah, this is something I'm really concerned about. So here in New York City, for example, we're actually at recent highs when it comes to transit use, but that still means that we're down over 30% relative to where we were before the pandemic. There's a concern that a lot of these transit systems might go bankrupt if they don't see even more recovery in ridership. Now, I think there are a lot of options to try to sustain transit. One example would be to divert congestion pricing revenue that we're planning here in New York and divert that not towards new capital improvements, but just towards operational revenue for the subways. But I think one challenge here, back to the doom loop idea, is that one way that transit systems might respond to these shocks is by cutting

• 20:48Speaker 06

  service. And I think what we'll see if they do respond by cutting service is that fewer people will take public transport because they view it as a lower frequency type of product. And that will further exacerbate the operational difficulties of the transit system.

• 21:04Stephen J. Dubner?

  Based on what you're telling me, one might assume that office rents in cities have decreased a great deal, 30 or 40 percent. But from what I've read, that's not the case. Can you talk about that for a moment?

• 21:15Speaker 06

  Yeah. Really, the key thing is that this asset has a lot of long-term leases. So only a fraction of people have actually had to make an active choice so far on what to do with the space.

• 21:26Stephen J. Dubner?

  In other words, this is a slow-playing apocalypse because those leases just haven't expired yet?

• 21:31Speaker 06

  Exactly, exactly. What we're seeing so far is some impact on pricing, some impact on occupancy, but we think this is really going to take a while to play out.

• 21:40Stephen J. Dubner?

  Do you think there's a chance that by the time many of those leases are up for renewal, that the demand will have increased so that the two opposite movements intersect and return to a sort of normal?

• 21:55Speaker 06

  Yeah, that's absolutely possible. What we're really trying to quantify is the persistence of that working-from-home parameter, right? Thinking about how likely is it this year, next year, or five years from now that we're going to be in the office or working at home?

• 22:14Speaker 06

  It's just going to be a really important challenge for cities to think through. I don't think it's all apocalyptic, as our title would suggest, but I think we are in for a very different world than we lived in before. When it comes to remote work, I think that's going to prove to be one of the more durable impacts of this pandemic.

• 22:32Speaker 06

  There are a lot of opportunities here for different cities, different neighborhoods, to experiment and try new things.

• 22:38Stephen J. Dubner?

  What about converting commercial space to residential space? Can you talk about how much of that is already going on? And what are the challenges in doing that? Because obviously, these buildings were created for one purpose.

• 22:49Speaker 06

  Yeah, that's something we've been looking into, and it's something that does have a lot of challenges. So here in New York City, for example, we actually did a good amount of conversion in the financial district, particularly after 9/11. But there are a lot of challenges with this. It's a requirement here in New York City, for example, that you need a window in the bedroom. So that limits the area that can be devoted to bedrooms. So you often have a lot of dead space in the center, particularly with modern office buildings.

• 23:13Stephen J. Dubner?

  What about plumbing and electric when you convert commercial to residential? How big of a problem is that?

• 23:19Speaker 06

  Yeah, that's definitely a problem as well. You typically also need to have windows that can open out rather than being totally fixed. So there are a lot of complications here. Typically, it's actually easier to convert a hotel into a residential unit. However, now that tourist activity is back, the hotel sector doesn't really want to do that as much. And by the way, we haven't even touched on the regulatory and zoning issues that might come into play when trying to change the use of some of these buildings. We have a relatively restrictive set of regulations around building in your city. Now, one thing that does potentially make this easier is there are not as many neighbors of these buildings, right? Exactly because they're office buildings in the center of the city. So you don't have the NIMBY problem to the same extent because people don't currently live there as much.

• 24:03Speaker 06

  And these buildings are actually quite optimally located from a residential standpoint because they're right at the center of the transit network, right? So the same trains that are there to bring people out from the suburbs into the center of the city, well, if you're in the center of the city, you also have access to the full network there as well. So there are some potential benefits to try to make this happen, but a lot of challenges as well.

• 24:24Stephen J. Dubner?

  Are you or either of your co-authors funded directly or indirectly by the real estate industry?

• 24:29Speaker 06

  No, we don't take funding directly or indirectly from the real estate industry. We're just scholars and academics trying to make sense of the world.

• 24:39Stephen J. Dubner?

  And where is Arpit Upda working as he tries to make sense of the world?

• 24:44Speaker 06

  I'm actually in the office five days a week personally.

• 24:46Stephen J. Dubner?

  And why is that?

• 24:47Speaker 06

  One of the things we've learned from this remote working research is that remote work appeals to different types of people and has different appeal in different firms. I just personally love the ability to come into a physical office where I can interact with students, with my colleagues, and share ideas. I also have a relatively short commute, so it's pretty low cost for me, and I have a pretty small apartment. So it's a little bit hard for me to work remotely. But one of the things I've learned is I'm not very typical. And there are a lot of knowledge, white-collar workers that because of their age, because their industry, because of what they're looking for in life, they really enjoy their remote working option. So I think it's just a lot of heterogeneity with respect to how people like it.

• 25:30Stephen J. Dubner?

  Coming up after the break, how that heterogeneity is playing out and some more unintended consequences of the work from home revolution, positive and negative.

• 25:41Speaker 04

  If you cut that out by being remote, that is a big risk.

• 25:45Stephen J. Dubner?

  I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. Now that a lot of people have been working at home for a while, part time and full time, some interesting patterns are starting to emerge.

• 26:04Speaker 04

  I initially didn't believe the data.

• 26:06Stephen J. Dubner?

  That, again, is the economist Nicholas Bloom of Stanford. The data he's talking about is the number of startup companies in the US.

• 26:14Speaker 04

  So we saw a drop in startups as the pandemic began. That's no surprise. We had a global pandemic, there was a lockdown, so startups fell, I think, by 20%, 30%.

• 26:22Stephen J. Dubner?

  But since then?

• 26:24Speaker 04

  They then recovered and overshot, and they've been above pre-pandemic levels ever since. And like, early on, it's like, is there a mistake in the data? Is this just catch-up? But by now, we've far beyond caught up. We have many more business created if you add back to the beginning of the pandemic. And I think it's because work from home is one of the big drivers, makes it cheaper to do it, it's easier to do it. And also, everything's remote. If you're out in North Dakota and you want to work with tech firms, it doesn't really matter where you are. And so suddenly, a great coder in North Dakota can go work with a bunch of barrier tech firms. It was a huge surprise, certainly to me, I think to many economists, to see the surge in startups.

• 27:03Stephen J. Dubner?

  The surge in startups is just one of many unintended consequences from shifting to remote and hybrid work. Here's another. Think about employees with disabilities. Their disability may have made it hard for them to commute. They might have encountered discrimination in the labor market. But since April of 2020, the labor force participation rate for American adults with disabilities has risen nearly five percentage points, a huge gain. Remote work has also meant a lot of people can relocate without changing jobs. Some members of the Freakonomics Radio team have done just that, like Jasmine Klinger, one of our audio engineers.

• 27:45Speaker 12

  And that actually allowed me to buy a house. I don't think I would ever been able to buy a house in the New York metro area.

• 27:54Stephen J. Dubner?

  And Emma Terrell, who's our operations manager.

• 27:58Speaker 05

  I used to live in New York City and now I live in Boulder, Colorado.

• 28:01Stephen J. Dubner?

  Emma really likes to go rock climbing and that's more fun in Boulder than it is in New York City, I assume. I've never gone rock climbing in New York or elsewhere. This brings us back to something the NYU finance professor Arpit Gupta said earlier. I think it's just a lot of heterogeneity with respect to how people like it. If you think about it, remote and hybrid work are a gigantic vote in favor of heterogeneity. Different people have different appetites, preferences, needs, abilities. So the work from home revolution is bound to affect people differently, just as the pandemic itself affected us differently.

• 28:40Speaker 05

  When the pandemic first hit, I was struggling to figure out how I keep my career path going in this new crisis environment.

• 28:50Stephen J. Dubner?

  That is Misty Heggenis. She is an economist at the University of Kansas. Before that, she was principal economist at the US Census Bureau. She also has two kids.

• 29:00Speaker 05

  I just figured I can't be the only one having these struggles. And so since I'm an economist and a nerdy data person, my first instinct was let's go to the data and see what the data says.

• 29:11Stephen J. Dubner?

  Heggenis and her fellow economist Palak Suri looked at how the pandemic and remote work affected working women, especially working moms. Their paper is called Telework, Childcare, and Mothers' Labor Supply.

• 29:25Speaker 05

  When we look at mothers divided out by whether or not they have an onsite job, meaning that they have to actually leave their home and go to their place of employment, compared to moms who have telework compatible jobs. And when we look at it by education, what we see is that it's the moms in telework compatible jobs with a college degree or higher. Who really were differentially impacted by the pandemic in two ways. One, they reduced their labor force participation. Even potentially more interesting is that they were almost one percentage point more likely to be taking a leave compared to women without children.

• 30:07Speaker 05

  And so the women who had the most flexibility were the ones who were more likely to pull back from the labor force.

• 30:17Stephen J. Dubner?

  Economists have long argued that flexibility is especially valuable to working mothers. The rise of remote and hybrid work, once all the COVID dust settles, would seem to provide that flexibility. So is that good news?

• 30:31Speaker 05

  This idea that telework and remote work is going to be the savior for all women, there is a lot of evidence showing that you can increase women's labor force participation with flexible work. But I think the piece here that's missing and what our research shows is that that's not really enough. That's not going to work if you don't also solve the childcare problem.

• 30:56Speaker 09

  I absolutely hate working from home when my kids are there.

• 31:00Stephen J. Dubner?

  That again is Julie Canfor, who produces Freakonomics MD. Her kids are nine and six.

• 31:05Speaker 09

  It is horrible. It's not that I feel guilty not spending time with them, it's that I absolutely cannot focus.

• 31:13Stephen J. Dubner?

  And The Economist Misty Heggenis again.

• 31:16Speaker 05

  Telework and flexible work is a double edged sword. There's lots of benefits that can come from it, but there's also some cautionary tales that we need to be really aware of if we're going to implement it on a more macro level.

• 31:34Stephen J. Dubner?

  This gets us to perhaps the biggest macro question of all. How will remote and hybrid work affect the future of work itself?

• 31:43Stephen J. Dubner?

  Nick Bloom again.

• 31:44Speaker 04

  The tricky thing is, if somebody is working fully remotely, they maybe aren't developing the kind of skills you get from coming in two or three days a week in terms of knowing coworkers, knowing strategy, being mentored. I mean, there's a lot of junior folks that get mentoring from being there and seeing what other people are doing and learning for them. Even basic things, how many hours do people work? Because I'm not in the office anymore. I don't see, I don't know, I'm expected. I mean, most professional jobs don't have a strict number of hours.

• 32:13Stephen J. Dubner?

  What about from, let's say, a societal perspective? If more and more people are working on their own, does that lead to more, you know, what we typically call polarization these days? People are interacting less with people who aren't just like them? And that might have some societal downsides? Or am I reading too much into that?

• 32:35Speaker 04

  No, it's a pretty fascinating and somewhat worrying side effect of at least fully remote. If you look at friends and family, they tend to be much more polarized than work colleagues. So most people can choose their friends. You tend to have mostly the same political views as your family, but you really can't choose your work colleagues. And so when you come into work, you're sitting at luncheon as a Republican and a Democrat, and you have to moderate a bit. If you're now working from home full time, you don't really have that moderating experience. And of course, media, you might think would moderate, but people again can choose their media. So turns out that just about the least polarized information source you get are coworkers. And if you cut that out by being remote, or at least cut out those non-work conversations, because they don't tend to happen over Zoom, that is a big risk.

• 33:19Stephen J. Dubner?

  But the good news, Bloom says, is that work from home technologies will keep improving.

• 33:25Speaker 04

  Technology firms, hardware firms, software firms, all of them are saying, look, this is a major new market. The amount of dollars being spent on R and D to support work from home has exploded. They've been scraping new patents issued by the US Patent and Trademark Office. We've been text mining them for frequency of words like work from home, fully remote. And that has gone up a lot. It's more than doubled since the beginning of the pandemic. So down the pike, there are going to be some incredible things. What they are is hard to be sure. You know, predicting future technology really is a fool's game, but it's going to be stuff like, you know, holograms, the metaverse, virtual reality, augmented reality, much better A V. You know, if you go into offices still, you go into conference rooms, there's often only one camera. For people at home, you can see the side of somebody's ear or something.

• 34:09Speaker 04

  The future is like eight cameras using A I to make sure. Like when you watch a football game, they have seven or eight cameras and they switch around to get the best view. So video cameras using A I to have multiple cameras to get a better view and make sure whenever somebody's speaking, they're looking at the camera. It seems like everything you see on Star Trek and Star Wars eventually comes. We haven't seen Jedis yet, but you know, a lot of the other technologies there.

• 34:31Stephen J. Dubner?

  Wake me up when we get to teleporting.

• 34:33Speaker 04

  I haven't seen any patterns with teleporting. I'm sure they're out there. Imagine 10 years from now, we have six foot real life holograms that you can interact with. That would make remote work much more appealing. I don't think it would end in person interactions, but certainly you'd shift it further towards more remote days.

• 34:52Stephen J. Dubner?

  So knowing what you've learned about working from home and hybrid work policy, which is a lot, I have to say, and I've loved hearing you talk about it today. Is there any advice you would give to a firm who's trying to optimize their hybrid work policy for their employees, for themselves, for their shareholders and so on?

• 35:14Speaker 04

  Two pieces of advice, I think. One would be it's very hard and it's continuing to change. Whatever plan you set, be prepared, you're going to have to rip that up next year. So be realistic. The second thing is I think coordination is key. When you survey employees about why they want to come into the office, it's to work with coworkers. So there is really not much point having, you know, half the team in on some days, half the team on the others. Cause you get this theory, if I come in, it's. Dead, there's low energy, Jim or Sarah ones to work with aren't there. So I would suggest coordinate and the best days to coordinate probably a Tuesday, Wednesday, Thursday. Now, that's in the long run, not maybe a great strategy, but at least for the rest of 22, 23, while things are settling down, that's a safe bet. And in the long run, you can get more creative.

• 35:58Stephen J. Dubner?

  It just sounds like a checkerboard with many, many different colors or a very complicated schedule that I'm trying to create here. Once you take into account both efficiency and personal preferences.

• 36:11Speaker 04

  Yes, I think we're just going to see enormous churn in labor markets. A lot of people are going to move jobs. Let's just think of two example companies, Airbnb and Apple. Airbnb has said they're going to be fully remote. Apple has a more office-based environment. They're roughly saying 50% of the time in the office, 50% at home. So imagine you're a young, like one of my students, you're in your early twenties, you're starting a new job. We know in the survey data, I know from talking to them, these folks really want to spend some time in person because they like the mentoring. They are just much more likely to take a job in Apple than Airbnb. If you flip it around, for someone maybe early to mid 30s, has young kids, just bought a house, they may really like being able to work remote.

• 36:54Speaker 04

  They've, you know, spent 10 years being mentored there, I mean, junior, middle management level, they may much prefer Airbnb.

• 37:01Stephen J. Dubner?

  So but the problem from the firm side is I want to have as broad a talent pool as possible. If I'm Apple, I also want the 30 some year olds with young kids or the 40 and 50 year olds and so on. So what you're describing now, employment becomes an even bigger selection game. And I understand that. But what if I want to keep my possible employee pool as large as possible? What do I do about that?

• 37:27Speaker 04

  You know, there's like two strategies here. You could either try and appeal somewhat to everyone or you can take more of an extreme position, let's say be fully remote or fully in person. I call that as a Brit, the Marmite strategy. So if everyone's heard of Marmite, it's this, you know, spread that goes on toast.

• 37:42Stephen J. Dubner?

  Love it or hate it.

• 37:44Speaker 04

  Exactly. No one is indifferent. 10% of people love it, 90% of people hate it. But look, if you're a product and you get 10% of a country loving it, you're in good news.

• 37:55Stephen J. Dubner?

  Thanks to Nicholas Bloom for all his research insights and to Arpit Gupta and Misty Haggenis for sharing their research. Thanks also to our Freakonomics Radio teammates, Julie Canfor, Ryan Kelley, Jasmine Klinger, and Emma Terrell, and to Jessica Fox from Sirius XM. And thanks to you, as always, for listening. If you liked this episode, please share it with your friends and family. That is the single best way to support the podcasts you love. Coming up next time on Freakonomics Radio.

• 38:25Speaker 13

  I think my obsession sort of crept up on me.

• 38:27Stephen J. Dubner?

  Becoming a fan of someone or something has never been easier.

• 38:32Speaker 10

  One of the cool things about the internet, it's allowed people to find like-minded others.

• 38:37Stephen J. Dubner?

  Including like-minded others in politics.

• 38:41Speaker 14

  There's nobody who is a partisan of the two-party system. Everybody wants one of them and not the other.

• 38:48Stephen J. Dubner?

  The downsides of fandom and the upsides.

• 38:52Speaker 13

  My heart rate just increased, and I have this smile on my face.

• 38:58Stephen J. Dubner?

  That's next time on the show. Until then, take care of yourself, and if you can, someone else, too.

• 39:09Stephen J. Dubner?

  Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Alina Coleman. Our staff also includes Neil Carruth, Gabriel Roth, Greg Rippon, Zach Lepinski, Ryan Kelley, Rebecca Lee Douglas, Julie Canfor, Morgan Levy, Catherine Moncur, Eleanor Osborne, Jeremy Johnston, Jasmine Klinger, Daria Kleiner, Emma Terrell, and Lyric Bowditch. Our theme song is "Mr. Fortune" by The Hitchhikers. The rest of our music was composed by Luis Guerra. We can be reached at [email protected], and you can get our entire archive on any podcast app.

• 39:46Speaker 04

  Amusingly enough, I think if you look up in the Urban Dictionary, work from home has another interpretation.

• 39:57Speaker 07

  The Freakonomics Radio Network. The hidden side of everything.

• 40:04Speaker 13

  Stitcher.