Forecasting the Future of Remote Work
(1:18 Start Listening Here)
Troy Mix: Thanks for joining me, Adam.
Adam Ozimek: Yeah, glad to be here.
Troy Mix: So I wanted to dive right in. Talk about remote work, and get your sense, I guess, to kind of level-set. How prevalent pre-pandemic was remote work and how dramatic has the shift been over the last year?
Adam Ozimek: The pre-pandemic prevalence question is a little more complicated than it seems. It's not exactly straightforward because there's a lot of different ways to define what remote work is. So if you ask very strictly, percent of wage and salary workers who were working from home full-time, it's...probably like 3 percent, something like that. When you start to look at well, “what about self-employed?" that expands it some more. If you look at what about people who don't work remotely, but they work in a coworking space or they work in a private office, the line between what's remote and what's not remote starts to get kind of fuzzy.
Say you're a graphic designer and you do all your work for other clients. You're a freelancer and you work in an office on the third floor of your house. That's clearly remote work, but say you interact with clients in the exact same way, entirely remotely, but you have a little office downtown. Is that remote work? From the perspective of how you interact with a client, it's entirely the same, but from the perspective of where you're located...like how you would describe the geography of your business, it becomes gray.
I think probably somewhere between 5-10 percent is how many were working remotely pre-pandemic… Currently, we're looking at like 40 percent or more who are still remotely. I think long-term, what we're going to see when the economy comes back to normal is somewhere between 20 to 25 percent. So a significant increase. It's going to go from something that, 1 out of 20 to 1 out of 10 people to something that 1 out of 4 to 1 out of 5 people are doing. That's a really big change. It's going to be a very prevalent way of working.
Troy Mix: These are people...they're wage and salary employees, typically, when we're talking about this shift, right? Because as you said, there's a lot of people that were in the gray area before, but now we're talking about JP Morgan Chase, for example, sending people home and having real questions about whether they are going to bring them back or, in what form. Is that right?
Adam Ozimek: We're going to see both, I think. So the stories we hear and the biggest change, I think when you look at pre and post is going to be for wage and salary workers, because that's going to go from something that's relatively scarce to much more abundant. Whereas independent professionals, freelancers, self-employed that kind of person, they were always disproportionately remote. But even there, I think we're going to see, among them, an increase in the percent remote. And also, I think an increase in the percent who are professionals as well because being remote and being independent, they go together well. We've certainly seen on the Upwork platform, a huge demand over the last year, both on the client side and on the freelancer side. So I think both sides of the marketplace are having an increased interest in this way of working.
Troy Mix: The interest is one thing. It's kind of, necessity at the moment in terms of public health emergency for a lot of people. In terms of forecasting that 20 to 25 percent number of remote workers in the future, what seems to be working well at the moment that gives you confidence that employers will want that, and employees will want it as well?
Adam Ozimek: Yeah, so certainly can't just rely on employee only preferences, right? Because cost to the firm matters as well and organizational style, or whatever you want to call it, to the firm matters as well. What I'm basing that at 20 to 25 percent number on is a survey of hiring managers about their plans. If anything, I believe that is conservative because this is what hiring managers are planning to do over the next year and the next five years in terms of their hiring. That's relatively more concrete than just saying workers value this, or don't value it. It's their forward-looking projections, the people who are actually going to be making the decisions at the firms.
Now what's working better about this? What we found in our survey of hiring managers is a couple of things. There's fewer interruptions, there's less distractions—so like fewer, unnecessary meetings, stuff like that. The lower commute time is obviously a big deal. And, there's sort of a trade-off in some circumstances, you lose on collaborativeness, but you get a better ability for like, heads-down work. And you also get different kinds of collaboration, too. I've already heard some professors saying like, “I'm going to miss teaching by zoom. There are things I can do in ways I can work. It works better than in-person." And so I think that there are collaborative advantages, too. Overall, we see productivity going up, where then it goes down according to hiring managers, and that's consistent with all the experimental evidence that you've seen as well. You look at, productivity up and also, costs down because it increases your labor market footprint.
And this is one of the reasons why I'm optimistic that these estimates are actually conservative because generally companies aren't doing that much hiring remote right now. I mean, they are somewhat and they always haven't been somewhat, but I think there are huge advantages to hiring remote that firms are going to discover, especially fully remote. Which is that if you allow your workers to work remotely four days a week, or like, they only have to come to the office a couple of times a month, you expand your effective labor market footprint because now the two hour commute or hour and a half commute is much less of a problem than it was pre-pandemic because you only have to do it a couple of times a month.
If you hire remotely entirely, now your effective labor market is your entire time zone or the entire United States or the entire world. That's a huge advantage to remote work that I don't think is being fully baked into the projections yet. I think that will make it lean towards higher than that. The other thing of course is if you make something, you have a product market niche and you find that remote work doesn't work for you and your employees—and maybe it's just you as the manager CEO—that's not the end of the discussion about whether your part of the economy will be reallocated to remote work or not because you're going to have to vie with competitors for whom remote work does work. And, you're going to have to compete against startups who are remote first. Just because one firm can't make it work doesn't mean that all their production and their corner of the economy may just become reallocated away to a company who can make it work.
Troy Mix: And the “making it work" isn't just a convenience, it's a cost product that they're going to get out-competed eventually or potentially, right?
Adam Ozimek: Exactly, yeah.
Troy Mix: That commute and non-commute distance piece is really interesting. It's something that I know when I first started teasing this around in my head, I thought, “oh, well, now we can attract anybody to locate anywhere and work wherever they want." Then I think about my job. I'm like, well, currently I'm still, somewhat tied to this area and that's for the foreseeable future. I'm not going to commute from upstate New York to Delaware anytime soon. Do we have any kind of sense at this point about how many of those truly fully remote jobs there'll be versus how many of those you need to come in occasionally? Or do you think it's way too early to speculate?
Adam Ozimek: Well, the 20 to 25 percent number I said is the fully remote. We actually asked in addition to that partially remote, which was another, like I think 10 to 12 percent or so. That to me, I think firms are going to be experimenting with and we'll see. I do think that a lot of firms think that they are going partially remote, but that's because they aren't yet experiencing the benefits of fully remote. When you think about, “how do I maximize benefits and minimize risks with my current employees?", it might make sense to do the hybrid model because that seems conservative, but eventually the conservative attitude will give away to economic realities that the economic realities are different than that, which I think in a lot of circumstances they will be.
Now remember we are talking 20 and 25 percent of the labor market. I don't want to appear to be some...futurist, everyone's going to be at home kind-of-thing. That still leaves 80, 75 percent of work done in-person. Maybe when you include like, partial remote, we're talking like 60, 65 percent, something like that. So it's not the end of working face-to-face. It's important to draw a benchmark here, like 20 percent will be a huge deal. That would be a huge deal. It does not require that everyone work from home. It does not require that work from home works for all companies.
Troy Mix: Yeah. Starting to tease out that “who it's going to work for" in terms of jobs and industries, the first episode in the series, we talked to a president of a logistics company, and a lot of their work is computer and call work. It seems like for the foreseeable future, those will be almost completely remote. Then they've got some kind of high collaboration jobs that they're getting better at using tools like Microsoft Teams, but they foresee they'll be in-person at least part of the time. So that's one type of industry. I look at the job I'm in at higher ed. We're teaching a lot online. We do need to have student contact at some point. That's part of the experience for example, so it's unclear what that line will be. What do you see, beyond kinda the white collar-blue collar divide...in terms of the types of jobs where this is going to make a lot of sense?
Adam Ozimek: Two ways to look at that. One is the skill-biased nature of the work that we see so far. It does seem to be true...Dingel and Neiman have a study where they look at like, what are the jobs that seem like they could be done remote, and based on like the actual characteristics of the work they do. There you have a skill bias to it where more educated, more skilled work seems more capable of being done remote. That's also true pre-pandemic as well in terms of who actually was doing it. Certainly since the pandemic, that bias is still there as well, where the most remote group is those with advanced degrees or higher, they're the ones who are doing the most work from home. I think that, big picture, it's definitely going to be the more skilled things which tend to be able to be done from home. Now it happens across the spectrum...of skills and there are examples of basically every skill level of jobs, it can be done remote. But it is a skill-biased technology. The other thing I think that's important to think about is that if we're talking about largely professional, skilled services, those jobs exist in almost every industry. In a lot of ways, it's more occupational-determinant than industry-determinant. For example, in the BLS data, the monthly current population survey, they ask a question now about whether someone is working remotely and what you can see in that data is even in the manufacturing industry, 20 percent of workers are remote right now. That tells you they have skilled professional services in those fields. You're going to see it in occupations, even in blue collar or traditional industries, because those firms, they use marketing, they use legal accounting, design, creative, programmers. Those are jobs that exist in most industries. I would look towards the occupation level for a greater indicator of what will be done remotely than the industry, I believe.
Implications for Cities and Regions
(13:44 Start Listening Here)​
Troy Mix: Again, thinking about that commute distance piece, the fully remote piece, there's been a lot written about people buying homes in different places or camping out during the pandemic in different places. What impacts have we seen so far, in terms of migration? What do you think long-term in terms of where people choose to live? What do you think the impacts might be?
Adam Ozimek: First, let's talk about within metro areas, the changes that we're seeing, Arpit Gupta has a really great study he just put out on this where he looks at zip code level housing market data. What he's seen is basically a flattening of the price gradient within the city. It used to be the closer that you got to the downtown core, the higher housing prices went, when you're looking at either rents or prices. And the farther out you got the lower prices got. So, a basic urban model, you pay more to be close to the core. What he found is, post-pandemic, that slope has declined. You're still paying more to be close to the core, but less, because prices have fallen more in the core than they have in the surrounding suburbs. And, I think what you're seeing there is a declining dis-utility of commute, because you don't have to do it as much as you used to. Being close to the core is less valuable and being out in the suburbs, it doesn't take as big of a hit. I think that's one way to look at it.
The other thing of course is that the edge of a metro area has just increased. What is a reasonable commute has gone up, and so the effective labor market area will have gone up. You're going to see places that didn't used to be considered suburbs of various metro areas become suburbs of various metro areas. Those are the kinds of within metro changes.
The between metro changes, I think what we're seeing most is that places where you had a huge price effect of the labor market—what I mean by that is it was an agglomeration labor market and that drove prices up. People were willing to pay a lot of money to access the labor market there. In most cases also they had inelastic housing supply. You have this expensive city because of access to jobs. That's a place that's going to take a price hit. That's a place that is now taking price hit. You can see it biggest in New York, San Francisco, Washington, DC, Seattle, what we think of as the superstar metro areas. They're taking the biggest price hits because a lot of what supported the high prices there was that people were willing to pay to access those good jobs and they no longer need to do that as much. Those are...the big kind of trends that I think you are seeing, and that we'll see more of.
Beyond that, there's a ton of nuance and uncertainty about places that are going to benefit from this and be harmed by it. The example I like to give is Philadelphia, which I think will benefit by being a greater option relative to New York. You can live in Philly and commute to New York a couple of times a month, really conveniently on Amtrak. I think you'll see some people deciding “I'm going to pay these much lower house prices in Philadelphia and get to my office a couple of times a month on a decent Amtrak ride." That benefits Philadelphia. On the other hand, it's now much easier to live in the lower cost parts of Pennsylvania and come into Philadelphia via Amtrak a couple of times a month. Philly has the competitive gain and the competitive loss as a result of this. It's hard to say exactly where it'll shake out. I think you're going to see a lot of examples of places like that across the country.
Troy Mix: When we think about the...potential role for public policy, what kind of public benefits do you think there are for remote work potentially?
Adam Ozimek: I think of it as leaning against a negative trend over the last few decades. That negative trend was the growth of opportunity in superstar cities. Like, you really had job creation, skilled job demand really became increasingly concentrated in superstar cities. In those cities you have inelastic housing supply. What happened was you had agglomeration pulling more of economic activity into places where you had economic rents. You get this productivity growth from putting all these people in these cities, and then that productivity growth just gets taxed away by land rent owners. If you think about...increasing economic activity being concentrated in these places, it has the negative effect on the labor share value in the sense that a bigger piece of the pie is going to be going to land rent owners, which is just bad for efficiency.
The other effect...is on the places that are left behind. What we've seen over the last few decades is an increasing skill bias of migration, which means in layman's terms that a lot of parts of the country are losing their most skilled people. They're not just seeing their population fall, they're seeing their prime working age population fall, and they're seeing their college educated population fall even faster. And that has a lot of negative spillovers for these places. We are talking about like, if you look at measured by space, you're talking about most of the country. Measured by population it's not most of the country, but it is a huge share of the country that is seeing this sort of demographic decline. This will help us lean against this. It makes it easier to work and stay in those places. The magnet superstar city agglomeration that was pulling skilled people out of these places is going to be weakened. I'm very optimistic about the effects of letting more skilled people stay where they want and not feel like they have to leave in order to get access to the best jobs.
Troy Mix: To kind of add on and interpret that, I mean, you don't have to worry about attracting five big employers to keep your best people in town necessarily. There's less of that magnet. There's always going to be some of it, but there's less of it, potentially in this situation.
Adam Ozimek: Yeah, exactly. You no longer necessarily have to leave to find the best job opportunities. If you do leave, this lets you come back once you get them. I think we'll see a lot of like, in your twenties you still go to the big city, you move up the ladder and you get to like experience level at whatever company. Then you go remote and you come back. That's going to become, I think, a more common pattern.
Adjusting to Remote Work
(20:23 Start Listening Here)​
Troy Mix: You've been working remotely for a while. Is that right?
Adam Ozimek: Yeah. I was more and more remote. Before Upwork, I was at Moody's, and I was an hour or so away from where I live. I had a long commute and so gradually I was becoming more and more remote. By the time I was done there, I was only going into the office once, maybe twice a week. I was one of those partially remote people. Since I've been in Upwork, I've been fully remote because I'm still here in Pennsylvania and they're out there in California.
Troy Mix: How was the adjustment period, when you first started going to remote?
Adam Ozimek: Well, it was gradual because I was easing into it at Moody's. Even before that, at the job I did before that, a consulting company, I would work from home—well I would try to work from home—like once a week because that was in Philadelphia, which is even a longer commute. Jobs for economists being like an hour or more away from Lancaster, I've always liked to work remote when I could to avoid those commutes. Just the longer I was at Moody's I got more ability to do that. And I just enjoy this way of working. I like to be home, I don't like to commute.
And it's funny when you are commuting—and I think a lot of people learned this this year—you get used to it.
If you ask people, “oh geez, an hour commute, how is that?"
“Eh, I'm used to it, like I listen to my podcast. I don't mind it that much."
You tell yourself that, but then once you don't have it, you're like, “man, I can't believe I was used to that."
I think a lot of people are going to find that's hard to go back to, because there's something in humans that adapts and you tell yourself that it's fine. There's this story, I think Robin Hanson and other economists tell a story...this thought experiment that if every morning you were woken up by a man coming into your room and punching you in the face, like it was out of your control and that was your alarm clock. Eventually you start telling yourself, I don't mind it that much. It's kind of a fast wake up. Like, if you did it long enough, you'd start telling yourself like, “actually this is how I like to wake up."
There's just something about human nature where we start to justify the things we need to be doing as being not as bad as they actually really are. I think commuting is kinda like that. It's kinda like the guy who punches you in the face every morning to get up. You tell yourself it's not that bad, but then the day that guy doesn't show up, you're like, man, actually that kind of sucks. I'm glad I don't have to do that anymore.
Troy Mix: Yeah. I think it's a pretty good story there. I think, we're all kind of in store for a bit of a punch in the face as we get back into what was normal for us, and it's going to be a little different going back. I appreciate you spending time today, talking through about what you envision, what's working for companies and what's working for individuals, and what we have to figure out. Thanks a lot for joining me today.
Adam Ozimek: Thanks for having me. ​
