Fed study says telework has little impact on productivity, good or bad

Whether remote work has been good or bad for productivity is an ongoing debate. Some say it’s highly beneficial while others think it is highly harmful. A recent study from the San Francisco Federal Reserve, however, says it makes little difference one way or the other.

The San Francisco Fed noted that much of the previous research on this question used very specific occupations with quantifiable outputs, such as call center workers. The researchers noted that this is a very narrow scope of empirical evidence, which leads them to explore this matter further.

Instead, researchers chose to measure industry productivity by output, using value added per hour. The data focused on 43 industries that span the private economy, including chemical manufacturing, retail trade, and accommodation and food services. It excluded the real estate rental and leasing industry because a large fraction of output in this industry is imputed rather than directly measured. To do this, the San Francisco Fed combed national accounts measures of output by industry from the Bureau of Economic Analysis and all-employee aggregate weekly hours from the Bureau of Labor Statistics. For each industry, it calculated the average annualized growth in quarterly productivity to measure changes in industry productivity over the pandemic.

While productivity growth varied significantly across industries, the Fed said it appears unlikely that the differences in performance during the pandemic across industries have much to do with differences in teleworking. Even after accounting for some industries being more “teleworkable” than others, they found no link between remote work and excess productivity gains or losses.

“There is essentially no relationship between teleworkability and pandemic productivity growth,” the study concluded. “We found similar results using only data during 2020 when firms were first adjusting to new work arrangements. The results are also similar for 2021-23, when firms had more experience with remote work and were also shifting to reopening office workspaces and, increasingly, to hybrid work.”

The researchers noted that the findings do not rule out that this might change in the future as remote work becomes more common. The economic environment has changed in many ways since the pandemic, which could have masked the longer-run effects of teleworking.

“Working remotely could foster innovation through a reduction in communication costs and improved talent allocation across geographic areas,” said the study. “However, working off-site could also hamper innovation by reducing in-person office interactions that foster idea generation and diffusion. The future of work is likely to be a hybrid format that balances the benefits and limitations of remote work.”