Working from Home - the Productivity Question

By Stephen Bevan, Head of HR research development, Institute for Employment Studies

There have been various newspaper reports that the government is concerned that working from home during the Covid-19 pandemic has reduced productivity.  So the news that England is entering another period of lockdown will not help to calm those fears. At its annual conference the Confederation of British Industry (CBI) warned that UK firms faced a bleak midwinter.

Photo by Mike Kononov on Unsplash

Since the initial ‘lockdown’ began in March 2020, UK businesses have been thrust into a live experiment for which there is no precedent and no choice but to comply. By June, 49% of the UK working population were working from home compared with only 12% before the pandemic. It’s worth remining ourselves that the last decade has not been good for UK labour productivity; the gap with other European and developed economies remains worryingly wide. It is understandable therefore that the government wants to avoid UK productivity falling further behind. Productivity has always been a conundrum for economists. Is the UK such a laggard because of low investment in skills or poor adoption of new technology or is it the fault of a high prevalence of poor health in our workforce? Some have argued that the poor quality of UK management explains much of our productivity deficit. So, while the pandemic and the working from home experiment may not cause a productivity problem, the fear in Number 10 is that it might compound the one we have.

But what evidence do we have so far about the impact of working from home on labour productivity? The first thing to say is that only a small proportion of businesses measure productivity in a standardised or regular way. If productivity is taken to mean a measure, per worker, of their output per hour worked then it is easy to see why a car plant or baked bean factory will have good data but a law firm or a social services team might not. It is also argued that crude measures of productivity might capture the data but miss the point. If we increased primary school class sizes from 30 to 60 then we’d be doubling teacher productivity, right? Of course not, because, as in many other contexts, quality is at least as important as raw numbers.

What we know from the ‘lockdown’ is that there has been a dramatic reduction in commuting times for many workers and what was travel time has been redirected towards working time. We also know that many people have consistently been working longer than their contracted hours. In an IES survey of people working at home since March, 15% said they were working at least 10 hours longer than their contracted hours and 48% said that they did not have enough time to complete their work each week. As most people working from home are in higher skill, higher paying professional and administrative jobs, these extra hours are not likely to be recorded and are not attracting overtime pay, so many employers are benefiting.

The evidence from studies of working from home is growing, but it’s a mixed picture. A UK study by Alan Felstead & Darja Reushke found that, using self-report data, any productivity losses were cancelled out by an equal number of workers (about 30% on each side) who felt that their productivity had increased since lockdown. Data from Microsoft in the US suggests that employers are happy that productivity levels are stable or even marginally better than pre-Covid-19. Data from the UK Household Longitudinal Survey found no significant decline in productivity except among employees whose work was not suited to homeworking, among low earners, the self-employed and some women with children. The study found that productivity was better among employees in higher skill, higher earning jobs where employees received good support.

Photo by Jordan Whitfield on Unsplash

A study in Japan found that there was a 60-70% reduction in productivity overall and that this deficit was concentrated among those who have had to work at home since the start of the pandemic. Finally, a recent paper from Harvard Business School suggests that employers are experiencing less of a decline in productivity from higher skilled and better paid workers in professional roles.

One piece that is missing is any long-term evidence of the impact of working from home on productivity. In such a dynamic situation, it may be prudent not to decide too quickly if a policy intervention is needed. We know, for example, that working from home and home schooling did not work very effectively for working parents, but with schools now open, we might expect to see productivity improve. In addition, we have also seen the initial ‘spike’ in musculoskeletal pain among homeworkers settle down, and the early teething problems with broadband and Zoom connections seem to have been resolved for many. However, it is worth keeping an eye on Germany where the Labour Minister Hubertis Heil is proposing a Mobile Work Act which would extend the rights of workers to work remotely for up to 24 days a year.

As our ‘Work After Lockdown’ project progresses, we have a unique opportunity to study through a mixed-methods research design the drivers of productivity and wellbeing among workers in local government and in the legal profession  who have been working at home during and after the lockdown. We hope our findings will help give a richer picture of productivity in the UK.