Even in the 19th century, workers were beginning to resent the grind of office life.
“You don’t know how wearisome it is to breathe the air of four pent walls without relief, day after day,” British essayist Charles Lamb wrote in a letter to poet William Wordsworth back in 1822, railing against his toil in the East India Company’s office in Leadenhall Street, London.
For the last 17 months, however, Lamb’s modern successors have mostly worked from home, liberated from what he termed “official confinement.” Today’s white-collar staff are living through a radical transformation of professional life, one economists say is already beginning to jump-start economic productivity and accelerate innovation.
The pandemic has weakened the gravitational pull of city centers, with new forces now reshaping knowledge-based economies. Public transport journeys into cities are down, as are coffee shop sales, while demand for real estate in leafy suburbs is up. Americans spent more time on leisure and household activities in 2020, replacing commuter life with real life.
While a more permanent transformation of working life will have painful consequences for many inner-city businesses, economists see a recalibration underway that can revitalize smaller towns and suburbs. New digital tools mean that retail and hospitality—as well as knowledge-intensive industries—are already undergoing far-reaching change.
Working from home around one day a week will boost productivity by 4.8% as the post-Covid economy takes shape, according to a recent study of more than 30,000 U.S. employees co-authored by José María Barrero of Instituto Tecnológico Autónomo de México and others. Much of that one-off increase is projected to come from reduced commuting time, a factor not usually captured by economists.
The transformation will deliver enduring benefits, according to Steven J. Davis of the University of Chicago, who studies the evolving workplace and was one of the authors of the productivity study. The “positive consequences will be there indefinitely,” Davis said.
In remarks on Aug. 17, Federal Reserve Chair Jerome Powell alluded to a fundamental shift: “I think we know that we’re not simply going back to the economy we had before the pandemic, but it will take time to see exactly what the changes will be.”
“It seems a near-certainty that there will be substantially more remote work going forward. So that’s going to change the nature of work, and the way work gets done,” Powell said.
The clues were there before Covid-19 struck. In 2013, a landmark study by Stanford University’s Nicholas Bloom found that working from home boosted productivity by 13%. A University of Oxford research paper in 2019 revealed that happy staff closed more sales.
Countries with stagnant productivity records will be paying close attention. In 2019, Britain lagged 15% below its pre-crisis trend for total factor productivity, according to Bloomberg Economics. It’s a slump without parallel since Charles Lamb’s time, exacerbated by Brexit, an aging population and the pandemic. European peers have struggled, while the U.S. has found it hard to break away from the pack.