Ask an Economist: The shifting expectations for work from home

Before the COVID-19 pandemic, only about 15 percent of workers performed any full workdays from home over the course of a year. During the early stages of the pandemic, that percentage surged to nearly 40 percent as employers shifted toward remote work. As COVID-19 moves to an endemic state, workers are returning to offices, but many employees prefer to continue working from home at least some of the time. In a tight labor market, employers might feel pressure to provide greater worker flexibility while wrestling with concerns about productivity and employee engagement.

The resulting gap in expectations—between employees’ preferences and employers’ plans—is among the topics explored in a February 2023 Economic Review article by Vice President and Economist Jason P. Brown and Assistant Economist Colton Tousey.

How did you approach this study?

Knowing who currently works from home a larger share of time and where this gap is narrowest across worker characteristics and locations helps explain where and for whom work from home is most likely to remain a permanent feature in the labor market. We used a relatively new data source, the Survey of Working Arrangements and Attitudes (SWAA), to help discern who works from home more frequently and investigate how expectations for work from home have changed for workers and employers.

What did the research reveal?

We found that the share of paid working days from home is higher for workers with higher income, those who live in more densely populated areas, and those with faster internet connections.

One explanation for the positive relationship between population density and work from home might be that more dense areas also tend to have a higher share of telework-capable jobs, as shown in a 2020 study published by the National Bureau of Economic Research.

Our study showed that following the pandemic, workers reported a desire to work from home a larger fraction of time compared with their expectation—or understanding—of their employers’ plans for permitting work from home. Overall, our results were consistent with previous findings on the determinants of work from home:

• An increase in worker annual income is associated with increases in employee preference for share of days worked from home and an increase in their expectations of their employer’s plans for days worked from home.
• Older workers prefer to work fewer hours from home, in line with their employer’s expectations. One reason for this preference might be that older workers have more experience and might be in managerial roles requiring more in-office work on the margin.
• Men prefer to work fewer hours from home compared with women, though employees do not believe their employers’ plans differ for men and women. The difference in preference between men and women could be result from differences in time spent caring for children, as the presence of young children is associated with a higher share of worker preference for work from home.

Looking ahead, how do you think expectations will change?

Our study shows that, on average, workers in December 2022 worked from home around 27 percent of time—nearly double the pre-pandemic estimate. Although it is too early to determine whether these trends have fully stabilized, workers will likely continue to work a larger percentage of days from home than they did before the pandemic.

The gap between workers’ preferences for work from home and their expectations of their employers’ plans has declined over the last two years. The gap appears to be closing because of upward movement in employers’ plans. Our estimates suggest that if the trends in work from home continue, this gap might nearly close in the next three years.

Despite this shift in preferences toward work from home, our findings suggest that higher-income workers in more densely populated areas are most likely to be affected by this shift in preferences. Further, we suggest that work from home is more likely to be sustained in larger urban areas, potentially providing more economic flexibility and resiliency to these areas relative to smaller urban and rural areas.