520. The Unintended Consequences of Working from Home

SPEAKER_03: Free economics radio is sponsored by Capital One Bank. With no fees or minimums, banking with Capital One is the easiest decision in the history of decisions. Even easier than deciding to listen to another episode of your favorite podcast. And with no overdraft fees, is it even a decision? That's banking reimagined. What's in your wallet? Terms apply. See capitalone.com slash bank, Capital One NA, member FDIC. See? SPEAKER_16: Yeah! Carl's Junior's new Big Char Chili Burger is big on charbro flavor. Big on spice, with melted pepper jack cheese and spicy Santa Fe sauce. This a! Big on smokey sweet heat with a whole fire roasted charred Anaheim chili. And big on savings with the big char chili combo. Get the big cold smokey flavor of the new Carl's Junior Big Char Chili Burger with small fries and drink. For just $7.99. Yeah! tax not included for a limited time, price and participation may vary. SPEAKER_03: ["The Way You Look at Me"] You may have been hearing this debate about where you should be working. SPEAKER_13: It's not in your best interest to work at home. If you're just sitting in your pajamas in your bedroom, is that the work life you want to live? SPEAKER_09: I love the freedom of not having a commute in the mornings, of being able to set my own hours. SPEAKER_08: It does not work for younger people. It doesn't work for those who want to hustle. SPEAKER_13: Don't you want to feel part of something? SPEAKER_09: I love that I can work from anywhere. I can go work in Buddy, Florence, if I want to. SPEAKER_03: You too may have strong feelings about the work from home debate. This man certainly does. Yes, I mean, work from home is a real Wild West. A real Wild West meaning there may be rules and protocols, but they're not widely understood or followed, and they seem to change all the time. This has led to a lot of shouting and speculation. SPEAKER_12: I get frustrated when you read in the media, throwing against work from home, and they're comparing extreme positions. SPEAKER_03: That is Nicholas Bloom, an economist at Stanford. He gave us some numbers on where Americans are doing their jobs these days. About 55% are working fully in person. Think about jobs in manufacturing, retail, transportation, service and hospitality, many medical workers and some office workers. About 15% of US workers are fully remote. In a normal week, they never go to a workplace. And about 30% of us are doing what has come to be called hybrid work. We're in person some days and working at home or remotely the others. And if you want to understand how things have changed since the pandemic, hybrid work is where you should be looking. SPEAKER_12: Yes, this is the biggest change to hit labor markets in many decades. SPEAKER_03: Today on Freakonomics Radio, how is the new flexible hybrid model working out? SPEAKER_06: Flexible work is a double-edged sword. SPEAKER_15: One thing that we're concerned about is this possibility of an urban doom loop. SPEAKER_03: An urban doom loop? SPEAKER_06: I just figured I can't be the only one having these struggles. SPEAKER_03: The winners and losers of working from home and the many unintended consequences. SPEAKER_12: It was a huge surprise certainly to me, but I initially didn't believe the data. SPEAKER_03: We'll hear about all that and much more. And if you are working from home, SPEAKER_08: hey, nobody's listening. SPEAKER_03: Come on, whomp it with me. SPEAKER_07: Whomp, whomp, whomp. Whomp, whomp, whomp, whomp. Whomp, whomp, whomp. Whomp, whomp, whomp. Whomp, whomp, whomp. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. Whomp, whomp, whomp. SPEAKER_15: Whomp, whomp, whomp. Whomp, whomp, whomp. Whomp, whomp, whomp. We definitely need to do another take. Yeah. SPEAKER_03: You can't have a serious conversation about working from home without speaking with Nick Bloom. He has been studying remote work for over 20 years and he recently co-founded a work from home research group. SPEAKER_12: Yes, and we've been using it to collect tens of thousands of survey responses from Americans since the pandemic began on what they're doing, what they think of working from home, how they like it, how they don't like it, and interestingly, what their employees have told them about the future. SPEAKER_03: Bloom discussed his earlier research in a 2018 episode of ours called "'Yes, the Open Office is Terrible, "'But It Doesn't Have to Be.'" SPEAKER_12: Freakonomics was far ahead of the curve. Pre-pandemic, he had that fantastic piece on working from home. In that fantastic episode, his words, not ours, SPEAKER_03: Bloom described a study of his that analyzed remote work at a Chinese travel agency. SPEAKER_12: So the firm is called Trip.com. They're one of the world's big three travel agents. They were founded in Shanghai. My connection to them is the founder, or co-founder at least, was a guy called James Liang, who's currently the chairman, and was back then the original CEO. He was my student. You know, I was very Stanford, about a third of the way through the class. Someone pointed out there's this person sitting at the back of the class that founded this massive tech company. SPEAKER_03: So Bloom collaborated with Liang and two other economists to study more than 100 Trip.com call center employees who were working from home four days a week. What'd they learn? SPEAKER_12: We found working from home raises productivity by 13%, which is massive. That's almost like an extra day a week, so massively more productive, way more than anyone predicted. And they seemed a lot happier. Their attrition rates are how frequently they quit. Part of this was they didn't have the commute and all the uncertainty. But the other big drivers, it was just so much quieter at home. SPEAKER_03: So that was some interesting evidence, pre-pandemic, of course. And then in the summer of 2021. SPEAKER_12: In the summer of 2021, I actually had dinner with James when I was back in London visiting family. And he said, we're doing another big experiment. Would you like to be involved? SPEAKER_03: This time, Trip.com took 1,600 employees and randomized them into two groups. People with even numbered birthdays would continue to come into the office every day while people with odd numbered birthdays worked at home on Wednesdays and Fridays. SPEAKER_12: When you run experiments, it's so easy for them to go wrong. It's like the Anna Karenina thing that there's only one way to go right and there's 100 ways to go wrong. And so the aim was to keep it as simple as possible. But wait a minute. SPEAKER_03: Trip.com had already run one experiment, which found that remote work was successful. Why'd they need another? SPEAKER_12: A couple of things are very different about the old and the new experiment. The old experiment was on people that work in a call center. That is not a team job, and it's not really a creative job. And the other thing is it tested close to fully remote. These were folks that were working from home four days a week. This new experiment had employees working at home SPEAKER_03: just two days a week and included people in the company's engineering, marketing, and finance divisions. So there's 1,600 employees in the experiment, all grads. SPEAKER_12: A third of them had a post-grad degree. They're high-end professional jobs that have a lot of creativity, a lot of mentoring, the types of things people worry about. SPEAKER_03: Worry about, meaning you'd worry that the mentoring and creativity might suffer if people weren't in the office together. I was kind of testing what's currently happening in America. SPEAKER_12: We have thousands, millions of firms, organizations, research labs, hospitals, local city councils that are allowing folks to work from home typically two, three days a week. And the big question is, is that good for productivity? Is it good for them? Is it good for the business? SPEAKER_03: In other words, Blum wanted to test the hybrid work model, a couple of days at home, a couple of days in the office. I asked whether these findings from one Chinese firm could be generalized to US firms. SPEAKER_12: I think it's pretty generalizable. So just to explain, these people are writing code, they're coming out of advertising campaigns, doing accounts. A lot of them have actually been educated in the US and then returned back to China. The China location thing is interesting. If anything, it biases against work from home because it's pretty rare to have work from home in China. Apartments are small. It's not a normal thing to do. And so there is much more concern amongst employees that somehow be looked down upon or left out. My sense is if it works there in a setup that's not well-structured for working from home, it's likely to work even better in Europe and the US. SPEAKER_03: Okay, so what did Blum find in this new experiment? There were four key results. SPEAKER_12: The first is the most important result for the firm is employees were dramatically happier being allowed to work from home two days a week. You can see this in surveys and maybe more convincing you see it in quit rates, they fell by a third. They liked the ability to work from home on Wednesday and Friday, particularly Friday. A lot of feedback was, look, it enables us to go back sometimes to visit parents and relatives in our home village maybe get out of the city for a bit. And that is really valuable for someone. You can see your parents in a way you probably couldn't. If you're leaving at 7 p.m. out of Shanghai, the roads are gridlocked, the trains are full. If you're leaving at 2 p.m. you can get away and get back Sunday night. SPEAKER_03: Score one for work from home. Finding number two. SPEAKER_12: The second finding was that it also changed the structure of hours. If you're working from home, it's much easier to go to the dentist, maybe go pick up your kids from school, maybe go out for a jog. If you play tennis, the tennis courts are free or golf. So what we saw is folks that were working from home worked on average a couple of hours less a week on their home days, but made up for it on other days on the weekends. Okay, and here is the third finding SPEAKER_03: from Bloom's study of employees working from home. SPEAKER_12: They end up sending many more messages to coworkers. Now, the fact that they're messaging people more on their work from home days is hardly surprising. They're not in the office. What was striking is even on Monday, Tuesday, and Thursday, days in the office, they're significantly more likely to message people. When you interviewed them, they say, basically got used to just a different way of communicating. It's more written, less walking over to somebody's desk and tapping them, and they just carry that into the office. It's hard to know if that's good or bad. People have different views on that. There's certain levels of discrimination issues that come with always doing stuff face to face, and some people find it's a bit of a leveler if you're quiet or shy. All right, and what was the fourth key fact? SPEAKER_12: Fact four was productivity went up a bit. It wasn't enormous. It was less in some ways than we expected. There were four different measures of performance and productivity. Promotions, performance grades, a self-assessed measure, and then finally, how many lines of code they wrote. Promotions and performance grades were about flat, but self-assessed and lines of code were up, and in particular, lines of code, if you think of that as maybe the hardest measure, that went up by 8%, which is pretty large increase. SPEAKER_03: So in the midst of the noisy and sometimes contentious work from home debate, Nick Bloom has provided some actual evidence. It turns out that the flex or hybrid model, a couple days at home, a few in the workplace, seems to boost employee happiness and productivity. SPEAKER_12: Yes, oddly enough, individual employees, right from the get-go said, we love working from home. SPEAKER_03: Bloom knows this from the surveys he's been running as part of his new work from home research group. SPEAKER_12: What individuals wants being kind of flat at two and a half days, right back since the beginning of the pandemic. If you look at what firms are offering, it started off at about one day, beginning of pandemic, this huge gap, a massive gap, and now they're up to about two and a half days. That gap is almost completely closed. And in some ways, look, it's not surprising. This is the biggest change to hit labor markets in many decades. The fact has taken managers and firms two years to come to this conclusion. You know, you could say it's slow. I don't think so. This is such an enormous change. In some ways, it feels very rapid. Just to put numbers on it, working from home was doubling roughly every 15 years before pandemic. And it's now gone up threefold in the space of two years. That's almost 50 years of change, compressed into two years. So I'm not that surprised it's taken a number of managers 10, 15 months to get comfortable with it. What we've seen is that more and more firms have said, look, work from home is here to stay. It's going to be a permanent thing. We are now in the post-pandemic world in terms of the future of work. Work from home is here to stay, and it's roughly half time for professionals and managers. The problem is for the other half of the population, folks that work in frontline jobs, they also want to work from home about two and a half days a week, and they're getting more like half a day a week. SPEAKER_12: I feel like by late fall 2022, we are in the new normal. Anyone out there that's thinking, suddenly everyone's going to come back, cities are going to totally revive. You know, at this point you're dreaming. SPEAKER_03: Okay, so it's not a dream, but could the new world of hybrid work be a nightmare for our cities? Yeah, this is something I'm really concerned about. SPEAKER_15: That's coming up after the break. SPEAKER_03: I'm Stephen Dubner. This is Freakonomics Radio. with Canva Magic Resize. If you're a designer, Canva saves you time on repetitive design tasks. No design resource, just design it yourself. With Canva, you don't need to be a designer to design visuals that stand out and stay on brand. Start designing today at canva.com, the home for every brand. Strong bonds lead to lasting relationships. At Vanguard, their active fixed income team knows that strong relationships can build strong bond funds. Vanguard's active bond funds are backed by a collaborative culture and expert team. Vanguard is designed to keep fees low, creating an easier path for their active managers to seize the right opportunities to outperform at the right time. Vanguard knows active bond funds that help stabilize portfolios and generate income can give clients peace of mind, so they may focus on more important things like lasting relationships. At Vanguard, clients are more than just investors. They are owners. Vanguard strives to do what's best for its clients and their financial success. That's the value of ownership. Learn more at vanguard.com slash vanguardactive. Visit vanguard.com to obtain a fund prospectus or summary prospectus containing investment objectives, risks, charges, expenses, and other information. Read and consider carefully before investing. All investing is subject to risk. Investments in bonds are subject to interest rate, credit, and inflation risk. Fund shareholders own the funds that own Vanguard. Vanguard Marketing Corporation distributor. SPEAKER_03: As the economist Nick Bloom told us, roughly 15% of US employees are working remotely full-time with another 30% on hybrid schedule, some days remote, some days in person. The work from home numbers in Western Europe are similar and in Asia, they're slightly lower. SPEAKER_12: One of the reasons say China and Japan work from home levels are lower is it's not as appealing to be at home if you're in a very high density Asian city because your apartment is small. And in developing countries, you go to Africa, South America, it's a lot lower because the industrial structure isn't amenable, it's much more agriculture manufacturing, but the change is very high. So even in Africa, it's gone from one to 5%, it's still an enormous increase in levels. And how about our little company, SPEAKER_03: the Freakonomics Radio Network? We are firmly in the hybrid and work from home categories. None of us go to an office every day. I am 100% remote, although I have been since before COVID. I just like working on my own and I find it super productive. Right now, as I speak to you, I am being recorded by our technical director, Greg Rippon, working from his home. And the producer of this episode, Alina Cullman, is working from her apartment, although both Alina and Greg do sometimes go into our office and it's a nice office right on Bryant Park in Midtown Manhattan. It is one of four New York City offices run by our producing partner, Sirius XM. And how crowded is our office? When I came here, there was nobody here SPEAKER_08: at about nine o'clock in the morning. That's Julie Canfer. SPEAKER_03: She is the producer on one of the other podcasts in our network, Freakonomics MD. My host, Bapu, is in the Boston area. SPEAKER_08: Our engineer, Nelly, is also in the Boston region. I don't ever see them. It doesn't matter. We talk all the time. Most days, Julie works at home. SPEAKER_03: Before joining the Freakonomics team, she worked in live radio, also for Sirius XM. And there was always tons of people in the office. SPEAKER_08: I always liked being in the studio. I like being around people. So it's been a big change. I don't know that I will ever have a job again where I'm going into the office every day. You walk into the office SPEAKER_14: and the only other person who's in the office most days works for Sirius XM security. And that is Ryan Kelly, a producer on Freakonomics Radio. SPEAKER_03: I'd say I come into the office the most out of everyone SPEAKER_14: at the Freakonomics Radio Network. Recently, I've been coming into the office three to four days a week. And I'd say three of those days, the office is completely empty, which on one hand is depressing. On the other hand is awesome because I have a whole office to myself. We were pretty much in office entirely prior to the pandemic, SPEAKER_00: so all of our spaces were fully utilized. And that is Jessica Fox. SPEAKER_03: She runs the employee experience team at Sirius XM, and she helped design the company's hybrid work plan. Of course, no one wants to spend a lot of money SPEAKER_00: on real estate if we're not using it, but we do also find importance in offering a space for employees to come and collaborate or just get head-down focused time. So the space is there, but it is deeply underused, SPEAKER_03: as are a lot of offices in New York City. The city's office space is still only about half occupied, way up from the depths of the pandemic, of course, but still, that is a lot of real estate sitting empty. I think we should all be concerned. That is Arpit Gupta. SPEAKER_15: I'm an associate professor of finance at the NYU Stern School of Business, and I research real estate. And why is he concerned? Because it turns out that the centers of cities, the central business districts, are actually the linchpins holding together urban areas in many ways. And the impacts that we're seeing from remote work are impacting the commercial office owners, but they're also having broad spillover effects on how cities function more broadly. The most direct channel has to do with potential losses in property tax revenue. Cities fund themselves very heavily from property taxes, and so declines in office real estate values have a direct impact on the functioning of city budgets. Gupta and two other economists, SPEAKER_03: Stan Van Neuwerberg and Vrinda Mittal, recently published a paper called Work From Home in the Office Real Estate Apocalypse. SPEAKER_15: So we're estimating a decline in value of 45% in the short run for New York City office space, and 39% in more of a long-term perspective for the decline in value for that New York office real estate. One thing that we're concerned about is this possibility of an urban doom loop. Did you say an urban doom loop? That sounds bad, and it's not something we're predicting will necessarily happen, but it's a concern about the functioning of cities when one of those linchpins of value has been taken away. The basic chain of events that we're worried about is as city governments have more constrained budgets, as they're faced with declining revenue, they're gonna have to either raise taxes or cut services. And we've already seen over the last couple of years a lot of challenges in providing city services in areas like education, where there have been a lot of debates about remote education or in policing. And so cities gonna have to make difficult choices about whether to cut back on those essential services or on the other hand raise taxes on residents. Whichever way you choose leads to the potential of some of these people leaving the city, thereby lowering the tax base further. We've seen some episodes of this historically, cities like Detroit, cities like New York in the 1970s and 80s had a little bit of this destructive spiral going on. How safe is it to extrapolate from the New York City numbers? SPEAKER_03: We're always told that New York City is an outlier in real estate in a number of ways. SPEAKER_15: Well, on the one hand, New York has actually seen not as strong of an impact as some markets, particularly those on the West Coast like San Francisco. A lot of these markets have actually seen even greater impacts on the office because they have so many tech tenants, right? That are even more likely to move remote. At the same time, it's probably not as stark as what you see in some booming sunbelt markets, places like Miami that have had a relatively more robust recovery since the pandemic. But on balance, when we look across cities over the United States, we do observe a lot of similar patterns like increased office vacancies. Can you put that in some kind of total dollar figure? SPEAKER_15: Across the entire United States, the office real estate sector is worth over $1 trillion. If we take our estimate for the value decline in New York City and extrapolate that to the entire country, we would estimate a long-term impact of $453 billion. Good God, so half a trillion dollars almost SPEAKER_03: in what you call value destruction, yes? Value destruction from the standpoint of the office, SPEAKER_15: but another way you could think about it is it's probably partially a value transfer to residential real estate, which has seen an increase over the same period. SPEAKER_03: As for that value transfer to residential real estate, a recent report from the Federal Reserve Bank of San Francisco found that the shift to remote work accounts for more than half of overall house price growth over the pandemic. SPEAKER_03: What about the transportation sector? We take it for granted when it works well, but ridership is down so much in so many places, so what are the long-term effects of the office vacancies on public transportation? Yeah, this is something I'm really concerned about. SPEAKER_15: So here in New York City, for example, we're actually at recent highs when it comes to transit use. But that still means that we're down over 30% relative to where we were before the pandemic. There's a concern that a lot of these transit systems might go bankrupt if they don't see even more recovery in ridership. Now, I think there are a lot of options to try to sustain transit. One example would be to divert congestion pricing revenue that we're planning here in New York and divert that not towards new capital improvements, but just towards operational revenue for the subways. But I think one challenge here back to the doom loop idea is that one way that transit systems might respond to these shocks is by cutting service. And I think what we'll see if they do respond by cutting service is that fewer people will take public transport because they view it as a lower frequency type of product. And that will further exacerbate the operational difficulties of the transit system. Based on what you're telling me, SPEAKER_03: one might assume that office rents in cities have decreased a great deal, 30 or 40%. But from what I've read, that's not the case. Can you talk about that for a moment? Yeah, really the key thing is that this asset SPEAKER_15: has a lot of long-term leases. So only a fraction of people have actually had to make an active choice so far on what to do with the space. In other words, this is a slow playing apocalypse SPEAKER_03: because those leases just haven't expired yet. Exactly, exactly. SPEAKER_15: What we're seeing so far is some impact on pricing, some impact on occupancy, but we think this is really gonna take a while to play out. Do you think there's a chance that by the time SPEAKER_03: many of those leases are up for renewal that the demand will have increased so that the two opposite movements intersect and return to a sort of normal? Yeah, that's absolutely possible. SPEAKER_15: What we're really trying to quantify is the persistence of that working from home parameter, right? Thinking about how likely is it this year, next year, five years from now that we're going to be in the office or working at home. What is the impact on the city's workforce? It's just gonna be a really important challenge for cities to think through. I don't think it's all apocalyptic, as our title would suggest, but I think we are in for a very different world than we lived in before. When it comes to remote work, I think that's gonna prove to be one of the more durable impacts of this pandemic. What are the opportunities for remote work? There are a lot of opportunities here for different cities, different neighborhoods to experiment and try new things. What about converting commercial space to residential space? SPEAKER_03: Can you talk about how much of that is already going on and what are the challenges in doing that? Because obviously these buildings were created for one purpose. Yeah, that's something we've been looking into SPEAKER_15: and it's something that does have a lot of challenges. So here in New York City, for example, we actually did a good amount of conversion in the financial district, particularly after 9-11. But there are a lot of challenges with this. It's a requirement here in New York City for example, that you need a window in the bedroom. So that limits the area that can be devoted to bedrooms. So you often have a lot of debt space in the center, particularly with modern office buildings. What about plumbing and electric SPEAKER_03: when you convert commercial to residential? How big of a problem is that? Yeah, that's definitely a problem as well. SPEAKER_15: You typically also need to have windows that can open out rather than being totally fixed. So there are a lot of complications here. Typically it's actually easier to convert a hotel into a residential unit. However, now that tourist activity is back, the hotel sector doesn't really want to do that as much. And by the way, we haven't even touched on the regulatory and zoning issues that might come into play when trying to change the use of some of these buildings. We have a relatively restrictive set of regulations around building in New York City. Now one thing that does potentially make this easier is there are not as many neighbors of these buildings exactly because they're office buildings in the center of the city. So you don't have the NIMBY problem to the same extent because people don't currently live there as much. And these buildings are actually quite optimally located from a residential standpoint, because they're right at the center of the transit network, right? So the same trains that are there to bring people out from the suburbs into the center of the city, well, if you're in the center of the city, you also have access to the full network there as well. So there are some potential benefits to try to make this happen, but a lot of challenges as well. Are you or either of your co-authors funded SPEAKER_03: directly or indirectly by the real estate industry? No, we don't take funding directly or indirectly SPEAKER_15: from the real estate industry. We're scholars and academics trying to make sense of the world. And where is Arpit Upta working SPEAKER_03: as he tries to make sense of the world? I'm actually in the office five days a week personally. SPEAKER_15: And why is that? One of the things we've learned from this remote working research is that remote work appeals to different types of people and has different appeal in different firms. I just personally love the ability to come into a physical office where I can interact with students, with my colleagues and share ideas. I also have a relatively short commute, so it's pretty low cost for me and I have a pretty small apartment. So it's a little bit hard for me to work remotely. But one of the things I've learned is I'm not very typical. And there are a lot of knowledge white color workers that because of their age, because their industry, because of what they're looking for in life, they really enjoy their remote working options. So I think it's just a lot of heterogeneity with respect to how people like it. Coming up after the break, SPEAKER_03: how that heterogeneity is playing out and some more unintended consequences of the work from home revolution, positive and negative. If you cut that out by being remote, that is a big risk. SPEAKER_12: I'm Stephen Dubner. SPEAKER_03: This is Freakonomics Radio. We'll be right back. Hey everyone, there is a new show for you. It's the story of a woman who discovers her uncle's secret life buried inside a low budget 90s thriller that started Rob Lowe and Ice-T. The podcast is called Magnificent Jerk. It's a journey through Chinatown gangs, drug robberies, Hollywood reinvention, and a family confronting its unspoken past. Magnificent Jerk, the true story of a fake story about a real life. Magnificent Jerk is an Apple original podcast produced by Pineapple Street Studios, available on Apple podcasts. SPEAKER_10: Paramount Plus is central plan only, separate registration required. See Walmart Plus terms and conditions. SPEAKER_03: Now that a lot of people have been working at home for a while, part-time and full-time, some interesting patterns are starting to emerge. I initially didn't believe the data. That again is the economist Nicholas Bloom of Stanford. The data he's talking about is the number of startup companies in the US. So we saw a drop in startups as the pandemic began. SPEAKER_12: That's no surprise. We had a global pandemic, there was a lockdown. So startups fell, I think by 20, 30%. But since then? They then recovered and overshot and they've been above pre-pandemic levels ever since. And like early on, it's like, is there a mistake in the data? Is it just catch up? But by now we've far beyond caught up. We have many more business created if you add back to the beginning of the pandemic. And I think it's because work from home is one of the big drivers, means it's cheaper to do it, it's easier to do it. And also everything's remote. If you're out in North Dakota and you wanna work with tech firms, it doesn't really matter where you are. And so suddenly a great coder in North Dakota can go work with a bunch of barrier tech firms. It was a huge surprise, certainly to me, I think to many economists to see the surge in startups. SPEAKER_03: The surge in startups is just one of many unintended consequences from shifting to remote and hybrid work. Here's another. Think about employees with disabilities. Their disability may have made it hard for them to commute. They might've encountered discrimination in the labor market, but since April of 2020, the labor force participation rate for American adults with disabilities has risen nearly five percentage points, a huge gain. Remote work has also meant a lot of people can relocate without changing jobs. Some members of the Freakonomics radio team have done just that, like Jasmine Klinger, one of our audio engineers. And that actually allowed me to buy a house. SPEAKER_04: I don't think I would ever been able to buy a house in the New York Metro area. SPEAKER_03: And Emma Turrell, who's our operations manager. SPEAKER_06: I used to live in New York City and now I live in Boulder, Colorado. Emma really likes to go rock climbing. SPEAKER_03: And that's more fun in Boulder than it is in New York City, I assume, I've never gone rock climbing in New York or elsewhere. This brings us back to something the NYU finance professor Arpit Gupta said earlier. SPEAKER_15: I think it's just a lot of heterogeneity with respect to how people like it. If you think about it, remote and hybrid work SPEAKER_03: are a gigantic vote in favor of heterogeneity. Different people have different appetites, preferences, needs, abilities. So the work from home revolution is bound to affect people differently, just as the pandemic itself affected us differently. SPEAKER_06: When the pandemic first hit, I was struggling to figure out how I keep my career path going in this new crisis environment. That is Misty Hageness. SPEAKER_03: She is an economist at the University of Kansas. Before that, she was principal economist at the US Census Bureau. She also has two kids. SPEAKER_06: I just figured I can't be the only one having these struggles. And so since I'm an economist and a nerdy data person, my first instinct was let's go to the data and see what the data says. Hageness and her fellow economist, SPEAKER_03: Palak Suri, looked at how the pandemic and remote work affected working women, especially working moms. Their paper is called, Telework, Childcare and Mother's Labor Supply. SPEAKER_06: When we look at mothers divided out by whether or not they have an onsite job, meaning that they have to actually leave their home and go to their place of employment compared to moms who have telework compatible jobs. And when we look at it by education, what we see is that it's the moms in telework compatible jobs with a college degree or higher, who really were differentially impacted by the pandemic in two ways. One, they reduced their labor force participation. Even potentially more interesting is that they were almost one percentage point more likely to be taking up leave compared to women without children. And so the women who had the most flexibility were the ones who were more likely to pull back from the labor force. SPEAKER_03: Economists have long argued that flexibility is especially valuable to working mothers. The rise of remote and hybrid work, once all the COVID dust settles, would seem to provide that flexibility. So is that good news? This idea that telework and remote work SPEAKER_06: is gonna be the savior for all women, there is a lot of evidence showing that you can increase women's labor force participation with flexible work. But I think the piece here that's missing and what our research shows is that that's not really enough. That's not gonna work if you don't also solve the childcare problem. SPEAKER_08: I absolutely hate working from home when my kids are there. That again is Julie Canfer who produces Freakonomics MD. SPEAKER_03: Her kids are nine and six. SPEAKER_08: It is horrible. It's not that I feel guilty not spending time with them, it's that I absolutely cannot focus. SPEAKER_03: And the economist Misty Hagenus again. SPEAKER_06: Telework and flexible work is a double-edged sword. There's lots of benefits that can come from it, but there's also some cautionary tales that we need to be really aware of if we're going to implement it on a more macro level. This gets us to perhaps the biggest macro question of all, SPEAKER_03: how will remote and hybrid work affect the future of work itself? Nick Bloom again. SPEAKER_12: The tricky thing is if somebody's working fully remotely, they maybe aren't developing the kind of skills you get from coming in two or three days a week in terms of knowing coworkers, knowing strategy, being mentored. I mean, there's a lot of junior folks that get mentoring from being there and seeing what other people are doing and learning for them. Even basic things, how many hours do people work? Because I'm not in the office anymore. I don't see, I don't know how much I expected. I mean, most professional jobs don't have a strict number of hours. What about from, let's say a societal perspective, SPEAKER_03: if more and more people are working on their own, does that lead to more, what we typically call polarization these days? People are interacting less with people who aren't just like them. And that might have some societal downsides or am I reading too much into that? SPEAKER_12: No, it's a pretty fascinating and somewhat worrying side effect of at least fully remote. If you look at friends and family, they tend to be much more polarized than work colleagues. So most people can choose their friends. You tend to have mostly the same political view as your family, but you really can't choose your work colleagues. And so when you come into work, you're sitting at lunch and there's a Republican and a Democrat, and you have to moderate a bit. If you're now working from home full time, you don't really have that moderating experience. And of course media, you might think would moderate, but people again can choose their media. So it turns out that just about the least polarized information source you get are coworkers. And if you cut that out by being remote or at least cut out those non-work conversations, cause they don't tend to happen over Zoom, that is a big risk. SPEAKER_03: But the good news Bloom says is that work from home technologies will keep improving. Technology firms, hardware firms, software firms, SPEAKER_12: all of them are saying, look, this is a major new market. The amount of dollars being spent on R&D to support work from home has exploded. I've been scraping new patents issued by the US Patent and Trademark Office. We've been text mining them for frequency of words like work from home fully remote. And that has gone up a lot. It's more than doubled since the beginning of the pandemic. So down the pike, there are gonna be some incredible things what they are is hard to be sure. You know, predicting future technology really is a fool's game, but it's gonna be stuff like, you know, holograms, the metaverse, virtual reality, augmented reality, much better AV. You know, if you go into offices still, you go into conference rooms, there's often only one camera. If a people at home, you can see the side of somebody's ear or something. The future is like eight cameras using AI to make sure, like when you watch a football game, they have seven or eight cameras and they switch around to get the best view. So video cameras using AI to have multiple cameras to get a better view and make sure whenever somebody's speaking, they're looking at the camera. It seems like everything you see on Star Trek and Star Wars eventually comes in. We haven't seen Jedis yet, but you know, a lot of the other technologies there. Wake me up when we get to teleporting. I haven't seen any patterns with teleporting. I'm sure they're out there. Imagine 10 years from now, we have six foot real life holograms that you can interact with. That would make remote work much more appealing. I don't think it would end in-person interactions, but certainly you'd shift it further towards more remote days. SPEAKER_03: So knowing what you've learned about working from home and hybrid work policy, which is a lot, I have to say, and I've loved hearing you talk about it today. Is there any advice you would give to a firm who's trying to optimize their hybrid work policy for their employees, for themselves, for their shareholders and so on? SPEAKER_12: Two pieces of advice, I think. One would be it's very hard and it's continuing to change. Whatever plan you set, be prepared. You're gonna have to rip that up next year. So be realistic. The second thing is I think coordination is key. When you survey employees about why they wanna come into the office, it's to work with coworkers. So there is really not much point having half the team in on Sundays, half the team on the others, because you get this story, if I come in, it's dead, there's low energy. Jim or Sarah wants to work with them there. So I would suggest coordinate and the best days to coordinate probably are Tuesday, Wednesday, Thursday. Now that's in the long run, not maybe a great strategy, but at least for the rest of 22, 23, while things are settling down, that's a safe bet. And in the long run, you can get more creative. It just sounds like a checkerboard SPEAKER_03: with many, many different colors or a very complicated schedule that I'm trying to create here. Once you take into account both efficiency and personal preferences. Yes, I think we're just gonna see SPEAKER_12: enormous churn in labor markets. A lot of people are gonna move jobs. Let's just think of two example companies, Airbnb and Apple. Airbnb has said they're gonna be fully remote. Apple has a more office-based environment. They're roughly saying 50% of the time in the office, 50% are home. So imagine you're young, like one of my students who are in your early 20s, you're starting a new job. We know in the survey data, I know from talking to them, these folks really wanna spend some time in person because they like the mentoring. They are just much more likely to take a job in Apple than Airbnb. If you flip it around for someone maybe early to mid 30s, has young kids, just bought a house and they may really like being able to work remote. They've spent 10 years being mentored there. I mean, junior middle management level, they may well much prefer Airbnb. But the problem from the firm side SPEAKER_03: is I want to have as broad a talent pool as possible. If I'm Apple, I also want the 30 some year olds with young kids or the 40 and 50 year olds and so on. So what you're describing now, employment becomes an even bigger selection game. And I understand that, but what if I want to keep my possible employee pool as large as possible, what do I do about that? SPEAKER_12: You know, there's like two strategies here. You could either try and appeal somewhat to everyone, or you can take more of an extreme position. Let's say be fully remote or fully in person. I call that as a Brit the Marmite strategy. So if everyone's heard of Marmite, is this spread that goes on toast. Love it or hate it. Exactly, no one is indifferent. 10% of people love it, 90% of people hate it. But look, if you're a product, if you get 10% of the country loving it, you're in good news. SPEAKER_03: Thanks to Nicholas Bloom for all his research insights and to Arpit Gupta and Misty Hagenes for sharing their research. Thanks also to our Freakonomics Radio teammates, Julie Canfer, Ryan Kelly, Jasmine Klinger and Emma Terrell. And to Jessica Fox from Sirius XM. And thanks to you as always for listening. If you liked this episode, please share it with your friends and family. That is the single best way to support the podcasts you love. Coming up next time on Freakonomics Radio. SPEAKER_05: I think my obsession sort of crept up on me. SPEAKER_03: Becoming a fan of someone or something has never been easier. SPEAKER_02: One of the cool things about the internet is it's allowed people to find like-minded others. Including like-minded others in politics. SPEAKER_03: There's nobody who is a partisan of the two party system. SPEAKER_01: Everybody wants one of them and not the other. SPEAKER_03: The downsides of fandom and the upsides. SPEAKER_05: My heart rate just increased and I have this smile on my face. SPEAKER_03: That's next time on the show. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Alina Cullman. Our staff also includes Neil Carruth, Gabriel Roth, Greg Rippon, Zach Lipinski, Ryan Kelly, Rebecca Lee Douglas, Julie Canfer, Morgan Levy, Catherine Moncure, Eleanor Osborn, Jeremy Johnston, Jasmine Klinger, Daria Klenner, Emma Terrell, and Lyric Bowditch. Our theme song is Mr. Fortune by the Hitchhikers. The rest of our music was composed by Luis Guerra. We can be reached at radio at freakonomics.com and you can get our entire archive on any podcast app. SPEAKER_12: Amusingly enough, I think if you look up in the urban dictionary, work from home has another interpretation. SPEAKER_07: The Freakonomics Radio Network, the hidden side of everything. SPEAKER_00: Stitcher. SPEAKER_14: So you can eat your favorite thing while you watch your favorite thing at home. Order McDelivery in the McDonald's app. SPEAKER_13: At participating McDonald's, delivery prices might be higher than at restaurants. Delivering other fees may apply.