Prior to the Covid-19 pandemic, few customer service jobs in the US were fully remote. This was puzzling given that studies suggested remote workers could be more productive (1) and that workers were willing to take pay cuts for the option to work from home (2). So why the reluctance to offer remote work?
New research by Emanuel and Harrington helps solve this puzzle by looking at the experience of a Fortune 500 firm’s call centers before and during the pandemic (3). They find that the initially lower productivity of remote workers was driven by both negative treatment effects of working from home and adverse selection into remote jobs.
The Treatment Effect: Remote Work Directly Reduces Productivity
When the company’s offices closed due to Covid-19, on-site workers’ productivity fell by 4% compared to those already working remotely. This suggests working from home directly reduces productivity, accounting for a third of the initial 12% productivity gap.
The researchers attribute this negative treatment effect to challenges communicating and coordinating with colleagues remotely. Going remote increased call hold times by 11% and led to a 3% rise in call-back rates, indicating customer questions went unanswered, especially among less experienced staff.
Selection Effects: Less Productive Workers Opt for Remote Jobs
However, even once all staff worked from home, an 8% productivity gap persisted between those who had originally chosen remote versus on-site jobs. The gap remained because remote work attracts less productive workers.
One reason may be remote workers had far lower promotion rates before the pandemic, making ambitious high performers reluctant to work remotely. The stigma and career penalty of remote work could discourage more productive staff from choosing it.
Implications for the Post-Pandemic Workplace
These findings help explain the pre-pandemic rarity of remote work. Firms were trapped in a prisoner’s dilemma where individually they were hesitant to offer remote work despite the potential collective benefits.
However, the pandemic may have resolved this dilemma. Normalizing remote work could reduce stigma and change worker selection. Firms may also have improved their ability to monitor remote productivity. Workers themselves likely have greater clarity about their preferences after extended remote work.
While treatment effects impose some productivity costs, resolving the prisoner’s dilemma could allow firms to access a broader pool of talent. That would let them efficiently expand remote opportunities to match worker demand in a post-pandemic world.
(1) Bloom, Nicholas, James Liang, John Roberts, and Zhichun Jenny Ying. “Does working from home work? Evidence from a Chinese experiment.” The Quarterly Journal of Economics 130, no. 1 (2015): 165-218.
(2) Mas, Alexandre, and Amanda Pallais. “Valuing alternative work arrangements.” American Economic Review 107, no. 12 (2017): 3722-59.
(3) Emanuel, Natalia, and Emma Harrington. “Working Remotely? Selection, Treatment, and the Market for Remote Work.” Federal Reserve Bank of New York Staff Reports, no. 1061 (2023).