81%: The Impact of Flexible Work on the Economy

ELISE HU: You heard that right: holograms. Today we’re gazing into the future with Nicholas Bloom. He’s a Stanford University economics professor who’s studied remote and hybrid work for nearly 20 years—so, way before it was a hot topic. Today, 81 percent of company leaders are changing their workplace policies to offer more flexibility, and that’s according to a LinkedIn survey. Nick has actionable advice about how to manage that new flexibility and prepare for even more changes ahead.

Later in the episode, we’ll check in with Microsoft employee Emily Sterken. She’s navigated a lot of change in her own work and life lately, and she’ll talk about what she’s learned.

But first, here’s my conversation with Nicholas Bloom.

ELISE HU: Nick Bloom, Business Insider has called you “America’s best work from home expert,” so, I want to know what surprised you about your own experience moving to working from home in the pandemic.

NICHOLAS BLOOM: ( Laughter ) My personal surprise, I really quite liked it. I have four kids, so it’s nice to be around. It took a while to get used to it. I’m not very handy, but it took me about two hours to put up this desk that goes up and down. It’s great. I’m actually standing up now.

Generally, for me, it’s worked really quite well. I’m getting to feel a little bit lonely. Stanford University just started going back in person now. So, I’ve enjoyed that. I went to an event yesterday. It was really nice, actually, to see my colleagues, but I, like everyone else it seems, in the survey data, have found working from home generally works pretty well. I hope to be able to continue to do it maybe two or three days a week, and go in person two, three days a week.

ELISE HU: Flash back to March 2020 for a minute. ( Laughter ) I know that’s not quite a time that any of us want to look back on, but really quickly, we went to work from home or work-with-home mode. And at that time, you predicted a productivity disaster for companies because we were having to deal with also homeschooling our kids and working in unsuitable places with no choice and no in-office days.

It has now been 18 months. What actually happened in terms of productivity?

NICHOLAS BLOOM: By now, and I’d say within six to nine months after the beginning of the pandemic, productivity working from home turned out to be extremely good. I’ve been running surveys of 5,000 Americans per month since the beginning of the pandemic. And one thing you hear from that and from talking to firms is everyone was universally amazed at how well working from home turned out.

It possibly was a productivity disaster for the first month or two. Everything was in such chaos, it was hard to tell what was going on, but certainly by late 2020, and certainly by now, 2021, it’s clear working from home has worked out pretty well.

ELISE HU: How much did that surprise you?

NICHOLAS BLOOM: I shouldn’t have been surprised. I faced years of skepticism for being so positive on working from home, pre-pandemic. In fact, I did a large randomized controlled trial back in 2010 in China and the folks that worked from home were 13 percent more productive, and that thing got a lot of coverage. I gave a TEDx Talk, published a paper. I should have been the last person to be surprised.

ELISE HU: I’d love to hear more about the data that you’ve been able to collect, because it sounds like the top line findings are that hybrid work actually works, and it’s here to stay.

NICHOLAS BLOOM: Yes. Hybrid is here to stay. Five-day return to the office for people that are currently working from home is dead. I mean, that died early to mid-2021. Any employer that is currently thinking of trying to get current work-from-home employees back to the office five days a week is dreaming. Reason is, you just face a mass wave of resignation. I’ve probably talked to 300 or 400 managers since the beginning of the pandemic, and a lot recently, and there’s not a single firm I talked to that’s trying to get currently working-from-home employees back to the office.

Just to be clear, about half of all Americans can’t work from home. These are folks that are in frontline retail, manufacturing, a lot of healthcare, public services. They have unfortunately never worked from home and are never likely to work from home, given the roles they do.

There’s then the other half—professionals, managers, university graduates, pretty much all of us have been working from home close to full time throughout the pandemic. And it looks like now, we’re almost all of us work from home, post-pandemic, but probably two or three days a week.

ELISE HU: Based on this, what type of employees are you finding really want to work from home the most or more than other demographic groups?

NICHOLAS BLOOM: Current working-from-home employees, post-pandemic, want to work from home about two and a half days on average. Now, there’s a big spread around that, and what you see is young single folks and older empty nesters basically don’t like working from home that much. They want to come in four or five days a week.

Then at the other end, people with young kids, people living in houses with long commutes from the office, some minorities, actually, slightly more true for women, have a higher preference to work from home. And some of them want to work from home full time, post-pandemic.

ELISE HU: What are the implications for having a diverse workforce?

NICHOLAS BLOOM: Diversity is hugely important for working-from-home policy. I think there’s a couple of things firms need to get right. One thing is to offer hybrid, and pretty much everyone’s on that train already.

The second thing that is important is to make sure that the days at home [are] also controlled, and people do that. Here’s the fear: Imagine you have a situation whereby all the single young men that live right next door to the office come in five days a week, and other people work from home two days a week and come in only for three. You can see where that’s going to lead in terms of promotion, because there’s plenty of evidence if you come in extra days compared to folks who are fighting for that promotion, for your life to get ahead.

I’ve been advising firms to a) suggest how many days you come in, but importantly, b) also suggest how many days you work from home. And a typical policy may be, I’d like everyone to come in on Monday and Wednesday. I’d like everyone to work from home on Tuesday and Friday in my team, and Thursday’s your free day. You choose what you do. But that way, we’re all roughly doing the same thing.

When we’re in work, it’s super social. We have all our lunches and leaving events and team bond building stuff. On the two home days, we know it’s going to be quiet, there aren’t going to be big meetings and work. And then, on the fifth day, it’s a bit of a mix.

ELISE HU: That's interesting. Some leaders might want to give more flexibility than that, thinking, there’s no one size fits all. Plus, we know that underrepresented groups, or some underrepresented groups, prefer more remote work. Is that what you’re seeing in the data?

NICHOLAS BLOOM: Yes. If you look at it quite broadly, there are a few groups that show a stronger preference to work from home. One is disabled people. A second group turns out to be college-educated women with young kids, kids under the age of 12. College-educated men with young kids also want to work more from home, but women within that cell, even more so. If you look by race, we see that Black and Asian workers report higher preferences.

Interestingly, if you also look by politics, people that report that they don’t share the same politics as their colleagues want to work from home more. ( Laughter ) People that report that their colleagues don’t respect their religion want to work from home more. Basically, what you’re getting is actually people want to work in a diverse workplace. And if your workplace is not diverse, people have more of a preference to work from home.

There’s kind of a reinforcing effect here. If you want a diverse workplace, you want to make it successful to support working-from-home employees. That then helps to promote diversity and makes people want to come in.

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ELISE HU: Lots of great advice there for times of change. Now let’s hear from someone who’s been managing a lot of change herself, in work and life. Correspondent Mary Melton is talking to Microsoft employee Emily Sterken today, who’s had quite an eventful year and a half of hybrid.

MARY MELTON: That’s right. Emily is a communications expert who moved across the country—twice in two years. She also left a job in the retail industry for a role at Microsoft. Thanks so much for joining us, Emily. Can you tell us why you’ve been on the move?

EMILY STERKEN: I moved out to Seattle about nine years ago for a job opportunity and really loved the area, ended up staying a lot longer than I thought I would, started a family here. And my husband actually got a new job opportunity in Ohio, so we relocated to Ohio at the end of January 2020. So that was a few weeks before the pandemic. So we had a few weeks to kind of settle in, and then all of a sudden, we were all at home. My husband and I were both working from home full time. Our two kids were home full time. It was a different experience than we thought it was going to be moving out there, and it gave us a chance to think about where we really wanted to be. Ultimately, we just really loved the lifestyle that we had in Seattle. Our friends were here. Our house was here. And so he got the opportunity to work from home from Seattle as opposed to Ohio. So, we moved back this summer.

MARY MELTON: You also changed sectors, and you discovered that your skills from the retail industry were also valued in tech. What have you learned that might help other people who are making these big moves right now?

EMILY STERKEN: I think being open-minded is one of the most important mindsets you can have for any stage of your career, whether you’re just starting or whether you're looking for a change—that you never know what an experience is going to end up feeling like and being like, and you never know what you’re going to learn.

It’s also about finding a company that is willing to take a chance on you. Microsoft knew that I was not tech savvy or didn’t have a tech background, but they were able to see some of those skills that I did have that they thought would translate really well. It’s about finding the right match.

MARY MELTON: Have you met any of your colleagues now that you have moved to Seattle? Have you seen anyone in person yet?

EMILY STERKEN: No, I have not met a single person, but I feel like I’m forming relationships and getting to know people’s personalities. I’m going to be on campus next week, so I think I’m going to have the opportunity to meet at least a few people in person, which will be really exciting.

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ELISE HU: That was Microsoft communications expert Emily Sterken. Now back to Nick.

ELISE HU: Nick, the Great Reshuffle is one major labor trend of 2021, with so many people like Emily switching jobs and making big changes this year. Can we talk about another couple of trends emerging now in this hybrid work world? And how they’ll play out in the future?

NICHOLAS BLOOM: One trend is the revival of the war for talent. People have probably forgotten that topic, but it is back with a vengeance. The U.S. labor market is red hot. And one way companies I’m talking to are fighting bitterly for is by offering more and more generous work-from-home packages.

What I mean by generous is the typical employee out there actually doesn’t want to work from home five days a week. They actually, on average, want to work from home two to three days a week, but have some flexibility around it. Two companies I’ve been talking to have set-ups whereby they say, look, we’re going to have three days a week in the office, two days a week at home. But each year, you’re going to get one month or 22 days of additional days you get to choose when you work from home.

And that is amazingly appealing because you can think, look, I’m going to have hybrid most of the time, but maybe one month a year, I may go work from Mexico, and I’m going to go hang out at the beach or go to Alaska or whatever I want.

ELISE HU: Yes, and the numbers really back that up. Eighty-one percent of leaders are saying they are changing their workplace policies to offer greater flexibility, like you’re talking about.

NICHOLAS BLOOM: Yes. Another trend that is starting, and I personally think is important to push ahead, improving flexibility for non-work-from-home employees. Half of Americans cannot work from home. They’re frontline retail, manufacturing, public services, teachers—a lot of the people we have to thank very much for our ability to survive throughout the pandemic.

These folks, post-pandemic, are not getting this amazing work-from-home perk. This perk in our survey, hybrid work, appears to be worth about a seven to eight percent pay increase. For everyone that’s getting hybrid, that’s fantastic; for other employees, you’re really genuinely missing out.

When I’ve been talking to firms, I’ve been saying, well, a) recognize that and maybe think about that in the way that you set pay for non-work-from-home employees to make it more generous; and b) think about ways to make it more flexible for them.

For example, there’s things like the 9/8/0-hour scheme. The idea here is every two weeks, rather than do two weeks of five days each, you do eight days of nine hours, one day of eight, and then you have the final Friday off. You basically have every other Friday off.

There is the four-day week. Rather than work five days a week at eight hours each, you work four days at 10 hours each. Basically, things that make it more flexible, in terms of working patterns that non-work-from-home employees can also benefit.

ELISE HU: This is interesting in that employees are becoming more empowered, and as employees are becoming more empowered, they are demanding more flexibility, businesses are responding. Over the next five or 10 years or so, how do you expect the relationship between employee and employer to continue to change?

NICHOLAS BLOOM: As long as the economy continues to grow—right now, we’re in a good rebound from the pandemic—I think employees will hold the upper hand. So, in bargaining, when I talk to employers, they’re desperate to hire. And so all the power goes to the employees, to people like us in some way. I mean, it depends on who’s listening. If you’re a manager trying to hire, maybe you’re an employer.

As a result, perks like working from home levels and flexibility are becoming much more commonplace, because if you’re a firm, you can go about hiring people through two ways: You can, one, pay them, let’s say, 10, 20 percent more—you can basically outbid—or you can say, look, I’m going to be more generous on working from home. And the latter turns out to be cheaper and more profitable and makes sense because that’s what employers want. One big move is greater flexibility that’s driven by the strength of the labor market.

The other thing that’s kind of on the horizon in the long run is going to be improvement in working-from-home technology. I’ve been working from home for almost 20 years. And if you go back 20 years ago, when I first started, there were no video calls. There was no cloud, there was no file sharing. If you’re working at home, you’re basically phoning people up and you’re emailing backwards and forwards attachments with all the problems that has.

Now, we have shared files, we have Teams. It’s very, very easy to work remotely. That process of improvement of remote technology is actually only just beginning, because the pandemic has led to an enormous surge of companies throwing money at getting work-from-home technologies up and running, because the market has expanded.

In one study, we went to the U.S. patent office, and we searched for new patents and how often they mention work from home, remote work, etcetera. And you see, this has really taken off after March 2020. Many tech firms, hardware firms, are coming out with fantastic new technologies, virtual reality cameras that track you, much better sound, much better video, connectivity tools that mean, five to 10 years from now, we’re going to look back at 2021 and think, that was terrible, how did we survive, with that poor quality of equipment and software?

And in 2030, work from home is going to be, I suspect, we’ll be in Star Wars -style holograms talking to each other.

ELISE HU: Let’s continue to talk about macro trends here, because we are in this tectonic shift, and the world as we know it has changed. We’re charting a new economy, which leads to my question about onshoring and offshoring. How might companies change this up?

NICHOLAS BLOOM: I think the pandemic is going to lead to an explosion in outsourcing and offshoring. I’ve spoken to quite a few managers that have said, we’ve discovered throughout the pandemic that working from home works really well. I’ve had entire teams that haven’t stepped foot in the office for the last 18 months, and they’ve done really well. I’ve been thinking, why do they need to physically be in the office? And, in fact, why does that team even need to be part of our company? Why do they need to even be in the country?

A lot of managers are joining the dots and saying, now is the time to think about offshoring, so, maybe moving some of those teams out to Mexico or China, India or South America, depends on your time zone and the other issues, or certainly outsourcing them.

I think the pandemic is going to be, for services trade as an outsourcing of service tasks, in many ways what 2002 was to manufacturing. That’s when China joined the World Trade Organization. There was a huge increase in manufacturing trade with the U.S.

I think we’re going to look back on 2021 and see this is a hugely important point of inflection, whereby suddenly offshoring and outsourcing just explode. That’s good for many people, but it also raises issues for firms to think about how to exploit this and make sure you’re ready to adapt.

ELISE HU: I’m sure we’ll hear more about offshoring talent in the next few years. Before we go, Nick, do you have any other research you’d like to share with us that’s really struck you? A parting thought?

NICHOLAS BLOOM: Another quirky result I’ll mention now is on handshakes, inspired by Pilita Clark. She’s a journalist at the FT . She said the handshake is dead. We thought, aha, I wonder if that’s true. And we surveyed two waves of 5,000 folks in the U.S.

And lo and behold, what you saw is, pre-pandemic, for business greetings, two-thirds of people said they would shake hands. The third had an array of other things. Post-pandemic, two-thirds of women say they want to verbally greet people, the other third are mixed between handshakes and fist bumps, which tells you handshakes are pretty unpopular amongst women. For men, it’s not quite as stark, but men are equally split a third-third-third between verbal greetings, handshakes, and fist bumps or something else.

The bottom line is, if you’re in a business environment, unless you are very certain the other person wants to shake your hand, I would not put your hand out, particularly if they’re junior. There’s a kind of power dynamic because you’re going to end up forcing them to shake their hand, and they may well be squirming inside and thinking, I really don’t want to do this. There are all kinds of weird and wonderful things you pick up from surveys, but I thought that was interesting.

ELISE HU: So many fascinating insights, everything from macro-economic trends down to handshakes. Nick Bloom, professor at Stanford, thank you so much.

NICHOLAS BLOOM: Thanks so much for having me on.

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ELISE HU: You’ve been listening to the WorkLab podcast, from Microsoft. There’s a WorkLab digital publication too, where you can find a transcript of this very episode. Check out microsoft.com/WorkLab for more insights about the future of work, and please rate us, review, and follow us wherever you listen.

The WorkLab podcast is a place for experts to share their insights and opinions. As students of the future of work, Microsoft values inputs from a diverse set of voices. That said, we do want to mention that the opinions and findings of our guests are their own, and they may not necessarily reflect Microsoft’s own research or positions.

WorkLab is produced by Microsoft with Godfrey Dadich Partners and Reasonable Volume. I’m your host, Elise Hu. Our correspondents are Mary Melton and Desmond Dickerson. Sharon Kallander and Matthew Duncan produce this podcast. Jessica Voelker is the WorkLab editor. Thanks for listening.

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