The ongoing shift to remote and hybrid modes has had an enormous impact on the ways many of us work, live, and play. We’ve swapped commutes for video calls. We’re learning new ways to communicate and collaborate. The shift to hybrid work is also impacting lives and companies on a global scale, transforming the economy in ways that will be felt for years to come.

What will those broader changes look like—and what emerging trends should business leaders be watching? Nicholas Bloom , a Stanford University economics professor who has studied remote work since 2004, shared his perspective in a series of conversations with Microsoft, including one at Innovation@Work US, a virtual event hosted by The Economist . Bloom joined Jared Spataro , corporate vice president for Modern Work, for a spirited conversation about the signals he’s seeing in the economy.

One of Bloom’s big takeaways: “Hybrid work is the future.” As for companies trying to bring people back to the office five days a week? “That is something I just don’t hear about anymore,” Bloom says. But what about the ripple effects of hybrid work—what comes next?

As cities change, so will companies’ approach to real estate

The move to remote and hybrid work, Bloom notes, is already luring workers out of cities and into the suburbs. In one study, Bloom documented how rents have dropped in central business districts during the pandemic and home values in the hinterlands have climbed. Using information from real estate marketplace Zillow and change-of-address data from the U.S. Postal Service, Bloom and colleague Arjun Ramani noticed about 15 percent of Americans moving from large urban centers like New York City and San Francisco farther out into suburban rings. This so-called “ donut effect ,” referring to city centers hollowing out, is easy to understand, Bloom says: “If I’m only coming into the office two or three times a week, I’m not that bothered about the commute.”

A photograph showing a woman looking at a screen as she works from home.

Photography by Kyle Johnson

How companies will react is less certain, Bloom says. Some predict that businesses will be less reliant on city centers, adapting to the decentralization of workers with a “hub and spoke” system of satellite offices. Bloom believes many companies will do the reverse, relying instead on one office in a city center where people can come for two or three days a week of “concentrated interaction,” while enjoying the flexibility of working from home on the other days. “So city centers become more work-focused, more business-focused, and we slightly unwind what’s been happening for the last 20 or 30 years of people moving to live in city centers,” he says.

Companies will onshore manufacturing and offshore more talent

The effects of the pandemic—including massive ongoing product shortages—are one factor that may lead more companies to onshore manufacturing to protect the supply chain.

“On the other hand, COVID is likely to generate a huge increase in service sector globalization,” Bloom says, as firms realize they can look farther afield for more types of talent—including high-level knowledge workers. In one survey conducted by Bloom and other researchers, nearly 40 percent of respondents said they were more efficient when allowed to work from home. If people can work from anywhere, and do so even more efficiently, organizations will be able to pull talent from just about anywhere.

“At a number of firms I’ve spoken to, executives said things like, ‘I’ve been thinking the last 18 months that this team has been really great. They’ve been fully remote … and given that, why do they need to physically be in our office? In fact, why do they need to be in our country?’ ” Bloom says.

A Boston-based company, for example, could draw talent from anywhere from Los Angeles to London to Tokyo, provided the worker had a decent internet connection and the right tools to communicate despite working from a different time zone. Many of these workers may be contractors, with companies paying for their services rather than hiring them directly, Bloom says. “I think we’re going to look back on 2021 and see this as a hugely important point of inflection whereby, suddenly, offshoring and outsourcing just exploded,” Bloom says.

Frontline employees will gain new flexibility

In a Microsoft-commissioned global survey of more than 30,000 people, 73 percent reported that they wanted to keep flexible work options post-pandemic. And research from Bloom and his colleagues suggests that nearly half of workers would quit or seek employment elsewhere if their boss wanted them to return to the office five days a week. “Individuals like working from home because it’s more convenient,” Bloom says. “And there’s quite a large and growing research base that shows productivity is actually higher.” In other words, flexibility is win-win for employees and employers.

If people can work from anywhere, and do so even more efficiently, organizations will be able to pull talent from just about anywhere.

According to one of Bloom’s surveys, the flexibility of hybrid work is worth a 7 to 8 percent pay increase to workers. But what about the half of Americans who can’t work from home, including workers in healthcare, manufacturing, retail, and public services? Frontline workers have missed out on the benefits of remote work during the pandemic, and many are looking for new options; since the pandemic, more than 500,000 workers left their jobs in the healthcare industry alone. “When I talk to employers, they’re desperate to hire,” Bloom says.

Clearly, employers will need to innovate to ensure frontline workers feel like they’re enjoying some of the benefits of the evolution in workplace flexibility. Two possible options for companies, according to Bloom: pay onsite employees more to make up for the work-from-home benefits they can’t enjoy, or make their schedules more flexible in other ways. Managers could offer schedules where, instead of two weeks of five days each, workers would do eight nine-hour days, one eight-hour day, and then get every other Friday off. Or companies could offer four-day work weeks, at 10 hours per day. Either way, frontline workers get days at home they didn’t have before.

The bottom line: Bloom sees opportunities ahead for companies and executives who embrace flexibility and think creatively. With technology enabling remote and hybrid work, expect new talent markets to open up in previously unseen ways. More companies will pursue talent in other states and other parts of the world. And they’ll be open to more flexible schedules for frontline workers—or for retirees and people with young children who want to work from home two or three days a week. Overall, “this is going to be a huge period of continuous change,” Bloom says. Leaders and organizations will need to follow the trends closely—and keep listening to their employees—to come out on top.