The COVID-19 pandemic catalyzed an incredible shift in people’s day to day lives, most notably impacting work arrangements. From 2019 to 2023, remote work has seen a five-fold increase, with nearly 40% of US employees reporting working remotely at least one day per week. This shift represents a fundamental change in the way work is organized and raises questions regarding productivity, work culture, and future costs.

The implications of the shift to remote work are rather nuanced and depend on the specific work arrangement. Fully remote work appears to reduce productivity by approximately 10% compared to traditional in-person work. This productivity gap stems from factors most would expect to come with remote work: communication challenges, mentoring difficulties, cultural development barriers, and issues with self-motivation.

Although working in person may seem like a Pareto improvement from this, the economic calculus is more complex than simple productivity measures. Despite the reduction in productivity, fully remote work still remains attractive to many firms due to substantial cost reductions from office space savings and the ability to hire talent globally. These economic benefits can outweigh the productivity losses in certain contexts.
Interestingly, perceptions of remote work productivity have evolved over time. Bartik et al. (2023) document a remarkable shift in small business owners' views: while 70% reported productivity declines due to remote work in early 2020, by 2021 the median business owner reported positive productivity impacts. This may, however, be a temporary transitional effect as firms gain remote experience, leading to productivity improvements through organizational learning, IT investments, and process changes.
As workplaces become increasingly geographically dispersed, these factors become especially critical for managers leading remote teams. The pandemic not only created an immediate shift in work arrangements but initiated a sustained transformation in how productivity is achieved and measured in the modern economy.

References:

Barrero, José María, et al. “The Evolution of Work from Home.” The Journal of Economic Perspectives, vol. 37, no. 4, 2023, pp. 23–50. JSTOR, https://www.jstor.org/stable/27258124. Accessed 1 Mar. 2025.

Bartik, Alexander, Zoë Cullen, Edward L. Glaeser, Michael Luca, and Christopher Stanton. "The Rise of Remote Work: Evidence on Productivity and Preferences from Firm and Worker Surveys." Journal of Economics & Management Strategy (forthcoming). (Pre-published online October 24, 2024.)