Remote work fuelled US productivity growth during pandemic, study says

American study finds increase in productivity for service-based businesses due to the rise of remote work during Covid-19. — Photo by Chris Montgomery on Unsplash

US economic productivity during the pandemic was driven entirely by firms with remote work capacity, according to a new study co-authored by Robert Gordon of Northwestern University.

Productivity in work-from-home services businesses, which includes information and finance, grew 3.3% between the beginning of 2020 and early 2022. Meantime, growth in the goods sector, in jobs like construction and mining, was unchanged and services industries that required in-person contact contracted by 2.6%, according to a working paper by Gordon and Princeton University’s Hassan Sayed.

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“WFH respondents assess their own productivity as substantially higher than their expectations, which may provide a comparison between productivity of WFH activity compared to the productivity of the same individuals in their previous office environments,” the authors wrote in a paper published by the National Bureau of Economic Research, citing a recent survey.

Gordon – a productivity expert and author of the 2017 book The Rise And Fall Of American Growth – wagered that in-person services likely lost productivity growth due to pandemic shifts, like airline pilots transporting fewer passengers and restaurant staff tending tables with few if any patrons.

At the same time, “pandemic-era GDP growth may be understated by neglecting the shift of residential capital from non-work to work activities and the large personal investment in technology hardware and communications software needed to make WFH effective,” the authors wrote.

Gordon and Sayed also note that a revival in productivity growth through the coming months is unlikely, given that continued rehiring in businesses that laid off employees in 2020 as the pandemic spread is going to reduce output per person. The average productivity growth rate may fall to around 1.4%, compared with 2.1% between 2020 and the first quarter of 2022. – Bloomberg