What are the Conditions for Successful Telework?

TSURU Kotaro
Faculty Fellow, RIETI

Indisputably, the highlights of the Action Plan for the Realization of the Work Style Reform prepared by the government of Japan at the end of March 2017 are the introduction of the limit on overtime work with penal regulations and improvements in the working conditions of non-regular workers such as by providing equal pay for equal work. Yet, it is worth noting that "telework," which is a flexible work style that doesn't require a fixed place of work, is covered as one of the measures to promote flexible work styles.

Telework is a general term for work from home, work using mobile devices, and work at satellite offices. In my book titled Reform of the Japanese Employment System for Revitalizing Workers and the Economy, the importance of disseminating new work styles by making full use of information and communications technology (ICT) including telework while standardizing job-based employees whose duties are limited and dual income families was emphasized as part of the work style reform that revitalizes individual staff and the economy and thereby increases labor participation and productivity.

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Then, what are the specific advantages of telework? Looking at the questionnaire survey conducted with employees engaged in telework by the Japan Institute for Labour Policy and Training, about 17% of the respondents answered that telework reduces the burden of commuting, and about 5% to 8% answered that it increases time for childcare, nursing care, or household affairs; this is not a large number (see Figure).

Figure: Advantages of Telework for Employees (multiple answers allowed)
Figure: Advantages of Telework for Employees
Source: Japan Institute for Labour Policy and Training "Research on the Substance of Diversified Work Style Using Information and Communication Equipment" (2015)

However, more than 50% of the respondents answered that telework increases work productivity and efficiency; this implies that improved productivity is also very important from the employees' viewpoints. Needless to say, attention should be paid to the fact that about 40% of the respondents answered that they were facing difficulty in drawing lines between work and non-work affairs, while about 20% of the respondents are aware of disadvantages such that telework is likely to result in long working hours.

In Europe and the United States, more than a few interdisciplinary studies have been accumulated with respect to the impact of telework since the 1980s. A paper written by University of Texas at Austin Associate Professor Diane Bailey et al. investigated the existing studies through the beginning of the 2000s and introduced the fact that, while the decline in the commuting costs is not the primary motive for telework, many studies have confirmed that telework has the effect of improving productivity.

Yet, it has been pointed out that studies on improved productivity are based on self-reporting by teleworkers who may be biased to claim that telework is successful. Moreover, the paper introduced an investigation example wherein 67% of the teleworkers reported increased productivity, but among them, 40% reported that they worked too much, and thus the improved productivity may have been overstated by increased working hours. Based on these findings, it was argued that analysis based on self-reported data fails to provide convincing support for empirical results of improved productivity.

Against this backdrop, in recent years, some empirical analyses have overcome the above mentioned problems. For example, Stanford University Professor Nicholas Bloom et al. used an experiment at Ctrip, a Chinese travel agency, wherein the call center employees were randomly assigned either to work from home or in the office for nine months and showed that a 13% performance increase was seen in the employees working from home, as a result of assessing productivity (number of phone calls) in a quantitative manner.

It was further shown that among such increase, 4% was attributed to a quieter and more convenient working environment while 9% was attributed to increased working hours due to fewer breaks and sick days, and thus, apparent improvement in productivity includes increased working hours.

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Meanwhile, the content of work is also an important factor along with the working hours to increase the productivity of telework. Ohio University Assistant Professor Glen Dutcher et al. carried out an experiment wherein college students were randomly assigned to participate in the lab on campus or outside the lab and to engage in either dull tasks such as typing or creative tasks. The results of the experiment showed that working "out of the lab environment," which is a situation close to telework, reduced productivity in the dull tasks by 6% to 10% while it increased productivity in the creative tasks by 11% to 20%.

This means that, in the case of dull tasks, productivity increased under the eyes of peers. This result is consistent with a paper written by Princeton University Professor Alexandre Mas et al. in which it was verified that peer effects (effect of motivating each other in a group) actually work by comparing the productivity of cashiers in a national supermarket chain and a paper written by University of Bonn Professor Armin Falk et al. which clarified peer effects by an experiment using a simple task of stuffing letters into envelopes.

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Then, what is necessary for telework to become a work style that increases real productivity, i.e., productivity per hour?

First, it is important to assign creative work that is autonomous and can generate concentration and maximize the advantages of telework. It should be kept in mind that while an autonomous work style has become available as a result of blocking interference from the office and other noises, teleworkers can be easily monitored thanks to the progress in ICT, and, thus, the range of work to which telework is applicable is expanding. This implies that proper balance is required between autonomy and control.

Second, while telework, which is a flexible and autonomous workstyle, generates a high level of satisfaction, it is also highly likely to lead to longer working hours at the unconscious level. Thus, efforts must be made so as to prevent working hours from increasing in comparison to traditional working styles.

In Western countries, the difficulty of drawing a line between work and private life has long been identified as a typical problem of telework. If working from home removes the border between work and private life and promotes longer working hours, the advantages of telework would be reduced by half. This means that controlling long working hours by successfully drawing a line between work and private life is an important key for promoting telework.

Many employees wishing to use telework due to childcare or nursing care issues prefer working, for example, late at night after their child(ren) has(have) fallen asleep or early in the morning before the child(ren) wake(s) up. However, working late at night (between 10:00 p.m. and 5:00 a.m.) results in the creation of an obligation for the employee to pay extra premium wages even in the case where a de facto working hours system is applied (Article 37 of the Labour Standards Act). Thus, there are cases where companies prohibit employees from working late at night or do not introduce telework.

Therefore, the obligation to pay premium wages for night work should be made flexible based on certain conditions for telework, and, thereby, the opportunities for employment of persons who can work for only a limited time should be expanded. Specifically, in the case where the working hours per day fall within the range of eight in the case of telework using ICT, even if work was conducted between 10:00 p.m. and 5:00 a.m., such work could be excluded from the application of the payment of premium wages for night work under Article 37 of the Labour Standards Act.

At that time, an accurate understanding of working hours using ICT, along with the consent of the worker, a discretionary arrangement of working hours, and introduction of measures to secure health (e.g., to limit night work to no more than two hours a day) will be an essential measure in avoiding overwork.

An accurate understanding of working hours to control long working hours is a condition necessary to promote other flexible work styles such as side jobs and multiple jobs. Some companies have already started ascertaining working hours or productivity of employees by making full use of the latest ICT, such as wearable devices and attendance management apps. These efforts are important points to lead workstyle reform to increased productivity.

>> Original text in Japanese

* Translated by RIETI.

May 15, 2017 Nihon Keizai Shimbun

May 31, 2017