Productivity of Working from Home during the COVID-19 Pandemic: Panel Data Analysis

Author Name MORIKAWA Masayuki (President, RIETI)
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This Non Technical Summary does not constitute part of the above-captioned Discussion Paper but has been prepared for the purpose of providing a bold outline of the paper, based on findings from the analysis for the paper and focusing primarily on their implications for policy. For details of the analysis, read the captioned Discussion Paper. Views expressed in this Non Technical Summary are solely those of the individual author(s), and do not necessarily represent the views of the Research Institute of Economy, Trade and Industry (RIETI).

1. Background

Following the expansion of the COVID-19 pandemic, there has been a rapid increase in workers practicing Work from Home (WFH). Within this context, there has also been a rapid increase in research on WFH during the pandemic. We have come to know what characteristics workers need to have in order to practice WFH as well as what kind of workers are actually engaging in WFH. Findings generally show highly-skilled, high-wage, white-collar employees who work in large firms tend to practice WFH, meaning that the expansion of WFH has tended to increase disparity in the labor market. In contrast, formal research on WFH productivity is still limited to a few studies both in Japan and abroad. This paper expands upon Morikawa (2020), which was based upon a survey conducted in June 2020. Another survey conducted in July 2021 is utilized to present new observations about changes in the practice of WFH and productivity during a year of the COVID-19 pandemic, the substitution of commuting time for working time, as well as other areas of focus.

2. Key results

(1) The latest survey indicated that 21.5% of workers were practicing WFH, which is quite a decrease from the 32.2% a year prior. When tabulated using only continuing respondents, the extent of the decline was somewhat large. Of the employees who continued to reply to the survey, 3.2% just started practicing WFH during the past year, while 41.7% stopped practicing it. Of the employees practicing WFH, a large number had reverted to working at their usual workplace. Also, individuals with lower WFH productivity had a higher probability of exiting WFH.

(2) Average WFH productivity was still 20% lower than productivity in the usual workplace, but an improvement of over ten percentage points was observed during the past year. Figure 1 shows a comparison of the distribution of WFH productivity between the current survey and the one a year prior. From this figure, it can be seen that the mode of productivity has shifted somewhat to the right and the lowest point of productivity distribution has contracted significantly. (1) "Selection effect" arising from the exit of low WFH productivity employees from the WFH practice, and (2) the improvement in WFH productivity through "learning effect" contributed almost equally to the improved productivity of WFH.

(3) An average of a little more than 40% of the commuting time saved due to WFH has been allocated to work time. The increase in labor input due to this has amounted to 3.0% of the total labor input of employees practicing WFH and 0.7% of the total labor input for all workers. Even taking into consideration the allocation of saved commuting time to work time, there is no substantive change in the conclusion reached about WFH productivity.

(4) The number of individuals who said they would like to practice WFH at the same frequency as they currently do even after the COVID-19 pandemic subsides significantly increased (Figure 2), suggesting a high likelihood that WFH may become established as a highly-convenient and advantageous workstyle for workers engaged in work suited to WFH.

Figure 1. Change in WFH Productivity Distribution
Figure 1. Change in WFH Productivity Distribution
Figure 2. Intention to Continue WFH after the COVID-19 Pandemic
Figure 2. Intention to Continue WFH after the COVID-19 Pandemic
  • Morikawa, Masayuki (2020),"Productivity of Working from Home during the COVID-19 Pandemic: Evidence from an Employee Survey," Covid Economics, Issue 49, pp. 132-147.