Episode 2: Who Can Work From Home?

TESS VIGELAND: Social distancing has become the dominant tool to slow the spread of coronavirus throughout the world. And working from home has become a dominant tool to remain both safe and employed during this crisis.

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EDUARDO PORTER: But how many people can do this? How much of the workforce can work from home?

TESS VIGELAND: This is Pandemic Economics, a podcast about the global impact of COVID-19 from Stitcher and the Becker Friedman Institute for Economics. I’m Tess Vigeland.

EDUARDO PORTER: And I’m Eduardo Porter. We’ve been invited to have this series of conversations with University of Chicago economists. In this episode, we speak with Brent Neiman and Simon Mongey not only about how many, but also what kind of workers can keep toiling from home.

TESS VIGELAND: I spoke with Brent Neiman about the factors that make working from home possible, and how those factors are affecting the number of US jobs that can still be done while social distancing orders are in place.

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It feels like we’ve been hearing about kind of a work from home revolution for years now. But clearly in this pandemic, we’re seeing just how much of that is true. But let’s talk numbers here. First, kind of the overall picture of what you found. How many people in this country can work from home?

BRENT NEIMAN: My colleague, Jonathan Dingel and I, we find that 37% or so of US jobs could be performed at home, or equivalently, that 63% of US jobs could not be performed. And we’re talking about entirely at home.

TESS VIGELAND: 37% percent doesn’t seem like a lot. It seems kind of obvious that a lot of desk-based jobs could be done from home. Is that what we’re mostly talking about here?

BRENT NEIMAN: Certainly that’s what our study finds. You know, if you look in industries, like professional and scientific services or management of companies and enterprises or finance and insurance, there are a lot of jobs that it’s not, doesn’t take a huge stretch of the imagination to say, look, of course it can be done now. There are somewhere it’s a little more hazy, more of a middle ground. So things like certain types of educators we might not have thought of as being able to work from home before, but the proof is, I guess, in the pudding, as I’ve got my first and fourth graders in the room next to me right now.

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Our classification does treat most teachers and most providers of educational services as able to work from home.

TESS VIGELAND: Yeah.

BRENT NEIMAN: We estimate in health care and social assistance, it’s on the order of a quarter of the jobs can be done from home.

TESS VIGELAND: Now I know in your paper, you not only talked about just the raw numbers, the percentage of people who can work from home, but also what that represents in terms of wages in this country. So can you give us a sense of what you found there?

BRENT NEIMAN: Yes. So 37% of the jobs we find in the US can be done from home. But those 37% of jobs actually account for a disproportionately large share of total wages. And how can that be? It’s the case that jobs that can be done from home on average, pay more than jobs that cannot be done from home.

TESS VIGELAND: Hmm.

BRENT NEIMAN: So even though 37% of jobs we find in the US can be done from home, we think those jobs account for 46% of all wages. A little less than half of all wages earned in the economy can be done from home. On the one hand, it’s positive that that’s a large number, because it does mean that in principle, a greater share of US GDP in value added can continue under strong social distancing guidelines.

On the other hand, it does mean that to the extent the can’t work from home jobs are lost or receive less hours, it’s evident that there will be an unequal impact, an unequal toll of these social distancing measures, and that they’re likely to be particularly hard for poor earners that earn less than the average.

TESS VIGELAND: Brent, you created a sort of heat map that shows who’s working from home. And I wonder if you could describe what that map looks like, and what it shows us in terms of where and who is working from home.

BRENT NEIMAN: Yeah. And again, I want to emphasize, it’s really about who could work from home, as opposed to who is or has been.

TESS VIGELAND: Right.

BRENT NEIMAN: In terms of which parts of the country have jobs that are less likely to be done from home, it’s the kind of industrial places, for example, like Elkhart, Indiana or Muskegon Michigan, Decatur, Alabama, where the share of jobs that can be done from home are quite low. Near to 20%, let’s say. By contrast, there are other college towns, tech hubs, urban areas, where it’s actually quite common and quite likely that you can work from home. In Washington, Chapel Hill or Ann Arbor, or San Francisco, Boston, Cambridge. These are all areas where somewhere between 40% and 50% of all jobs can be done from home.

TESS VIGELAND: So what do these numbers tell us about the need and ability to reopen the economy? If that many workers cannot and are not working from home, then a lot of them simply aren’t working. They are also going to have trouble with social distancing potentially.

BRENT NEIMAN: The question of whether we can relax social distancing measures, the question of whether we can allow people to return to the workplace and return to the marketplace is likely to be guided, and properly so, by public health considerations. But I view our results as important in the context of when that decision is made, it’ll be useful, I think, to policymakers, to look to the work from home statistic as a useful indicator of how devastating these social distancing restrictions, though necessary for the public health, how devastating they might be in certain communities and in certain job categories.

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TESS VIGELAND: Did your research give you a sense of what changes we might see when we come out of this crisis?

BRENT NEIMAN: It’s quite hard to believe that this won’t facilitate at least some more work from home in the long run. How transformative, whether this will be a true revolution or not, is a deep and I think, still open question.

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TESS VIGELAND: After the break, Eduardo talks to Simon Mongey about the underlying factors widening the gap between those who can work from home and those who can’t.

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EDUARDO PORTER: We are back with Pandemic Economics from the University of Chicago’s Becker Friedman Institute.

TESS VIGELAND: So, Eduardo, clearly, work from home is an issue that is going to be with us for a long time. And it’s yet another indicator of how unequal this whole experience has been for so many people. You talked to Simon Mongey about some of the real details here.

EDUARDO PORTER: Yeah. One of the thing that struck me was actually how little work can be done from home. I would guess that this kind of shock to the system is going to encourage more automation. Bring in more computers and more robots and more machines. Most workers could be in big trouble.

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What do you normally work on most? What’s your area of principle expertise?

SIMON MONGEY: So I’m a labor and macroeconomist. But what myself and my co-author, Alex Weinberg, were interested in, was trying to figure out, what are the characteristics of the workers in these low work from home jobs. Are the individuals with college degrees? Are they individuals that have a lot of liquid wealth? If the individuals are those types, then one might think that you would need to provide say less economic support to these individuals. However, what we find, is that these individuals in low work from home occupations disproportionately do not have a college degree, are below median income, don’t have employer-sponsored healthcare, are predominantly renters.

EDUARDO PORTER: So distributional impact is basically, where is this disease hitting hardest, right?

SIMON MONGEY: Exactly, exactly. What some of the main figures in that paper show is, the individuals in jobs which are less able to be done from home, are those which are at the bottom of the income distribution already. So to that extent, their incomes are going to be falling, whereas those that can work from home, their incomes will be less affected. That’s going to lead toward widening in income inequality.

When we think about coming out of this and how jobs would go back, we have a separate measure in the paper which tells us how close to other individuals you are when you’re at work. And so we can split occupations, split jobs into high physical proximity jobs, where you’re very close to individuals. You spend a lot of your day working within arm’s reach of other individuals. So you could think of a dentist or someone working in a nail salon.

And jobs which are very low physical proximity. So you could think of say, a truck driver, where you spend most of the time working by yourself. And what we find, is that similarly to this measure of can a job be done from home, the jobs which are very high physical proximity, the workers in those jobs also skew towards the economically more vulnerable. The average worker in a high physical proximity job is also more likely to be below median income, to be part-time employed, to be single, to be renting.

So we think about opening up the economy, you could think about a indiscriminate opening, where all jobs go back, say hypothetically. If we were to do that, then the individuals which are going to be in the highest proximity jobs, so their highest health risk are individuals that are kind of economically more vulnerable already. If you think about a slow opening up of the economy, where you allow low physical proximity jobs to be done first, then these individuals would track not to be vulnerable and normally high physical proximity jobs are going to be the last to go back.

So an indiscriminate opening, these individuals are at higher health risk. A slow opening, these individuals are at higher economic risk. So either way, individuals which are at the bottom of the income distribution are at higher health risk one way or economic risk the other.

EDUARDO PORTER: The top line story here coming out of this piece of research of yours, is that the distribution of pain from this disease just really fits well within our deeply established pattern of inequality, right? The poor, people of color, immigrants, get the punishing end of the stick. And higher income Americans are sheltering at home.

SIMON MONGEY: That’s exactly right. Something that Alex and I have been working on in this other research I’ve been doing and trying to understand in a sense, how substitutable all workers are in low skill occupations in the US, and whether that’s changed over time. And what we find there, is evidence that occupations which feature workers which predominantly, say don’t have a college degree, which we found here, also is kind of high physical proximity, low work from home jobs. Those jobs have become a lot more similar in the US economy over time.

So a way to think about that, is that the skills required to work in say, an Amazon warehouse or to work in a coffee shop, have become more similar over time. Whereas before, you might have been a kind of specialized individual working in a coffee shop or a specialized individual working in a warehouse. We now see a lot more bouncing around of these occupations.

So as we see these individuals losing their jobs, one of the concerns that I have ongoing, is that to the extent of these jobs have become more substitutable and individuals are kind of less specialized, less attached to their jobs, that is going to potentially compound the effects of this in terms of the wages that people are paid for these jobs. The lines outside the door are going to be very, very long as people are eager to get back to work.

And the lines are going to be even longer, because these jobs, just over time, due to automation and the integration of IT into many of the jobs in the economy, just means that there’s more people that are able to do these jobs. And that’s going to, I think, relieve a lot of any upwards pressure on wages in these jobs. And that could potentially have a longer run scarring effect on the wages of workers in lower skill occupations in the US.

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EDUARDO PORTER: So, Tess, I wanted to hear your thoughts on this. I mean, from having heard Brent talk about who can work from home and who cannot, what does that make you think?

TESS VIGELAND: Well, quite frankly, I think it’s very concerning. I mean, I think this is really relatively few people who are able to work from home. And so if we continue to have social distancing measures in place, even if they go away for a while and then come back, what it means, is that the people on the lower end of the wage scale are going to be faced with a horrible choice. They can’t work from home, which means that they’re not really working at all. And how do you provide that segment of the population with an income?

EDUARDO PORTER: These folks on the bottom half of the income distribution, as it were, face a double whammy. Say if they are at the highest health risk, because if they are deemed essential workers, well, you know, these guys are going to be in a lot of contact with other people and at higher risk of getting infected from COVID. But they’re also at the highest risk of becoming unemployed and losing their incomes.

TESS VIGELAND: And that’s what I find really concerning, as we look down the line to the future, where working from home could be this revolution in the workforce, but only for a small percentage of the population, less than half.

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So what kind of revolution is that really?

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The first quarter of 2020 saw the biggest and fastest economic contraction in a decade. Next time, Austan Goolsbee, Former Chair of the Obama Administration’s Council of Economic Advisors, joins us to share lessons from the 2008 financial crisis, and get his thoughts on what policy guardrails are needed in this one.

AUSTAN GOOLSBEE: Our task is to keep this thing both on the medical side, and by consequence, on the economic side, to keep this a temporary phenomenon and not let it turn into regular business cycle recession. Because stimulus does not work if you do not have control over the virus, period. That’s my rule number one of virus economics.

You could give people a tax cut. They will not spend the money unless the virus is under control. They will save the money. The right answer are things that are about are making sure that people don’t starve, that they don’t get evicted, they don’t get their gas shut off, that companies that are viable in the medium and long run don’t run out of money and have to liquidate, so that when we all go under the rock, a tornado passes by, we can come back out again. And that’s different than what we’ve done in the past.

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EDUARDO PORTER: Pandemic Economics is produced by the University of Chicago’s Becker Friedman Institute. Our producers are Kaitlyn Nicholas and Dana Bialek. Our Executive Producer is Ellen Horne. Production and original music by Story Mechanics.

TESS VIGELAND: Pandemic Economics is part of the University of Chicago Podcast Network.

EDUARDO PORTER: I’m Eduardo Porter.

TESS VIGELAND: And I’m Tess Vigeland. Thanks for listening, and we’ll see you next time.

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