WFH's Role in the Modern Labor Market

The U.S Government Accountability Office (GAO) has just released an excellent report titled; “Telework: Private Sector Stakeholder and Expert Views”. I enjoyed participating in this process.

I will first sketch out the report’s themes and then offer some thoughts.

HERE is a direct quote from the report;

The employer stakeholder organizations we interviewed said private sector employers consider several factors when deciding whether to adopt telework, such as job types, costs, and effects on recruitment and retention. They said employers also consider effects on their ability to track job performance and maintain collaboration.

The employer stakeholder organizations most often said the greatest benefit of telework is the ability to attract and retain staff. Worker stakeholder organizations also said telework benefits recruitment and retention.

Both worker and employer stakeholder organizations said that the greatest challenge of telework is building workplace culture.

Six of the eight experts we interviewed advocated for a policy to clarify the state to which workers who telework across state lines pay income taxes. Further, two of the eight experts said a policy to encourage states’ job license reciprocity could remove a barrier to teleworking across state lines when states’ licenses differ.

Seven of the eight experts we interviewed said telework helps those with barriers to work—such as workers with disabilities—remain in the workforce.

DOL provides guidance on telework under the Fair Labor Standards Act (FLSA). FLSA establishes federal minimum wage, overtime pay, and recordkeeping requirements for covered workers (including teleworkers), among other things. DOL also provides guidance on teleworkers' eligibility for unpaid, job-protected leave under the Family and Medical Leave Act (FMLA)

Here is a great Figure from the report focusing on specific types of workers and families who gain greatly from access to WFH.

In my research on WFH, I have emphasized that Work from Home accommodates our diversity and allows us to reoptimize as new shocks occur. Suppose that Matt’s mother lives in Baltimore and she is getting old. If Matt works in Philadelphia and is able to engage in WFH for two days a week, Matt can do a better job caring for his mother and may even choose to live in Baltimore. Suppose that Dora and Matt are married and Dora has a job in NYC and Matt has a job in DC. This couple could live in Baltimore and use WFH to balance their daily life. The Amtrak Corridor creates so many permutations in terms of work/life balance (and new opportunities for cities such as Baltimore to attract these individuals) when workers do not have to go to the office 5 days a week.

When people know that they must only go to work 3 days a week, many will choose to live further from where they work. This is a type of “Rebound Effect”. As people search for housing and the right community using a larger commuting radius, this increases their feasible choice set. Let me explain. Suppose that you can commute at 30 miles per hour and you have to go to work 5 days a week. A person will spend 10 hours a week commuting if he lives within 30 miles of where he works.

If this person must only go to work 3 times a week, then the person can live more than 40 miles from work and commute less than 10 hours a week. This increases in the commuting radius opens all sorts of new opportunities in terms of being close to activities for one’s children, better schools, and recreation opportunities.

Of course, there are costs to an organization of not having workers at the office every day. But, I believe that the quality of interactions will be higher if workers are not there daily. There is a quality/quantity tradeoff here. Of course, workers need to know each other but I believe that bosses can figure this out. Of course, young workers need to be mentored but upper management can figure out how to reward younger managers for being good mentors.

There has always been a self-selection process concerning what types of workers join what types of firms. Persistent WFH further delineates this process. An extrovert who loves seeing his colleagues and showing off his success in sales will want to go to work each day. Firms that want these sharks will not offer WFH. In this sense, WFH is another attribute of jobs. Basic supply and demand forces will determine whether workers will sacrifice significant salary in return for having the WFH right.

Over the course of one’s career, one’s desire to engage in WFH changes. The modern economy celebrates our diversity. WFH is a new example of how Labor markets evolve over time to accommodate our diversity.

Read this great piece about Sherwin Rosen’s scholarship.

To wrap up, I do believe that WFH strengthens the family. For too long, there was a literal separation of the household sector and the working sector. In the recent past, men work up and commuted to work. The rise of WFH integrates the household and working sector and this allows many more permutations of how one spends the day. Young mothers can work some hours. A dad can stay home with a sick child. A parent can attend a school play. In the 1970s, none of this was possible. This is progress. Yes, for profit firms face “cut throat” competition but those firms that commit to being family-friendly will attract and retain more talent.