In a June 15th blog post entitled “Productivity Down as Remote Work Up?”, Arnold Kling discusses recent US productivity numbers, which show weakening productivity per worker in the aggregate. Kling’s argument is straightforward: he points to the mathematics of the “GDP Factory” idea of macroeconomics and, consequently, the calculation of productivity can mislead if one is not careful about looking at the underlying figures.
Kling goes on to discuss how many combine the productivity figures with the Work From Home (WFH) trend that has been happening since the governments locked everything down in response to the COVID-19 pandemic at the beginning of 2020. The conclusion, then, is that WFH is bad for productivity. But Kling notes that’s not necessarily the case, and not just because of the mathematical fluke of how productivity is calculated. Work From Home has a large increase in well-being associated with it, as well as the reduction of dead time such as commuting and annoying meetings:
I think that WFH is a huge increase in well-being, regardless of what the GDP factory is reporting. Whatever the drawbacks are, business executives should be trying to overcome them, rather than go back to the bad old days. If you need to get employees together, do so at short offsite retreats.
Keep upgrading the technology for interpersonal interaction on line. Evaluate what you have and keep tweaking. Emphasize quality of communication rather than quantity (I am very dubious of Slack on those grounds).
I certainly do not dispute the well-being effects of WFH. When Virginia and Maryland shut everything down in 2020, my life improved along many margins. At the time, I lived an hour away from George Mason University, where I was a graduate student. There were obligations I had to attend to in person several times a week, and with Northern Virginia traffic, that one hour drive could sometimes take three hours. Once everything went online, my personal productivity and well-being skyrocketed, for sure.
However, I do question WFH’s ability to result in long-run productivity gains, especially as new workers enter the labor force. Much knowledge of our jobs is tacit and, in many cases, inarticulable. There are numerous pitfalls new employees can fall into about how things are done in the firm, or what expectations are, etc. Every system has its own quirks, and those cannot be understood unless one is actively interacting with the system.

Institutional knowledge is transferred from employee to employee through interaction, imitation, and observation. Yes, meetings can be boring, and who hasn’t wanted to shout at a boss “Just leave me alone and let me work!” But, I contend, they also can serve as a vital knowledge-transmission service. The office exists for a reason, and given how much communication is non-verbal, I strongly doubt communication software can replicate those knowledge-transmitting avenues. Small chats between workers, or even just seeing how others solve the same problems, help expand our knowledge. Humans are social creatures, and we work better when we work together.
Kling ends his post by stating “We should not convict WFH. It has not been proven guilty.” True. But I think economic theory gives us enough evidence to indict WFH.
Jon Murphy is an assistant professor of economics at Nicholls State University.
READER COMMENTS
David Seltzer
Jun 24 2023 at 2:41pm
Jon wrote, “Small chats between workers, or even just seeing how others solve the same problems, help expand our knowledge. Humans are social creatures, and we work better when we work together.” It seems yours is an example of spontaneous order wherein, the chats between workers are “the result of human actions, not of human design”. I think spontaneous order scales. The classic example is the development of language so social creatures could interact. Of course I could be wrong.
Jon Murphy
Jun 24 2023 at 2:44pm
You’re right; although I didn’t use the phrase “spontaneous order” I am making that argument. The office evolved for a reason, and I think that reason includes the production and dissemination of knowledge.
THOMAS HUTCHESON
Jun 24 2023 at 5:08pm
But the “office” evolved in an environment where face to face interactions were the only way (almost) that work communications could occur. I seems reasonable to think that when that changes, some part of work communication will cease being 100% in the “office.”
Jon Murphy
Jun 25 2023 at 1:04pm
Yup.
Andrew_FL
Jun 24 2023 at 3:10pm
I would dispute the very premise that productivity is weakening. In general in most recessions, average productivity rises above trend-apparently either at a firm level or industry level, or both, less productive workers lose their jobs first. Then afterwards during the recovery phase, average productivity returns to trend. The productivity numbers, as of Q1 2023, are perfectly consistent with just such a pattern. There is no reduction in average productivity to explain.
Jon Murphy
Jun 25 2023 at 1:05pm
Correct. There is no weakening.
steve
Jun 24 2023 at 4:54pm
Agree with you here. WFH is probably doable for experienced workers in some fields. Managers will need to adapt how they manage to make it work sustainably. For new people it’s mostly a fail. It slows learning and they just dont learn the culture. Also, my experience with meetings (TEAMS mostly) was very mixed. In small groups where we already knew each other well it worked fine. In larger meetings with a broader mix of people it was awful. I would just talk and get zero feedback. In person you can see how people react even if they are quiet at first.
Steve
Jon Murphy
Jun 25 2023 at 1:06pm
Yeah. Those non-verbal forms of communication are vital.
David Henderson
Jun 24 2023 at 5:16pm
Nicely done. I like the Polyani point about tacit knowledge.
Jon Murphy
Jun 25 2023 at 10:51am
Thank you
MarkW
Jun 25 2023 at 7:37am
I’m not sure how much we can intuit our way to the right answer here == I don’t know how we can even be sure about “Humans are social creatures, and we work better when we work together.” Yes, of course humans are social creatures, but there are a lot of negative as well as positive aspects to group socialization. Much of the typical office socialization that happens is merely wasteful, while some of it is actively harmful. Surely ageism, sexism, ‘lookism’ and other interpersonal biases (as well as jealousies, spats, squabbles, etc) are less of a problem with remote workers. Do the countervailing positives (of teamwork, fellow feeling, etc) outweigh the negatives AND the time and cost of commuting? And does this balance depend on the kind of work being done?
I think it’s fine to let the market sort this out. Some firms will call employees back to the office. Others will reorient around WFH and remote work. Let them compete in the marketplace (and to attract quality workers) and see where we end up.
Jon Murphy
Jun 25 2023 at 8:28am
The evidence is quite clear on that point. We have literally millennia of evidence. Gains from trade and all that.
I contend yes.
Sure. The devil is in the details, after all.
MarkW
Jun 25 2023 at 1:41pm
The evidence is quite clear on that point. We have literally millennia of evidence. Gains from trade and all that.
But gains from trade don’t require those making exchanges to work alongside each other. The typical case has surely been that they don’t — they meet only occasionally. Or never (in the common case that the goods are transported by those who are neither the producers nor the ‘end users’). Not only does nobody know how to make a pencil, but nobody knows (or even knows about) everybody else who’s involved in making a pencil.
In a large sense, WFH is a return to the pattern of cottage industry that was the human norm for all of the millennia leading up to the industrial revolution. Surely the practice of collecting large numbers of people together in an office or factory is the new, more unusual pattern.
Jon Murphy
Jun 25 2023 at 1:48pm
True. But working alongside one another improves outcomes because of gains from trade.
MarkW
Jun 25 2023 at 3:25pm
But working alongside one another improves outcomes because of gains from trade.
Because of gains from trade? It seems to me that people working alongside each other are almost never engaged in trade with each other. There may be other reasons why close proximity raises productivity (skills transfer, or specialization, or perhaps better morale due to camaraderie, etc), but ‘ease of mutual trade’ doesn’t seem to be one of them.
Jon Murphy
Jun 25 2023 at 4:38pm
And yet, in your list, you point to trade: specialization and skills transfer. Indeed, as Pierre points out below, the purpose of a firm is to make trade between people easier.
Anthony
Jun 25 2023 at 10:39pm
I have been WFH full-time for 2 years now and the ageism comments still happen but at a lesser extent. At least the “lookism” comments have stopped which I would get nearly on a daily basis because I didn’t stress in a suit like a lot of my counterparts (but they thought dressing in a suit made them important and more productive when it was the complete opposite)
Pierre Lemieux
Jun 25 2023 at 10:42am
Jon: Interesting post. Ronald Coase’s old “The Nature of the Firm” is also relevant. If the opportunity cost of virtual interaction were not positive (at some point), why would the firm exist at all? The devil must be in the “at some point.”
Jon Murphy
Jun 25 2023 at 10:51am
That’s precisely the paper I was thinking of when I wrote this. The original version was much more Coasian (I talked about the transaction costs of knowledge production).
Michael
Jun 26 2023 at 8:16am
I am a recent software development retiree. During the first years of COVID we had numerous online meetings, training sessions, and daily Agile scrums. What I noticed the most during the WFH years was less company gossip, less over-the-cube-wall bro culture, and longer stretches to focus on hard problem. One bad thing was for those who had repeated COVID infections, months-long subtle brain fog seemed to impact our team’s productivity, and this seemed to be more common among those returning to work.
Knut P. Heen
Jun 27 2023 at 8:50am
One thing I noticed is that seeing people in the hallway often reminds you that you actually need to have a chat with that person.
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