How could the recent increase in homeworking affect the economy?

The purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision.
Published on 22 January 2021
It’s not yet clear if more widespread homeworking will persist and what, if any, economic effects it will have. But it could affect how many hours we work and how productive we are. It could even bring more workers into the labour market.

Covid-19 (Covid) has caused an unprecedented number of people to work from home. Thirty-seven per cent of people in employment worked entirely from home in April immediately after the first lockdown was imposed (Chart A).

Homeworking remained relatively high even after restrictions were eased over the summer. Although working from home had been gradually increasing before the pandemic, only around 5% worked mainly from home in 2019.

The embedding of homeworking technology and changing attitudes to the practice may mean the shift to homeworking is not fully reversed after the pandemic is over.

There could be economic effects from more widespread homeworking, especially in the labour market. It could increase the amount of time spent on work: full-time homeworkers tend to work longer hours than their workplace-based colleagues, possibly because they spend less time commuting.

Some studies suggest working from home can boost productivity in certain circumstances – for example, offering workers a quieter work environment with fewer distractions. However, other studies suggest that it can reduce productivity, especially where tasks are complex or require collaboration with other people. Some early evidence suggests those that have had to work from home because of the pandemic have been less productive, although productivity may improve as workers adapt to new working arrangements and invest in homeworking spaces.

Homeworking could also increase participation in the workforce. Women, older workers, and people with disabilities were more likely to work from home in the past and were also less likely to participate in the labour market (Chart B). Homeworking may help overcome barriers to work, such as mobility issues. It could also mean people are able to take jobs anywhere in the country without having to move.

We don’t yet know to what extent the increase in homeworking will persist, and any economic effects are very uncertain. The Monetary Policy Committee (MPC) will be closely monitoring the issue as the immediate effects of the pandemic recede.



This post has been prepared with the help of Lena Anayi and Lee Robinson.

This analysis was presented to the MPC in November 2020.

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