Introduction
The COVID-19 virus and policy reactions to it have shut down wide swathes of the economy and sent labor markets into a tailspin. Total unemployment claims over the last seven weeks stand at 33.5 million, and early estimates suggest the unemployment rate has risen to 16.2% and the employment rate has declined by 23%. However, the shock has not affected all workers or businesses equally. While face-to-face work has come to a halt, many who can do their jobs remotely have been able to continue working. In the aggregate, one-half of U.S. workers are now working remotely.
To help understand how remote work has shaped the early stages of this economic crisis, this analysis quantifies the extent to which remote work has helped reduce job loss. Using data from the BLS and Upwork, the results show that early on in the economic crisis remote work has helped workers and firms continue working during this pandemic. Specifically, working in a remote work-capable job reduced the risk of being laid off in March 2020 by two thirds or more. Overall, working remotely means less risk for firms and workers, which suggests important benefits to the trend of growing remote work.
The effect of remote capability on workers
It is clear that remote work has gone up during the pandemic, and so too has unemployment. What we don’t know yet is by how much the ability to work remotely has insulated workers against layoffs. It may be the case that while remote working has gone up, those who can work remotely are no more or less likely to lose their jobs. The goal of this research is to help resolve this question.
To estimate the effect of the ability to work remotely on actual employment outcomes, we utilize the BLS Current Population Survey (CPS). The CPS is the data source used to measure the official unemployment rate every month. However, it does not ask who is working remotely. In addition, even if we knew who was working remotely before the crisis, to estimate the true effects of remote work, what we want to know is who has the ability to work remotely. Survey evidence on the labor market response to the pandemic suggests that the share of workers who are working from home has gone from 14.6% to 48.7%, implying there are over two workers who are new to working from home for everyone who was already doing so.
To measure the ability to work remotely, we use the occupation coding from Dingel and Neiman (2020). They determine whether occupations can potentially be done at home using the Occupational Information Network (O*NET) surveys that describe the “work context” and “generalized work activities” for hundreds of occupations. In short, if an occupation requires daily activities like “work outdoors” or “operating vehicles, mechanized devices, or equipment”, it is not considered possible to do remotely.
With occupations in the CPS categorized into “possible to do remote” or not, we can examine how this affects employment outcomes for March, 2020, the only month in the data that is post-virus. In addition, we can use regression analysis to control for other factors that may affect job loss, for example, an individual’s education level.
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Regression analysis suggests that workers in remote-capable occupations are significantly less likely to be unemployed in March 2020. However, to be counted as unemployed means you must be looking for work recently, and many who were laid off during the pandemic are presumably not looking for new jobs. Therefore we also look at whether someone is employed at all and find similar results.
Overall, the models suggest that unemployment was 1.2 percentage points higher in March 2020 and the employment rate was 1.3 percentage points lower. However, being in a remote-capable job offset 70.6% of the unemployment effect and 65.8% of the employment effect.
Importantly, these results hold even when you control for age, sex, education, industry of employment, and state. In other words, if you take two workers who are otherwise similar along all of these characteristics, but one has a job that can potentially be done remotely, that individual is around 70.3% to 66.0%less likely to have lost their job during the pandemic.
Industry controls are important because this shows the results are not due to those in remote capable occupations simply working in harder hit industries. For example, it’s not just that remote jobs are concentrated in professional service industries, which have not seen as big of a decline in demand. Workers in the same industry are less likely to lose their jobs if they can work remotely.
Overall, these results show that being in a remote capable occupation significantly reduces the risk of being laid off during the early stages of the economic crisis that is resulting from the COVID-19 pandemic. Furthermore, this is not simply a matter of those workers being more educated or being in less harmed industries. The ability to work remotely, by itself, reduces this risk of job loss in an economic emergency where face-to-face interaction is strictly limited.
The effect of remote capability on businesses
There are few places where remote work capability is more ingrained than for businesses and independent professionals on Upwork. As the leading online talent solution, Upwork has been helping people work together remotely for over two decades. Data from Upwork thus helps to illustrate the extent to which working remotely, flexibly, and globally has mitigated or exacerbated the impacts of the pandemic.
While the CPS looks at worker level outcomes, Upwork allows us to see the experience for businesses. The data shows that across business sizes, there is no evidence of an interruption in average weekly spending levels. For both sides of the Upwork marketplace, this means more stability and more reliability during this national crisis. Given that nearly one in six workers have been laid off, this is an impressive level of continuity of spending. Remote, flexible, global hiring helps to reduce the risk of business interruption, even when large parts of the economy have been shut down.
Going forward
Even before this crisis, remote work represented a growing share of employment year after year. With the COVID-19 pandemic, half of the workforce and millions of employers are being forced to road test working remotely. While it is likely the behavior will be sticky for many even when the pandemic has passed, it is too soon to know whether remote work continues its upward steady march or see rapid gains. Either way, it will be good news for businesses and workers whose relationships will be more robust in the event of future pandemics, natural disasters, and other emergencies where business continuity is threatened.
Continuity for Workers and for Upwork Clients
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