America’s Work-From-Home Transition Will Have Many Economic Ripples

About 14 percent of U.S. employees worked remotely before the COVID-19 pandemic, according to Bureau of Labor statistics. And while official figures have yet to be released on how stay-at-home orders have upped that, a new study by Massachusetts Institute of Technology economist Erik Brynjolfsson and others estimates that roughly half of the workforce is now remote.

Brynjolfsson told NPR’s Planet Money that many will likely stick to working that way, citing the growing list of Big Tech firms like Facebook and Google that have proclaimed employees can stay at home for the foreseeable future.

“There’s a lot of inertia in the way people work and it’s actually quite hard to change the processes, the culture, the training, the types of work and tasks that people are doing,” he said. “So unless there’s a shock, most people will tend to continue to do things the old way.”

Of course, the pandemic was the shock necessary to rapidly convince employers to redeploy their workforces — and now, many companies have seen the benefits of remote workers, according to Brynjolfsson. Employees don’t waste time and resources commuting, employers no longer need expensive office space and workers can live anywhere that has internet access.

Brynjolfsson said some workers will eventually return to the office and probably should, but many won’t — or at least won’t come back five days a week. The changes we’ve seen thus far “portend a much bigger shift in the economy,” he said.

After all, even the best office workers always did more than just work between the time they left their front doors in the morning and pulled back into their driveways at night. They ate restaurant meals, bought gas, paid tolls or subway fares and often shopped on their way home. All in, PYMNTS found in its 2018 Digital Drive Report that 135 million U.S. adults drove a car to work every weekday morning, with commutes averaging as little as 15 minutes to over an hour. And during that daily trek to work and back, these motorists were driving $212 billion in commerce spend annually.

But that spending dropped abruptly in mid-March as employers sent workers home, creating ripple effects that could soon reshape the entire U.S. economy. Here are some long-term effects that have already appeared:

Will We Ever Wear Pants Again? 

Most people have heard the one about stay-at-home workers forswearing pants because they’re only visible from the waste up on Zoom videos. Hence, many people only need meeting-appropriate tops, and pants sales have dropped by 13 percent.

By contrast, Adobe found that pajama sales have boomed, increasing 143 percent in March and April even as apparel sales on the whole declined sharply because U.S. consumers suddenly faced much less need to dress up.

And while apparel sales have begun to somewhat recover in response to massive discounting and enhanced eCommerce function, sales of athleisure wear and workout clothes are growing much faster than average. Americans are apparently gearing their wardrobes for life away from work and more toward working out.

Nowhere To Drive To 

While consumers’ shift in preference for comfortable clothing was probably predictable, other moves have been less foreseeable.

For example, people are driving a lot less as a result of not commuting to work, according to a recent KPMG International study. KPMG estimates that the pandemic will lead to Americans driving 270 billion fewer miles a year. While that will have lots of environmental benefits, it could also have some dire effects on the auto industry.

“People buy a car to get to and from work and because shopping is a very important part of their lives,” Gary Silberg, head of KPMG’s global automotive practice, recently told Bloomberg. “If two of the primary missions that the American public buys a car for are going to reduce demand, we know that’s going to have an adverse impact on auto sales. It’s just like gravity.”

Another casualty of less driving will be road-toll revenues, which have plummeted. The International Bridge, Tunnel and Turnpike Association has asked Congress to approve $9.2 billion to help its members begin or resume dozens of postponed road projects disrupted by the revenue drop-off.

“Congress could send a strong signal to consumers and investors” by earmarking stimulus money for such projects, the group’s CEO said in a recent media briefing.

No Going Out To Lunch 

Restaurants that were built around catering to office workers also feeling the effects of the shift toward working from home.

Sebastiaan van de Rijt, CEO and owner of San Francisco chain Bamboo Asia, told PYMNTS in a panel discussion on the future of the restaurant industry that his locations had been largely supported by office workers who suddenly disappeared. When a quick shift to carry-out didn’t work out as hoped, the chain took the more radical pivot to offering meal kits.

“We launched sous vide delivery kits, which are essentially family meals where everything is all ready to be cooked for you,” he said. “The packaging that consumers bring into their homes has also been sous vide prepared, and so is sterilized against any bacteria and viruses.”

But Charlie Yi, CEO of New York’s Zoku Sushi, told the panel that the Manhattan workforce going home caught his business “completely flat-footed.” Zoku is a ghost kitchen, which in some sense would be ideal for this environment because it doesn’t have dining rooms to worry about filling and is optimized for delivery.

But Yi said nearly the whole of his Midtown Manhattan client base was business customers ordering lunch while at work. When working from home — often in far-off suburbs — became the norm, his customer base basically vanished.

“Those workers who once sat in their offices are now are sitting in their home offices, so they’re physically not there to consume our food,” he said.

And Yi is far from the only restaurateur suffering in what The New York Times recently called Manhattan’s “Midtown ghost town.” The paper noted that New York City’s normally bustling “power center” of Midtown Manhattan — and its normally bustling ecosystem of shops, restaurants and food trucks — are now nearly devoid of any economic activity.

The vast majority of office workers still haven’t returned, and it remains unknown when or if they ever will. Local hot dog vendor Ahmed Ahmed told the Times that he used to sell about 400 hot dogs to passersby, but now that’s down to “about 10.”

What Comes Next  

It seems like the plethora of businesses built to support an in-office workforce has a lot of shifting to do.

After all, much of the U.S. workforce might not return to their offices even if scientists develop a COVID-19 vaccine. Our latest consumer survey found that only 24 percent of those we polled listed a desire to get back to work as the primary reason they wanted to leave the house.

But all isn’t lost for businesses that catered to office workers. When PYMNTS asked a national sample of more than 16,000 consumers at the end of May about their primary reason for wanting to go back into the physical world, 24 percent of Americans picked going back to work as their first choice, behind such things as seeing family and friends (75.2 percent) and going out to eat at a restaurant (68.5 percent). Our study also found that that a demographic subset we call “office shifters,” some 17 percent of the overall U.S. population, work from home now but in many cases want to go back to their offices. Some 47.8 percent of office shifters told us they want to get back to working on-site. Forty percent of office shifters also told us they’re feeling cabin fever and are “very” or “extremely” interested in finding a reason to leave their homes.

So, it seems that at least some of U.S. employees will get back to their offices someday — although how many permanently go remote remains to be seen. The business of serving office workers will have to change somehow, because work will likely look radically different — if not totally transformed — in the post-pandemic world.