The pandemic-era shift to remote work will likely be more persistent than anticipated, hitting the finances of U.S. cities that are banking on commuters to get back to the office post-pandemic.
Two recent studies point to the long-lasting impact of work from home.
About 75% of the increase in telework over the course of the COVID-19 crisis will likely stick, according to a paper from researchers at Arizona State University, Virginia Commonwealth University and the Dallas Federal Reserve.
Twice as many workers will be 100% remote as before the pandemic, and one in every five workdays will take place at home, the economists predict.
The analysis, based on novel survey data, found that work-from-home situations rose for every major demographic group and industry, but was especially sharp among highly educated workers.
The persisting loss of commuters will hit municipalities that rely on these employees for revenue, from sales tax on their lunches to tax on wages earned in the city and parking fees, according to separate research by the Pew Charitable Trusts.
“Fewer commuters, or workers who commute less often, could translate into a shrinking local revenue base and contribute to long-term fiscal challenges for local governments,” Pew wrote.
Cities have been bracing for this in their five-year budgets. But their projections for the share of people who will continue to work from home rather than return to the city office might underestimate the magnitude of the shift.
Philadelphia, for instance, assumed a permanent loss of 15% of the non-resident wage tax base in its projections, according to an analysis by the Philadelphia Office of the Controller last July.
San Francisco, in a five-year financial plan published in January, estimates that office workers will permanently telecommute about 15% of the time in the fiscal year 2025-2026.
In their paper, economists including Alexander Bick from the Arizona State University found that more than a third of workers expect to work from home at least one day a week this year.
The most striking takeaway from the rise of work from home during the pandemic is its persistence, Bick said.
This will likely have wide-ranging economic consequences, including in city centers, where lower-income and less-educated will be most affected, according to the paper he co-authored.