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Remote work seen more consistently than US city planners expected

(Bloomberg) — The shift to pandemic-era remote work will likely be more persistent than anticipated, affecting the finances of American cities that are banking on getting commuters back to the office post-pandemic.

Two recent studies point to a long-lasting effect of work from home.

According to a paper by researchers from Arizona State University, Virginia Commonwealth University and the Dallas Federal Reserve, telework will likely increase by about 75% during the COVID-19 crisis.

Economists estimate that twice as many workers will be 100% remote as before the pandemic, and one out of every five workdays will be from home.

The analysis, based on novel survey data, found that working from home increased for every major demographic group and industry, but was particularly sharp among highly educated workers.

According to separate research by the Pew Charitable Trust, the continued loss of commuters will affect municipalities that depend on these workers for revenue — from sales taxes on their lunches to taxes on city-earned wages and parking fees.

Pew wrote, “fewer passengers – or less frequent workers – could translate into a shrinking local revenue base and contribute to long-term financial challenges for local governments.”

Cities are gearing up for this in their five-year budget. But his estimates for the share of people continuing to work from home instead of returning to the city office may underestimate the magnitude of this change.

For example, Philadelphia assumed a permanent loss of 15% of the nonresident wage tax base in its estimates last July, according to an analysis by the Philadelphia Office of the Comptroller.

A five-year financial plan published in January San Francisco estimates that office workers will telecommute permanently about 15% of the time in fiscal year 2025-2026.

In their paper, economists including Alexander Bick of Arizona State University found that more than a third of employees expect to work from home at least one day a week this year.

Bick said the most important thing about the rise of Work From Home during the pandemic is its persistence.

According to its co-authors, this will have macroeconomic consequences, including in city centres, where the low-income and the less-educated will be most affected.

© 2022 Bloomberg LP

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