Moreover, the data does not fully capture the degree to which childcare problems are affecting working parents, and therefore employers. In recent years, many parents have had to take care of a child who is home due to illness, not in school or a lapse in coverage by a care provider.
They may be able to take a sick day or vacation time but that is not always possible. Doing work and childcare at the same time leads to inevitably lower quality work and more stress. These unpredictable absences and distractions are costly for employers and increase the burden to coworkers, which is accelerating burnout and undermining productivity.
Flexible work arrangements help
In the wake of the pandemic, more flexible working arrangements have become the norm, including full-time remote, or WFH, and different hybrid models. This sudden increase in flexibility, especially WFH, was met with a backlash. Debates immediately arose about WFH’s effect on employee satisfaction and its impact on productivity and profits.
Research has yielded a range of findings, from lower productivity to no effect to higher productivity. Research by Stanford University Professor Nick Bloom and colleagues found that WFH resulted in higher productivity and lower wage growth.12 Firms save money on wages and office space with fully remote and hybrid options.
Mothers with young children (especially those who are college-educated) have benefitted from WFH.13
Indeed Hiring Lab data show that women are more likely to say that remote work is a reason for looking for new employment.14
Hybrid work tends to boost productivity, as it allows for more mentoring, collaboration and engagement.15 The peak days in the office are Tuesday through Thursday. Younger and older workers want to be in offices more than millennials in their thirties.
Millennials moved the furthest from their offices, seeking space and schools for their burgeoning families.16 That shift in commutes has made it harder for companies to bring the largest share of the labor force back into offices.
When it comes to return-to-office (RTO) mandates, the evidence is clear. Research found that RTO mandates do not increase firm performance but do decrease employee satisfaction.17 An MIT Sloan article found that such mandates decrease employee engagement and increase turnover, especially for high performers and caregivers.
The KPMG U.S. CEO Outlook Pulse Survey, a survey of 100 CEOs of large companies, found that CEOs are increasingly predicting that hybrid work is here to stay. Only 34% stated employees would be back in the office within three years, down from 62% last year.
The problem is that flexible work arrangements tend to accrue to white collar workers. However, there are options that in-person establishments are exploring, including four-day work weeks. One study conducted in the UK on 61 companies that experimented with a 4-day workweek found that workers were more efficient, happier and had lower turnover rates.18
These debates will continue, but more flexible work arrangements are here to stay. Companies should pay attention to their employees’ different preferences. Instead of a strict company-wide policy, different business units, functions or teams could experiment with what their ideal arrangements might be.
Productivity growth still suppressed
Productivity slowed dramatically in the wake of the 2008-09 recession and remains below its pre-pandemic trend, despite substantial gains in 2023. The challenge is how to change that.
Generative AI (Gen AI) has extraordinary potential. Work done by the Census suggests that the number of firms investing in GenAI is low but moving up rapidly – it has increased from about 3.7% of all businesses in September 2023 to 5.4% in February 2024.19 Adoption is following a U-shape, with the largest and smallest firms investing the most.
The KPMG U.S. CEO Outlook Pulse Survey also found that nearly all CEOs will continue investing in GenAI next year with 41% responding they will increase their investments. Nearly 70% of CEOs stated that their companies are using GenAI to fill gaps in the workforce.
The costs of GenAI shift the dynamics of use cases that are theoretically versus economically feasible, at least for now. It has variable costs (e.g., costs increase as use increases). Add the time it takes to adopt a new technology, and GenAI alone cannot solve our current productivity challenges; it typically takes at least a decade to see the benefits of a technological innovation.
Even if adoption is much more rapid than historical norms, that means we are not likely to see the economy-wide effects of GenAI until the late 2020s and early 2030s. That raises the question: how can firms boost productivity growth more today?
This is where childcare policies can play a larger role. A growing body of research shows the benefits that companies and the economy at large can gain from childcare support and benefits.
Childcare issues are leading to absenteeism and its associated costs for employers. Chart 5 shows that American workers are increasingly taking time off work due to childcare problems.
