White House: The Economics of Workplace Flexibility

As part of the White House Forum for Workplace Flexibility, the CEA released a report today presenting an economic perspective on flexible workplace policies and practices.

Work-Life Balance and the Economics of Workplace Flexibility (pdf) highlights changes in American society over the past half century, including the increased number of women entering the labor force, the prevalence of families where all adults work, increasing eldercare responsibilities, and the rising importance of continuing education. These changes are among those that have increased the need for flexibility in the workplace.

This increased need can be met with flexibility in terms of when one works, where one works, or how much one works (including time off after childbirth or other life events). As such, “workplace flexibility” encompasses a variety of arrangements that allow workers to continue making productive contributions to the workforce while also attending to family and other responsibilities.

Data suggest that many employers are adapting to the changing needs of their workers. For example, in 2007 over one-half of employers reported allowing at least some workers to periodically change their starting and quitting times, although there is variation across workers who have access to such arrangements. And while most employers offer at least some workers the ability to return to work gradually after a major life event such as the birth or adoption of a child, job sharing is less widespread and only about one-fifth of employers permit some of their employees to work from home on a regular basis.

Many firms have found that such arrangements can represent smart management practice for which the benefits outweigh the costs. However, almost one-third of firms cite costs or limited funds as obstacles to implementing workplace flexibility arrangements. At the same time, other firms report benefits in the form of lower absenteeism and turnover, improved health of their workers, and increased productivity.

Perhaps the most compelling evidence of the impact of workplace flexibility on absenteeism comes from a single large public utility that temporarily adopted a flexible work schedule in one of its sub-units while retaining standard scheduling for other sub-units. As shown in Figure 8 from the CEA report, before the program, the average rates of absenteeism were roughly similar between the sub-unit that was offered a flexible work schedule and those that were not. In the year after the program was adopted, the sub-unit with a flexible schedule reported a more than 20 percent reduction in absences, with the absenteeism rate in the other sub-units essentially unchanged. Moreover, when the company reverted back to standard scheduling for all of the sub-units considered after a one-year trial, the rates of absenteeism of the two groups became, once again, similar. As a rough estimate, these results, if they generalize to other firms, suggest that wholesale adoption of flexible workplace schedules could save about $15 billion a year.1

Figure 8 shows the average absence rate for employees in two subunits of a public utility company before, during, and after a flexible work schedule program was implemented. Workers in one subunit of the company were offered a flexible work schedule for a year, while workers in another subunit were not. Prior to the implementation of the flexible work program, as well as in the years after the program ended, both groups had similar absence rates. For those workers not offered a flexible work schedule, their absence rate was roughly constant over the period considered. The absence rate for employees in the subunit that was offered flexible scheduling, however, fell dramatically during the year of the implementation of the program. Download this data as a CSV file. .While the growing body of evidence has established a strong connection between flexibility and productivity, research that explores the mechanisms through which flexibility influences workers’ job satisfaction and a firm’s profits would better inform policy makers and managers alike. In the meantime, the best available evidence suggests that encouraging more firms to consider adopting flexible practices can potentially boost productivity, improve morale, and benefit the U.S. economy. Especially at this time as the U.S. rebuilds after the Great Recession, it is critical for the 21st century U.S. workplace to be organized for the 21st century workforce.

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1 Nicholson et al. (2005) estimate that the annual cost of workforce absences due to illness was $74 billion. If workplace flexibility reduces absences by 20 percent and if all of this reduction translates into lower costs for employers, the implied savings due to flexibility are almost $15 billion a year. Note, however, that this estimate includes only absences due to illness, so the total cost due to all absences is likely to be higher. At the same time, there are several reasons why the estimate of cost savings may be too large. Most importantly, the results from the intervention that reduced absences by 20 percent may not generalize to other firms. In addition, the estimates of the annual cost of absences due to illness calculated by Nicholson et al. (2005) may overstate the true cost.

“Work-Life Balance and the Economics of Workplace Flexibility (pdf) highlights changes in American society over the past half century, including the increased number of women entering the labor force”

Okay I am going to get royally flamed for this comment, but back in the day when men worked and women stayed home and raised the kids there was no concept of “flexibility” in the workplace. You were hired to do a job and if you had other priorities than your job they found someone else who wanted to work. Now the government tells us that women in the workplace need flexibility on their work hours. I have worked in a number of settings where that was a huge problem because people had to be there at certain times to get the work done. The solution? The women with children got to take off early and come in late while the singles and men took up the slack. My answer to that, here comes the flame part, if you can’t commit to the job stay home and take care of your kids and let a dad have your job.

Note: The following text is a quote:

www.whitehouse.gov/the-press-office/president-and-first-lady-host-white-house-forum-workplace-flexibility

Home • Briefing Room • Statements & Releases

The White House

Office of the Press Secretary

For Immediate Release March 31, 2010
President and First Lady Host White House Forum on Workplace Flexibility

Small Business Owners, Workers, Business and Labor Leaders, and Experts Join Administration Officials to Discuss Workplace Practices for a Changing American Workforce

WASHINGTON, D.C. – Today, President Obama, First Lady Michelle Obama and the White House Council on Women and Girls are hosting the White House Forum on Workplace Flexibility to discuss the importance of creating workplace practices that allow America’s working men and women to meet the demands of their jobs without sacrificing the needs of their families.

Small business owners, business leaders, policy experts, workers and labor leaders are joining with senior administration officials today to share their ideas and strategies for making the workplace more flexible for American workers and families. The opening and closing sessions, as well as five breakout sessions focused on best practices and benefits for the American workplace and workforce, are streaming live on www.WhiteHouse.gov/live. In addition, much of the event is streaming on Facebook and Ustream, and the White House will include comments taken through these social networks in the feedback collected through the forum.

In conjunction with the forum, the President’s Council of Economic Advisers is releasing a report presenting an economic perspective on flexible workplace policies and practices. The report documents some of the changes in the U.S. workforce which have increased the need for flexibility in the workplace, including the increased number of women entering the labor force, the prevalence of families where all adults work, increasing eldercare responsibilities, and the rising importance of continuing education. It then examines the current state of flexible work arrangements and discusses the economic benefits of workplace flexibility - such as reduced absenteeism, lower turnover, improved health of workers, and increased productivity. The analysis is available online here: http://www.whitehouse.gov/files/documents/100331-cea-economics-workplace-flexibility.pdf.

“Workplace flexibility isn’t just a women’s issue. It’s an issue that affects the well-being of our families and the success of our businesses,” said President Obama. “It affects the strength of our economy – whether we’ll create the workplaces and jobs of the future that we need to compete in today’s global economy.”

“Flexible policies actually make employees more – not less – productive,” said Mrs. Obama. “Instead of spending time worrying about what’s happening at home, employees have the support and the peace of mind they need to concentrate at work which is good for their families – and the bottom line.”
The Office of Personnel Management is also announcing a pilot program to incorporate flexibility in the government to provide better, more efficient service for the American people – even in the face of snow storms and other emergencies. The pilot program will build on the cost savings telework provided during last winter’s snow storms and expand opportunities for federal employees, here in Washington and across America, to telework on a regular basis.

“Employers, including the federal government, will have to implement flexible work policies if they want to attract the best and the brightest,” said Valerie Jarrett, Senior Adviser to the President and Chair of the White House Council on Women and Girls. “ The President is committed to making sure that the federal government can compete for talent because he knows that good people produce better work, which in turn, leads to better service for the American people.”
Shortly after taking office, the President signed into law the Lilly Ledbetter Fair Pay Act, restoring basic protections against pay discrimination for women and other workers, and the American Recovery and Reinvestment Act, which is delivering relief to working families across the country, including tax credits and child care assistance for working families.

The President’s Budget for FY2011 builds on those initiatives with a series of investments to support caregivers for elderly relatives or family members with disabilities, to help families afford the cost of quality child care, to aid states wishing to establish paid leave funds, and to build the knowledge base about work-family policies.

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