Does working from home work in developing countries?

Who can work from home?

Workers in developing countries have lower chances of WFH than workers in developed countries and the gaps are large. The Illustration shows a clear positive relationship between the share of jobs that can be done from home and the level of GDP per capita. While the share of home-based jobs in countries such as Ethiopia and Rwanda is below 3%, it reaches more than 40% in more developed economies such as Luxembourg and Sweden.

There are several reasons for these gaps. First, countries differ in their occupational structure of employment. Services and sales occupations and elementary occupations, such as construction helpers, are jobs with low WFH possibilities and account for a much larger share of total employment in low- than in high-income countries. In contrast, managerial and professional occupations, which are more amenable to WFH, are more prevalent in developed countries.

Second, countries also differ in the task requirements of each occupation due to differences in the organization of production and in the level of technology adoption. Jobs in developed countries are more intensive in cognitive and interpersonal tasks, such as advising people, which can be compatible with WFH. On the contrary, in developing countries jobs are more intensive in routine or physical and manual tasks, such as operating industrial equipment, which are less amenable to WFH. An implication of the different task requirements across countries is that the same occupation can be more amenable to WFH in a developed than in a developing country.

Finally, besides the type of occupation, infrastructure characteristics and inputs, such as space availability and home internet access, can impose a constraint to the possibilities of performing a job effectively from home. For instance, workers in occupations such as call centers would be able to do their job from home if they had access to the appropriate technology, but in developing countries only some workers have home internet availability.

There is also evidence on the correlation between WFH possibilities, the size of the informal sector, and the share of self-employed workers in total employment in each country. The correlation between the share of informal workers—wage employees who are not entitled to pension benefits when retired—and WFH possibilities across 11 Latin American large cities is negative and strong [2]. Self-employed workers have lower WFH possibilities in comparison to wage employees and their share in total employment is much larger in low- than in high-income countries [3], [4]. Behind these two results are the occupations where informal and self-employed workers are usually employed. For instance, self-employed workers in poor countries tend to be employed in occupations with low WFH amenability, such as elementary and services and sales occupations, while in rich countries the occupational composition of self-employed workers is close to that of the aggregate economy.

An important characteristic of labor markets in less developed countries is the high share of agricultural employment. WFH possibilities of agricultural workers in developed countries are very low. However, in poor countries, agriculture activities are less intensive in technology and farms are smaller. If plots are adjacent to workers’ homes, WFH might be possible for agricultural workers. Evidence on the possibilities of agricultural workers WFH is only partial and not conclusive [1]. For a set of middle- and high-income countries, agricultural employment is less amenable to WFH in countries with lower income levels. Another piece of evidence based on a sample of countries from low- to high-income levels, shows that if it is assumed that all agricultural workers can work from home, the relationship between the share of jobs that can be done from home and GDP per capita becomes negative.

Other interesting findings appear when looking at WFH possibilities within countries. First, the positive association between development and the share of home-based jobs that is observed across countries is replicated when comparing regions of the same country [1]. Second, WFH possibilities are larger for workers with higher earnings and, although positive, this association is less pronounced in less-developed countries. Finally, WFH possibilities vary with workers’ characteristics. There is agreement on the lower WFH possibilities of low-educated workers in comparison to workers with high levels of education [1], [2], [3], [4], self-employed workers in comparison to wage employees [1], [3], and informal workers with respect to formal workers [3], [4]. These findings appear both in developed and developing countries. Regarding age and gender, the evidence is not conclusive and depends on the countries analyzed. Young workers (15–24 years old) in Mexico and India are less likely to work from home than adult workers [1], but the opposite relationship has been reported for a set of ten low- and middle-income countries [3]. Women have more possibilities of working from home in the same set of ten low- and middle-income countries [3], but there is no gender difference for a set of 11 Latin American large cities [2]. Differences in WFH possibilities by workers’ characteristics can be explained by differences in the occupations workers have [1], [2], [3], [4] and by differences in the tasks performed at work even in the same occupation [3], [4].

The findings described above remain unchanged when using the percentage of people who actually work from home instead of a measure of WFH possibilities, both in developed and developing countries. Evidence is not extensive because data on the number of home-based workers is rare, but it indicates that both measures—actual and predicted percentage of workers who work from home—are close. Moreover, findings for Brazil and Costa Rica show that the percentage of people who actually work from home is larger among high-educated workers and wage employees, and for managers and professionals than in lower-paying occupations, such as elementary jobs [3].

The role of infrastructure and services constraints

Other determinants of WFH possibilities are related to the infrastructure characteristics of the dwellings where workers live, such as electricity access, internet access, or the availability of an adequate physical space. An immediate consequence of considering such characteristics is that a job that is compatible with WFH on paper may not be able to be performed adequately by workers facing poor infrastructure conditions.

The consideration of jobs’ internet requirements and residential access to internet services makes a big difference when calculating the share of jobs amenable to WFH, especially in poorer countries. Figure 1 shows the percentage of jobs that can be done from home when information and communication technology requirements and internet access constraints are taken into account and when they are not. As was previously described, the share of jobs amenable to WFH increases with the development level of countries. In high-income countries, 33.8% of jobs are compatible with WFH while in low-income countries, only 3.8% are—equating to a ratio of 8.9 between high- and low-income countries. If internet requirements and internet access restrictions are not considered these figures would be 37.1% in high-income countries and 11.0% in low-income countries—a ratio of 3.4 [1]. This finding reveals that less-developed countries not only have fewer jobs amenable to WFH, but internet access is a much harder constraint for them.

Another way of illustrating the restriction imposed by not having home internet access is comparing internet usage at work with the availability of an internet connection at home. Countries such as Mexico, Peru, and Ecuador rank close to the average of a group of middle- and high-income countries in terms of internet use at work, but they lag in terms of internet access at home. As a result, WFH possibilities are lower in these three Latin American countries than in the others [4].

Home internet access is not the only infrastructure restriction workers may face. Not having sufficient physical space, such as a private room to use as a home office, also acts as an obstacle. The percentage of jobs that are amenable to WFH in 11 large Latin American cities is 25.8% when not considering internet access and space restrictions. When home internet availability is taken into consideration, the percentage drops to 19.2%, and when adding access to adequate space there is an additional reduction to 14.5% [2].

Infrastructure and services restrictions affect demographic groups differently [2]. When none of these restrictions are considered, men and women have very similar chances of WFH in the same group of 11 Latin American cities. When these restrictions are considered, the share of jobs amenable to WFH becomes larger for men than for women, that is, women are more likely to live in crowded houses and to lack internet connectivity than male workers in these cities. When the comparison is made across educational groups, the disadvantaged situation of low-educated workers increases as more restrictions are imposed.

What are the benefits and costs of working from home?

The knowledge about the potential benefits and costs of WFH in developed countries is extensive, but rigorous evidence for developing countries is limited.