Working from home (WFH) has taken a big jump after the Covid-19 pandemic, and some very smart people think it’s here to stay (as I reviewed in my last blog), because many highly educated workers like it. But others aren’t so sure whether employers will continue supporting it, especially if the economy softens and labor markets get tighter.
Some employers don’t like WFH. In June, Elon Musk told Tesla employees they had to “spend a minimum of 40 hours in the office per week,” and not in “some remote pseudo-office.” If they didn’t come in, Musk and Tesla “will assume you have resigned.” And Musk now has cancelled Twitter’s WFH option, saying workers needed to be in at least 40 hours per week. Any exception has to be approved personally by Musk.
Musk isn’t alone. JP Morgan CEO Jamie Dimon has dismissed remote work and Zoom meetings as “management by Hollywood Squares,” seeing it feeding “a working environment that’s less honest and more prone to procrastination.” In May, Goldman Sachs CEO David Solomon said remote work was “an aberration” that didn’t fit Goldman’s “innovative, collaborative apprenticeship culture.” In October, Solomon said 65% of employees are back, compared to a pre-pandemic level of 75%.
But other firms report moving extensively to remote work, especially tech companies like Facebook, Amazon
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A recent conference at the Boston Fed had a first-rate discussion of these issues. Economists Matthew Kahn and Steven Davis argued remote work is here to stay, with firms learning to adjust and even finding added value from new work arrangements.
But the conference also heard from the Wharton School’s Peter Cappelli, one of our best thinkers on work, management, and organizations. Kahn and Davis focused more on how workers prefer WFH, but Cappelli asked the other side of the question—“Is ‘Permanent Remote’ Good For Employers?” (The presentations can be found here, and a video of the full panel discussion here, starting at the two hour mark.)
Cappelli reviewed the experience with remote work prior to the pandemic. While “life satisfaction” increased for WFH employees, “work-related and career outcomes are worse on every dimension examined,” with increased communication problems at the firm and “more work for supervisors.”
Cappelli put the issues raised by Goldman’s CEO into a larger context. He noted that with “permanent remote” work, “a lot of things are harder to do—collaboration, innovation, maintaining culture, employee engagement, etc.” “Hybrid” work, where employees are in the office some of the time, isn’t an automatic solution. Firms still have to maintain office space, they get less social interaction and group creativity, and face increased scheduling and IT problems and more cumbersome project management.
Employers face a number of workforce challenges with extensive WFH. How are new employees onboarded and brought into the culture? What happens to on-the-job learning, a major source of how employees learn new skills, especially at a specific company? (Think about a new IT worker getting help from an experienced colleague at the next desk when facing a technical problem that needs solved right away, versus trying to connect remotely.)
For me, one major takeaway from the Boston Fed panel is how WFH is a potential locus of conflict between workers and employers. The initial health concerns in the pandemic and the tight labor market since gave workers—especially higher educated ones with essential skills—a lot of leverage with employers.
But that power balance may be shifting. If the Federal Reserve gets the recession it seems to want, then the labor market power balance will tilt more to employers. For example, some tech firms allowed significant working from home. As they lay workers off, and new job openings fall, employers will have more say over where and how the remaining staff will work.
There’s no question working from home has increased since the pandemic, and some of that increase will be permanent. But it also is tied to the ongoing and shifting power balances between workers and employers. The next few years, especially if we get a recession, will tell us how widespread and persistent this labor market change really is.