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Can telecommuting survive the weakening US labor market?

If the U.S. labor market continues to weaken next year, companies would be emboldened and may pull back on letting employees work remotely.

Executives are generally divided into two camps when it comes to working from home, which has grown during the COVID-19 pandemic as workers gained strength during a tight labor market. Some believe it has benefits, such as happier employees, while others say company culture is built in the office.

“There is a real difference between organizations,” said Melissa Swift, workforce transformation leader at consultancy Mercer. “You’re starting to see companies pick sides.”

Photo: AFP

However, telecommuting looks like it’s here to stay. Gallup predicts that about 75 percent of telecommuting workers would be hybrid or fully remote in the long term.

Here are the top reasons why experts say telecommuting will continue next year:

1. Retention

Enabling remote work is key to retention.

Hybrid work increased employee satisfaction and productivity, reducing churn by 35 percent, according to a study published this summer by researchers at Stanford University, the University of Chicago and the Instituto Technologico Autonomo de Mexico.

“Employees have experienced new levels of fulfillment working from home, and it’s been difficult for companies to justify going back,” said Caitlin Duffy, director of research at consultancy Gartner Inc.

Meanwhile, attrition has become a costly problem as quit rates remain above pre-pandemic levels. In a labor market that remains tight, many companies cannot afford to bleed talent.

That’s especially true for high performers, even if the economy worsens, said Prithviraj Choudhuri, an associate professor at Harvard Business School.

“In any economic environment, top talent always has outside opportunities,” said Chowdhury, who studies telecommuting.

2. Recruitment

Telecommuting opens up recruiting to a larger geographic area and a larger talent pool. This is a huge advantage, especially for specialized roles where it is difficult to find qualified candidates. It also gives employers, such as the U.S. Department of Veterans Affairs, which is struggling to convince people to move to Washington, D.C., a better chance of wooing talent from West Coast tech hubs.

Offering work flexibility can also support a company’s diversity, equity and inclusion initiatives. This is especially the case for groups, such as the disabled, who have often been excluded from the labor market. Working parents and people of color also reported tremendous benefits from telecommuting.

3. A cost-cutting recession

Rather than reversing the shift to telecommuting, the recession could accelerate the trend because it can reduce the need for office space and help companies cut costs, Choudhury said.

This summer, Yelp Inc closed its New York, Chicago and Washington offices, with plans to focus the savings on hiring and employee benefits. Not long after, Lift Inc leased about half of its office space in San Francisco, New York, Seattle and Nashville. Other major companies, such as Meta Platforms Inc and Amazon.com Inc, have scaled back back office expansion plans.

Employees who are allowed to work from home are willing to take a pay cut in exchange for more flexibility and lower travel costs. The work-from-anywhere policy also allows bosses to reduce labor costs by hiring in states, such as Idaho, Louisiana and Kansas, that have a lower cost of living.

4. Reversal risks

If a company is about face, executives risk damaging their reputation. Just look at Twitter Inc. In an attempt to shake up the company last month, new CEO Elon Musk ended the company’s remote work model.

However, so many employees opted for severance pay instead that he had to soften his stance to bring some staff back.

Taking maximum advantage of leverage in this way is not a good long-term strategy, said Ben Granger, chief workplace psychologist at Qualtrics.

“Prospective candidates can see comments from employees who have left,” Granger said. “They can read articles.” Leaders would be wise to think about that.”

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