A Recession Kill the Work-From-Home Revolution

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Sometimes a tendency that seems inevitable turns out to be a fragile creature of circumstance. For example, over the course of the 2010s, a fleet of consumer technology companies took venture capital money to provide subsidized services, including Uber and Lyft for shared transportation, and DoorDash and Postmates for food delivery. As I wrote this month, these companies have benefited from a low interest rate environment, in which investors were anxious for companies with global ambitions to burn money and grow. Then the party ended: interest rates went up along with nominal wages, investors demanded profits, and now an Uber from here to the end of the block costs about $ 100.

Recently, I’ve been wondering if the work-from-home revolution could suffer the same fate. It is clear that the pandemic and the rapid economic recovery have helped remote work in a number of ways. The coronavirus closed offices and the consequent narrow labor market gave workers the power to quit their jobs, fight for more money, and reject the purgatory tradition of daily commuting.

But just as the Uber-for-Everything revolution depended on a specific set of rapidly changing economic conditions, remote work could be just as sensitive to rapid economic change.

To understand where I’m going with this, unfortunately we have to talk about the US economy, which is not very fun. Inflation is stubbornly on hold for a maximum of 40 years, and nominal gas prices have set a record. The Federal Reserve is trying to cool demand by raising interest rates, although energy prices are rising largely due to global factors, such as the war in Ukraine restricting oil supplies. While a slowdown is not inevitable, the Fed runs the risk of destroying so much demand that the United States will fall into a recession over the next two years. And even if growth does not turn negative, rising interest rates will almost certainly result in less investment, less growth, layoffs and rising unemployment.

In the near future, then, management may regain the advantage of the job. The company culture will look more like what bosses want than what workers want, and that could mean a lot more junk in the seats. According to surveys by Stanford economist Nicholas Bloom, nearly 80 percent of employees say they prefer to work from home at least one day a week. But managers are roughly divided on whether remote workers are as productive as office workers.

We are already seeing how a bleak economic situation can burst the FMH bubble. Several weeks ago, Elon Musk told his employees to return to the office or lose their jobs. Initially, this seemed like a direct threat from an eccentric CEO with a passion for office-based proximity. But days later, Tesla announced that it would probably have to lay off 10 percent of its workforce, suggesting that Musk was using the threat to return to office to get one-tenth of his workforce resigned. on their own, without having to suffer the indignity of announcing a great reduction.

This diabolical playbook is widely available. Several technology companies, including Apple, have tried (and in some cases abandoned) a version of this poaching strategy, according to investor Jason Calacanis. “These companies are too proud to make layoffs, so they say,‘ Go back to the office or leave! ’” Calacanis told me in my podcast: Simple English.

Real estate billionaire Stephen Ross has articulated the other side of this dynamic, predicting that just as employers can use a return-to-office policy to push workers to resign, workers can return to avoid being fired. “Employers hesitated a bit because they didn’t want to lose their employees,” he said. Bloomberg. “But I think when you go into a recession and people are afraid they won’t have a job, that will bring people back to the office. You have to do what it takes to keep your job and make a living.”

Distance work is not just a macroeconomic development. It is a cultural trend, which, like all trends, is sensitive to reaction. Here is a story that could be told that would cause the decline of the FMH. In companies without a sophisticated telecommuting culture, many younger workers end up adrift. In a recession, more offices could attract these young workers back to the office. As they acquire each other’s skills and feel their fortunes increase, a skeptical move toward the FMH could form among Generation Z. Young workers would go viral TikToks about how older workers look like shit all day, sadly wandering about their beds to their sofas. WFH is for silly millennials! e Never leaving your home is a bit pathetic! it would be the general idea. The fact that remote work can be more challenging for the more active demographic on social media can lead to some unpredictable places.

Despite all this, I am not prepared to confidently predict that a recession will affect the remote work revolution, for two reasons. First, recessions lead to bankruptcy, especially among businesses with cluttered cost structures (such as paying for office space through the nose that you never use). As older and pro-office companies die, younger companies work from where they can stand up to fill their space. In this scenario, remote work would not disappear in a recession. It would move forward, one corporate funeral at a time.

Second, from a purely mathematical point of view, the most rational thing a zombie office company can do during a recession is to cut spending on everything related to the office. “Reducing office space and going completely remote is a cost savings for many businesses,” Adam Ozimek, an economist and advocate of remote work, told me.

The slowdown, if it arrives, will be a stress test of an emerging phenomenon. Remote work thrived when the pandemic was raging, when managers were desperate to cling to employees, and when white-collar workers knew they had power. The question is what happens when some of these tail winds weaken. “Some employers will respond to a slowdown with a plan to return to office,” Ozimek said. “Some may be happy that 20 percent of the workforce is leaving. But others may be really protective of their superior talent and willing to bend over backwards to keep them.”

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