Personal finance

Why a five-day return to office is unlikely, Stanford economist says

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The work-from-home trend is here to stay.

Many companies have continued to let employees work remotely for at least some of the workweek — four years on from the early days of the Covid-19 pandemic — due to the win-win nature of the arrangement: Remote work is more profitable for companies and highly valued by employees, according to labor economists.

While some companies have issued return-to-office mandates, they’re the exception. The five-day, in-office workweek is antiquated for a large share of workers, a relic of the pre-pandemic job market.

“Remote work is not going away,” said Nick Bloom, an economics professor at Stanford University who studies workplace management practices.

“In fact, if you look five years out, I think it will be higher than it is now,” he said.

One of the pandemic’s ‘most enduring legacies’

Working from home was relatively rare prior to 2020. At that time, less than 10% of paid workdays were from home, according to WFH Research.

The share swelled to over 60% as Covid-19 lockdowns pushed people indoors, then gradually decreased as employers called workers back to the office, mostly just a few days a week in so-called hybrid arrangements.

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However, the number of days worked from home isn’t declining anymore; it has held steady since early 2023 at about 25%, more than triple the pre-Covid rate.

The rise of remote work “is probably going to be one of the most enduring legacies” of the pandemic-era U.S. labor market, said Nick Bunker, director of North American economic research at job site Indeed.

The days of full-time in-office work “are gone,” he said.

Why remote work has stuck

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Of course, about half of all jobs — like those in service, accommodation and retail — can’t be done from home at all, Bloom said.

Of those that can be worked from home — such as many finance and technology jobs, for example — about 41% are hybrid and 20% are fully remote.

Remote work is “highly profitable” for companies, which is primarily why the trend has stuck, Bloom said.

The big upside is it reduces employee turnover rate by about a third. That’s because workers value remote work, they tend to quit less often, Bloom said.

Remote work is not going away.
Nick Bloom
economics professor at Stanford University

His research suggests they value hybrid work about the same as an 8% raise. A return-to-office mandate would require a commensurate pay increase to avoid attrition, he said.

Companies don’t have to spend as much on hiring, recruitment and training if they lose staff less frequently, he said. One company told Bloom that it costs the firm about $20,000 each time a worker quits.

Employers can also cut costs via the need for less office space, and can broaden their recruitment pool to all geographic areas of the U.S. — potentially to areas where the cost of living is lower and they may be able to pay lower relative wages, Bunker said.

‘Firms care about profits, not productivity’

In addition, hybrid work doesn’t appear to have any negative impact on workers’ productivity, Bloom said.

Ultimately, “firms care about profits, not productivity,” Bloom said. “What makes money in a capitalist economy tends to stick,” he said.

About 8% of all online job postings in the U.S. advertised the role as remote or hybrid, according to Indeed data as of May 2024. While down from a pandemic-era peak around 10% in early 2022, it’s still “far above” the roughly 2% to 2.5% before the pandemic, Bunker said.

That recent decline is partly attributable to a pullback in job ads among some struggling sectors like software development (which tend to advertise remote roles) rather than a broad-based throttling back of remote-work opportunities by employers, Bunker said.

When people have the chance to work flexibly, 87% of them take the opportunity, according to a 2022 survey by the consulting firm McKinsey.

“Job seekers really want it,” and employers feel they need to offer the benefit to stay competitive, Bunker said.

Why some companies are forcing a return to office

Of course, not all firms allow employees to work from home: About 38% of employees that can do their jobs from home are required to work full-time in the office, according to WFH Research data as of May 2024.

Such employees tended to be older, or work at older companies founded decades ago, it found.

Many companies point to downsides to remote work, including a reduced ability to observe and monitor employees and reduced peer mentoring (cited by 45% and 42% of employers, respectively), according to a 2023 ZipRecruiter survey.

However, a January study from University of Pittsburgh found that large U.S. companies imposing return-to-office mandates did so in order to “scapegoat” remote work for poor company performance — not because working full-time in the office boosted the firm’s values.

The study found “significant declines” in worker job satisfaction and without a big change in financial performance or firm values.

It’s kind of like a last-ditch effort by CEOs to stay in their jobs, Bloom said. But outside of these “struggling” companies, it’s rare to force people back to the office full-time. To that point, 90% of professionals and managers in the U.S. now work from home at least one day a week, he said.

In general, evidence suggests remote work benefits employees, firms and society at large (via things like reducing pollution from commuting and letting parents spend more time with their kids), Bloom said.

“It’s like a triple win,” he said. “And it’s really hard to think of something [else] that is that beneficial.”

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