10 Predictions for 2023: No. 2 - Remote Work Accelerates
The combination of tight labor markets, hollow office mandates, and market pressure toward the long-run occupancy equilibrium will advance remote work in 2023.
(I’m making 10 predictions for 2023. Find the links to my others at the bottom of this post.)
If you’ve read anything I’ve written this year, you know I’ve emerged from the pandemic as a remote work evangelist. I’ve written op-eds this year advising cities -- and countries -- on how to make themselves more attractive to remote workers.
Just recently, I’ve started publicly outlining my general framework on why I think remote work will dominate the future:
1️⃣ Covid universally normalizes remote work and advances 30 years of existing remote work trends in 3 years 👈🏿 ALREADY HAPPENED
2️⃣ Many large, attractive, influential employers offer permanent remote work options post-covid 👈🏿 ALREADY HAPPENED
3️⃣ The most high-leverage, high-optionality workers will choose employers that provide remote flexibility
4️⃣ Rigid employers who don’t provide location flexibility will lose their best people and be forced to provide remote flexibility to compete and survive.
In 2022, remote work underwent a post-pandemic normalization. If 2021 was marked by the emergence of covid variants, the global rollout of vaccines, and a chaotic tapestry of public health protocols, 2022 saw widespread relaxation of restrictions in most of the world. This offered our first glimpse of what work will look like in a post-pandemic future.
My prediction is that the share of remote working in the U.S. -- as measured by the percentage of paid days worked from home -- will end 2023 at greater than 30%, its current level, according to WFHResearch.com. The combination of tight labor markets, hollow office mandates, and market pressure toward the long-run occupancy equilibrium will advance remote work in 2023.
1/ Labor Markets are still tight, which means employees, not employers have the leverage.
I recently wrote:
According to LinkedIn’s November 2022 State of the Labor Market Update, in October:
📈 50% of JOB APPLICATIONS were for remote jobs.
📉 Only 14% of the JOB OPENINGS were for remote jobs.
There is more demand for remote work than there is supply. Workers are clearly signaling that they want remote flexibility while employers remain stuck in the pre-covid world of arbitrary office mandates.
But it is still a job seekers market. Despite headline-grabbing layoffs -- mostly in tech -- labor markets are still “tight.” LinkedIn has:
📈 historically high job openings
📈 historically high ratio of active job openings to active applicants
This means that employers will lose out on new talent or lose existing talent if they fail to embrace the future.
Here’s the key: Job seekers -- not employers -- have the leverage both now and in the long term.
More broadly, the number of unemployed people per job opening is at historic lows.
While LinkedIn data is a proxy for jobs that can be done remotely, the data from the U.S. Bureau of Labor Statistics data is representative of the entire U.S. labor market.
The key here is that as long as there are plenty of jobs for relatively few job seekers, employees will remain in the driver’s seat.
2/ Lots of office mandates are ‘in name only,’ or what I’m referring to as ‘hollow office mandates.’
Many companies have office attendance requirements on the books that, because of laziness, lack of process, or institutionalized passive aggressiveness, aren’t being enforced. I’ve seen this personally in dozens of companies. For example, the official policy says that people need to come in 3 days per week when, in reality, people come in when they choose, and yet no one says anything. It is the ‘don’t ask, don’t tell’ version of returning to the office.
The proliferation of these “hollow office mandates” suggest that some of the data about the number of people in the office, and the narrative around remote work, is skewed toward the appearance that office requirements are more effective than they actually are. I recently wrote:
Lots of companies are failing to enforce their return-to-office policies.
An August Gartner survey of HR managers found:
- 40% weren’t tracking office attendance
- 35% were gathering attendance data from key fob or badge swipes
- 22% said managers were tracking their teams’ attendance
- 10% said employees were self-reporting their attendance
According to the latest monthly survey data from WFHResearch.com:
- 31% of employees say that nothing happens when they don't show up to the office on days they are "required to."
An underreported remote-work era reality: many companies will talk a big game and profess to have office policies that they don't actually enforce.
3/ We’re headed toward a long-run office equilibrium.
You can’t beat the market or human nature. As long as employers insist on mandating arbitrary location requirements for work that can be done anywhere, there will be market pressure toward the natural equilibrium, which I recently wrote about:
I believe that going forward, the natural equilibrium of office occupancy will be around 36%.
Here’s my logic...
According to a 2022 survey from Gallup of people whose jobs can be done remotely:
🏠 34% want to be fully remote
🚗 60% want hybrid work
🏢 6% want to be fully in office
If those hybrid workers hope to work in the office ~2.5 days per work, the math works out to ~36% of people in the office on any given weekday.
Any business district with office occupancy rates significantly higher than 36% of pre-pandemic levels will face downward pressure on occupancy in the long run.
I’m making 10 Predictions for 2023. Read my others below.