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Will a Recession End the Remote Work Revolution?

Nearly three years after the beginning of the COVID-19 pandemic in North America, the percentage of employees working remotely some or all of the time has plateaued well above pre-pandemic levels. A recent spate of articles has examined the impact that remote work has on different regions in north America, with San Francisco famously becoming the poster child for the grim economic side effects of a remote workforce. However, sorting out the overall economic impact of remote or hybrid work is complicated. Some sectors, like cloud services and residential contracting and construction, could see a net benefit if such work arrangements continue, while others, including commercial real estate and food services, are likely to see negative impacts. There could also be regional economic impacts if fewer workers come into downtown cores on an ongoing basis. 

Even as organizations are increasingly asking staff to come back to the office, the workforce has made it evident that hybrid or remote work is an increasingly desirable element of the workplace experience — and they'll go where those workplace models are offered. And sectors with high numbers of open positions likely have less ability to refuse to allow remote or hybrid work arrangements, even if the labor market becomes more competitive overall. 

But while some analysts see the workplace as permanently altered, others think that upper management may leverage ongoing fears of a looming recession to shift the power of deciding where and when people come into the office from employees to employers. 

Will remote and hybrid workplaces last?

In 2022, some organizations walked back their plans to allow staff to work remotely, some or all of the time, as pandemic restrictions eased. Organizations as diverse as Meta, American Express, Citigroup, and Ford Motor were some of the many that asked employees to come back to work in their offices, at least part of the time, last year. 

Some argue that after a year of a sluggish stock market, rising inflation and interest rates, and big companies laying off thousands of workers amid fears of a recession, job hunters have less power to request remote or hybrid work arrangements than they did a year ago. The combination of tech-sector layoffs and high inflation could lead to a job market rich in talent and a broader economic situation where job seekers can't afford to turn positions down, predicted Rhett Stubbendeck, CEO of insurance brokerage LeverageRx

"The demand for hybrid or remote work arrangements may still be there, but at a minimum," Stubbendeck said. 

But others believe hybrid and remote work is here to stay. "The hybrid office, an arrangement that combines remote and in-office work, seems poised to become the new normal for many white-collar workers," said Christian Velitchkov, co-founder of marketing agency Twiz

The onset of the pandemic didn't mark the beginning of the trend towards hybrid and remote work arrangement — it only accelerated it. Pre-pandemic, one-fifth of employed American adults already worked from home all or most of the time, according to Pew Research Center. 

At their best, these flexible workspaces consider what we learned about productivity and work-life balance after the onset of the COVID-19 pandemic in order to develop new setups that maximize the upsides and minimize the downsides for both remote and in-office work, Velitchkov said. 

Those upsides can be especially beneficial for workers who are often marginalized in traditional workplaces — and who are more often at risk during an economic downturn. Research shows that for people with disabilities, remote work benefits both their productivity and their health, and some BIPOC workers say they find remote workplaces less stressful and healthier. 

Is it still a searchers' market?

Despite the economic doom and gloom, job hunters still have some flexibility to prioritize remote and hybrid work environments in their searches. Despite heavily covered layoffs at companies including Shopify, Meta, Twitter, and Salesforce, overall unemployment rates are still low — just 3.7% in November 2022, close to a 53-year low. 

And while layoffs were common in the tech sector last year, and are expected in other industries like mortgage lending and real estate in 2023, that's not the trend across the board. Several sectors are experiencing staffing shortages, including cybersecurity and healthcare. Job openings in the U.S. remained high throughout 2022, increasing in the final months of the year. 

"Even in an era of widespread layoffs, applicants are still being more selective than ever," said Andy Kalmon, CEO of —‹Benny, a company that finances for employee stock plan purchases. Some open positions may still be tough to fill, and organizations should realize that top talent will still negotiate, Kalmon advised. 

Those negotiations could include requests for hybrid or remote work arrangements, which many people still want. Owl Labs' State of Remote Work report found that more workers chose remote work in 2022 than in the year prior, and fewer of them were interested in in-office employment. Two-thirds of Owl's respondents said they would start looking for another job if they lost the ability to work remotely at least some of the time, and 39% would quit. 

"Many employees have come to value the benefits of hybrid and remote work, such as increased work-life balance and the ability to live in a location of their choice," said Shri Ganeshram, CEO and Founder of —‹—‹Awning, a real estate brokerage focused on short-term rental investment properties. 

Will fear change where employees work every day?

Knowing this, flexible work arrangements can be a selling point when wooing potential candidates, especially when hiring for hard-to-fill roles or competitive sectors. "By guaranteeing certain work conditions, including remote work and flexible hours, companies can offer workers more certainty about their future," advised Maria Britton, CEO of Trade Show Labs. Companies benefit too, because they can broaden their candidate search across the country — or even internationally. 

In those and other industries, a recession's impact on hiring could be limited and HR departments might need to consider creative means to increase staffing levels or retain existing employees. This is one area where smaller firms might have an advantage. "Small businesses are becoming a more popular choice among applicants because they are often more flexible with scheduling and work options, so larger corporations may wish to emulate these characteristics if they are struggling to hire enough staff," Kalmon said. 

But for some industries, the fear of a potential recession may outweigh their need to bring on new staff. "The ongoing fears of a recession may lead some companies to continue downsizing or restructuring their staff in order to stay competitive," Ganeshram warned. —‹—‹Under those conditions, hybrid and remote work options could decrease if there are fewer overall open roles.

—‹However, Ganeshram also pointed out that workers value flexible work arrangements, so continuing to offer them could provide a competitive advantage in attracting and retaining top talent. "Additionally, with the ongoing digital transformation of the economy, we may see an increase in the number of jobs that can be performed remotely, further increasing the demand for these types of work arrangements," he said. 

HR departments considering policy changes around remote work should also balance their need to reduce costs with the potential impact to productivity. WFH Research, co-founded by Stanford economist Nick Bloom, found turnover — costly in itself — is lower for companies with remote and hybrid work arrangements, and productivity increases by 3-5% in hybrid work environments. 

And aside from broader macroeconomic factors, hybrid models can save companies money — $11,000 per employee per year, according to Kate Lister of Global Workplace Analytics, thanks to reduced absenteeism, increased productivity, and real-estate savings. The potential balance-sheet benefits of flexible work arrangements are another factor to consider in planning for the business impacts of a potential recession. Add those to the ability to retain staff or hire plum candidates as needed, and even during a recession, the balance remains on the workers' side.