How to Resolve the Supply and Demand Imbalance for Remote Work
New research shows a very real mismatch between the desires of prospective employees to work from home and those of hiring companies to have them work in the office. Will the Free Market work its magic in the employment market to find equilibrium between what management and workers want today?
The free market does work. It may not be as pretty as we would like it to be. It may not be as fast as we would like it to be. It may not be as painless as we would like it to be. It may not be a lot of things, and it may not be as entirely “free” as Adam Smith envisioned it to be, back in his day in the 18th Century. However, in the end, the “Invisible Hand” of the market does work, as supply and demand do tend to - over time - meet somewhere in the middle, finding what has come to be known as the equilibrium point, where the forces of supply and demand become balanced.
And yes, make no mistake about it, the employment market is perhaps the ultimate free market. Employers are the buyers, and we, the labor, are the sellers. Yes, the labor marketplace is regulated by the government, with laws establishing the boundaries - these generally being minimums in terms of conduct and actual terms of employment (e.g. minimum wage, unlawful discrimination, etc.). However, the job market is where the matching process - and yes, it’s a somewhat mystical, magical, and at times, a very frustrating one - takes place that ultimately, sorts all of us into our respective jobs. Every company, government agency, non-profit organization goes to this amorphous market to find the workers they need, and likewise, each of us go into this very broad market to find a job. Each and every filled job is basically where the needs of the hiring company and the needs of the person hired for that job meet at a certain point in time.
Now, the employment market doesn’t work perfectly - by any means. There are certainly many market inefficiencies, as opportunities are missed - by both parties, and yes, even some degree of exploitation of individuals on the low end. However, somehow, someway, the employment market does “work” overall to match work and workers.
But at present, there is a very real imbalance in the employment market. Namely, there is a mismatch - and it is a quite significant one at that - in the number of employers offering jobs with remote work and the number of workers seeking jobs that offer them the chance to work remotely. And so in this article, we’ll look at just how bad the imbalance is at present and look ahead at where - and when - the Invisible Hand of the market will lead us to that equilibrium point where both sides of the employment equation are satisfied with the offerings of remote work - and what this means for the future of work for all of us.
Out of Balance: The Supply and Demand of Today’s Employment Market
We hear a lot today about the labor market today. That’s because the signs of the immediate crisis are all around us. These are the “now hiring” signs that are seemingly everywhere today, from the windows of stores and restaurants to even digital billboards and TV commercials! This is because there is a very real imbalance today between what employers are offering to pay - even as pay rates rise, particularly across the service sector - and the price at which people are willing to work in those jobs. From retail and restaurants to health care, service industry wages are rising to find that magic equilibrium point in the labor market. And while this has entailed a great deal of volatility in the employment market (i.e. “The Great Resignation,” greater use of self-service models that eliminate the need for service personnel, etc.) - and yes, higher labor costs have only added to the inflationary pressures we all feel right now, that is not the real, structural imbalance that we have in the labor market today.
Figure 1: Demand and Supply for Remote Work Jobs Are Not Lining Up
Source: Chartr, “Out of Office: There Aren't Enough Remote Jobs to Go Around,” December 2022 (Used with permission)
Rather, the very real, very intractable (one that will take quite some time and imagination to resolve) imbalance in the employment market can be seen in Figure 1 (Demand and Supply for Remote Work Jobs Are Not Lining Up) above. As you can clearly see in that graphic, put together by the data intelligence firm, Chartr, today, more and more people want to work remotely, and yet, employers are not catching up to that demand by offering more opportunities for remote work. In fact, they are backtracking on this shift to remote jobs - at least for the moment, with many prominent firms, Snap, Goldman Sachs, JP Morgan and others, calling back employees to work exclusively - or primarily - in their physical offices!
The Chartr chart (yes, a tongue-twister if you read it out loud!) was based on two and a half years worth of Linkedin data on job listings (starting from just before the COVID-19 pandemic hit in 2020 to late this year) from employers and job applications from prospective employees, which was originally reported in an article (“The Great Mismatch: Remote Jobs Are in Demand, But Positions Are Drying Up”) by Abha Bhattarai in The Washington Post. What you see in the Chartr graphic is simple: Remote work - and the demand for it from prospective employees - has grown rapidly since the onset of the pandemic. However, at the same time, there has been a growing - and quite significant - gap between what workers want in a job and what employers are offering. At present, while both job growth from companies and job searches by prospective applicants has slowed down as the economy has cooled, the gap between remote work jobs and those desiring to work remotely is now more significant than ever! The data doesn’t lie - and it is stark: 50% of those looking for work want to work remotely, while only 15% of jobs posted by companies are for remote work. Rand Ghayad, Head of Economics & Global Labor Markets at LinkedIn, characterized the situation in the following way:
“It’s the ‘great remote work mismatch’. In the past, labor mismatches have been about skills. Now we’re seeing a different kind of mismatch, where workers are looking for jobs that offer certain attributes — like the ability to work remotely — that employers aren’t willing to offer.”
As a strategic management consultant and professor who has been doing quite a bit of work and research on the whole remote work trend since the beginning of the pandemic (having published numerous articles on the WFH [Work from Home] phenomenon and a major report on the matter for The IBM Center for The Business of Government [The Age of Remote Work: How COVID-19 Transformed Organizations in Real Time], I think that the findings on the remote work imbalance are a clear wake-up call for all organizations today! And yes, I do think that over time, not immediately, but over the next five or so years, we will see the Invisible Hand of the market “work,” and bring into balance the supply and demand for remote work. Ultimately, the market will determine that equilibrium point where we have the best possible match between remote jobs and remote workers. But here’s my warning: It will be quite bumpy - and somewhat painful in getting there though - both for organizations of all types and for workers!
For companies, government agencies, and non-profit organizations, it’s vitally important that not just their HR (human resources) people - but that everyone in management as well - face-up to a simple fact today: There is a large - and growing - segment of the workforce that wants to - check that, expects to - be able to work if not fully remotely, at least mostly remotely! Whatever metaphor you would employ to characterize what has happened since the onset of the COVID-19 pandemic - and the decades worth of transformation in the way we work and communicate remotely that occurred in just a few months in 2020, it is a very, very real phenomenon! Yes, it’s going to be difficult to squeeze the toothpaste back in the tube, to put the genie back in the bottle, to get the horse back in the barn, to unring the bell, to unburn that bridge… well, you get the picture, when it comes to working remotely. There are vast swaths of the American - and really, the global workforce - that have discovered over the past 2+ years that they can do their jobs better, more efficiently, more economically, and yes, improve the balance of their work, family, and “other” commitments by working from home, at least a majority, if not all of the time. And for organizations, they are finding that having employees work remotely saves them on real estate, utilities, and other overhead costs, and most importantly, helps them reduce their turnover and all the ancillary costs and operational difficulties that can come from losing - and then having to replace - workers.
As one of the recognized experts in the WFH area, I think it is safe to say that the equilibrium point in the employment market - where the supply and demand for remote work will find balance - will not come from current and prospective employees saying basically: “Okay, you got me! I’m going to abandon my remote work ambition and just come into the office like you want me to!” In the short-term, many existing employees will come into the office when their employer mandates it. However, at the same time, many of them will take this as the sign to start looking for “other opportunities” - opportunities where they can return to working in the remote fashion that they had become accustomed to - and which they prefer. Similarly, a small percentage of an employer’s potential applicant pool will acquiesce to the “you must come into the office to be considered for this job” edict, but a much higher percentage will simply take a pass on such jobs listings. Over time, not immediately, not in a year, but more like five or at most ten years, I do believe that we will reach that equilibrium point as companies - and workers - determine, both independently and collaboratively - and through trial and error - which specific categories of jobs should be done “best” - from both sides of the employment equation - fully in the office, partially in the office, and wholly outside of the office.
It may indeed be messy, disruptive, and yes, costly as all of us together work through all of this. But in the end, I firmly believe that we will come out of all of this on the other side with a better functioning employment market for everyone - for all organizations and yes, for all workers as well. And if we end up with something vaguely close to an optimal resolution, we can have not just a more productive workforce and more efficient companies, and in the process, reduce the carbon footprint of work by eliminating unnecessary commutes and travel. Talk about a “win-win-win” solution for us all.
About David Wyld
David Wyld is a Professor of Strategic Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, publisher, executive educator, and experienced expert witness. You can view all of his work at https://authory.com/DavidWyld.
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