Last week, Amazon CEO Andy Jassy made news by informing Amazon employees that they would be returning to the office starting in January, not in a hybrid manner but in the office 5 days a week. This reversed a pandemic decision to allow remote work during that time of uncertainty. Jassy hopes his move would spur more opportunities for innovation and development through in-person collaboration. Jassy stated in his message that employees needed to be “deeply-connected collaboration (you need to be joined at the hip with your teammates when inventing and solving hard problems).”
Jassy is not the first major corporation CEO to make this decision, however most have adopted a hybrid model to ease into the return to the office for employees. Some of them include Disney who opts for four days a week in the office, JP Morgan where employees are in the office three days a week, and Walmart where employees were told to report to either its offices in Bentonville or at one of several hubs including Hoboken, NJ and Northern CA. Employees who do not adhere to the RTO plan must leave the company by January 2025.
Many of those who have been working remotely are in the tech industry where the need to actually be in the office is really only limited to those who must manage equipment. However, with many companies opting for cloud computing, that requirement quickly diminishes. What seems to be driving these decisions are the concerns from senior management that while employees are most likely working just as hard as when they were in the office, probably harder due to fewer distractions, there wasn’t as much innovation and collaboration as before.
In a WSJ article on the subject, a survey of CEOs showed that the number that would push for RTO has risen from 34% in April to 80% now. That’s a significant shift in attitude that will probably only grow going into 2025, especially as consumers opt less and less for online experiences and more for efficiencies across the board. Glenn Kelman, CEO of Redfin, another Seattle-based company, said many CEOs who still have a remote work policy will be watching two things: Will Amazon bleed workers? Or will this give it a competitive edge?
To some degree, these moves could also be coupled with recent job data that shows a downturn in tech job openings, leading to less churn in the market. A recent WSJ article noted that tech jobs are drying up and may not be coming back soon. From the article, “Postings for software development jobs are down more than 30% since February 2020, according to Indeed.com.” Companies are starting to focus more on revenue-generating projects and less on moonshots. Entry level positions have been curtailed and many companies are looking for experience, a departure from the pandemic era where they just wanted a warm body who could code.
As is always the case with technology, the job area not impacted by these cuts are those in AI fields, following the trend to integrate AI into process as much as possible, many following the hype caused by ChatGPT’s release of its Gen AI models in 2022. “It ignited a frenzy of investment and a race to build the most advanced AI systems. Workers with expertise in the field are among the few strong categories.”
A good portion of this shift in tech jobs is a realignment from the boom days during the pandemic when even entry-level applicants were being offered salaries once reserved for seasoned professionals. Now, salaries are starting to come down as companies re-evaluate their salary expenses. From the article, “The trend of ballooning salaries and advanced titles that don’t match experience has reversed, according to Kaitlyn Knopp, CEO of the compensation-planning startup Pequity. ‘We see that the levels are getting reset,’ she says. ‘People are more appropriately matching their experience and scope.'”
This shift back to the office will start to have an impact that extends beyond the workplace. During the pandemic when many companies shifted to remote work, they were able to find workers in a variety of locations, including rural communities. Those communities benefited from current residents finding high-paying jobs with companies without having to move and from urban/suburban workers moving to communities with a lower cost of living.
In an article in Progressive Farmers, Urban Lehner points out the impact of a shift in return to office. He points out many pros and cons of remote work, from finding better workers more easily to reduction in expenses. He does note that remote work is not for every company and that it really depends on the workstyle of the company. In some cases, that face to face collaboration is critical to success. “Rural America must hope that the pros will continue to weigh heavily in at least some employers’ equations.”
This shift in work will also create a shift in real estate markets as some will be faced with the hard choice of moving closer to the company they signed on to when they took the remote position or moved after the remote work shift. Some may have to abandon those low interest mortgages and be faced with higher rates as well as possibly having to sell at a loss according to an article in Yahoo Finance. They are going to find a tight real estate market as many companies are headquartered in urban or suburban locations with short housing stock.
These shifts in work will create new challenges for policy makers as the economy shifts to a new phase with a soft landing. Jobs continue to be strong, albeit a little weaker than during the post-pandemic period. Companies are starting to dial back to prepare for that soft landing, making sure expenses are in line with revenue. Coupled with those choices, employees will have to make their own choices for the future. Before, they had the upper hand in bargaining with employers. Now, that bargaining chip may not be as strong as it was in the past.