Economic Recession Leads to Layoffs... Will Office Returns Begin Again? [Jjinbit]

[Asia Economy Reporter Jeong Hyunjin] One of the core aspects of the 'Great Resignation' movement, which began amid the COVID-19 pandemic, is the imbalance of power between corporate executives and employees. In a situation of labor shortages, companies poured various compensations to retain employees who wanted to resign, and this was the background for that. As concerns about an economic downturn have grown this year, mass layoffs are occurring mainly among global IT companies. In such cases, the balance of power that had been leaning toward employees will shift back toward management.

◆ "Employees Will Return to the Office in Groups"

Will this change affect remote work and hybrid work, where employees only come to the office part of the week? Since management has been known to prefer resuming office attendance over employees, there are opinions that companies may push for expanded face-to-face work. Many global company leaders, such as Elon Musk, CEO of Tesla; Jamie Dimon, CEO of JPMorgan Chase; and Tim Cook, CEO of Apple, have emphasized the problems of remote work, citing that it hinders collaboration, and have demanded office attendance. Last month, Musk even threatened that employees who do not come to the office should quit the company.

In South Korea, the gaming industry ended remote work and began returning to the office in June. The reason for this shift, despite the gaming industry having actively encouraged remote work, was performance pressure. While large domestic IT companies like Naver and Kakao announced flexible work systems one after another, the gaming industry emphasized that new game development was delayed due to remote work and that office attendance was necessary to speed up development through face-to-face work. This is why there is speculation that global IT companies, which have started cost-cutting management amid concerns about an economic downturn and layoffs, might also change in this way.

Susan Gudaj, CEO of American financial software company Intuit, told MarketWatch last month that based on the opinions of 120 million consumers and small businesses, "If the situation worsens, more people will be required to come to the office, and power will shift to employers." She added, "Many CEOs I've talked to believe face-to-face work is better than video calls," and predicted, "As the economy worsens, we will see people returning to the workplace."

Steven Ross, founder of Related, which developed Hudson Yards, a landmark in New York, emphasized in an interview with Bloomberg last month, "Employers hesitate to lose employees, but if a recession comes and employees try not to lose their jobs, they will eventually return to the office," and stressed that when companies face difficulties, we will see employees returning to the office in groups.

There are also voices expressing concern about this atmosphere. Phil Libin, co-founder of Evernote and currently leading the video conferencing solution service Uh-huh, told MarketWatch, "The world outside the office is the most important social movement of our lifetime. We should not go back. This is not what people want," and pointed out, "Employers seeing unused office space will try to force people back to the office, which will reduce the productivity of employees who have to commute and those who are less motivated."

◆ "The Genie Won't Be Put Back in the Bottle"

However, some global workplace experts say it is not easy to reverse the major trend toward remote or hybrid work immediately. Johnny Taylor Jr., chairman and CEO of the U.S. human resources consulting organization SHRM (Society for Human Resource Management), recently told the U.S. internet media Vox, "Reversing this (remote work) is like putting the genie back in the bottle?it won't happen," adding, "During a recession, productivity will become even more important, and employees with higher productivity and efficiency will endure when management faces a choice."

Especially in the U.S., although news of layoffs continues daily, the current unemployment rate is very low at 3.6%, and the labor shortage persists, making it difficult for the balance of power to suddenly tilt toward management. Changing this situation is not easy. Nick Bloom, a professor at Stanford University, emphasized in a recent interview with Business Insider that even if some layoffs occur due to the recession, the need to recruit and retain talent remains. He said there might be a "slight retreat" in remote work due to the recession but added that he has not seen numerical evidence related to this.

While some departments are undergoing layoffs amid the recession, it is also important that existing employees perform their duties properly. According to a WFH Research survey cited by the World Economic Forum (WEF), which surveyed about 60,000 U.S. employers and employees each month, the gap between the number of remote workdays desired per week by management and employees narrowed from 1.38 days at the end of 2020 to 0.44 days last month. This means the difference in thinking between management and employees has decreased. Over the one and a half years, employees reduced their requested remote workdays by about 0.2 days, while management increased theirs by about 0.8 days. The change in management's thinking was much greater. Given this atmosphere, the balance of power still leans slightly toward employees, and management seems to be adjusting accordingly.

Some argue that the reduced need for office space due to the expansion of remote work can also help companies cut costs. This means rental costs can be reduced. Arpit Gupta, a professor at New York University, told Vox, "I actually think remote work will increase. Companies have gained bargaining power over employees, but most want to reduce real estate rental costs through expanded remote work." He pointed out that companies have lost interest in important office roles such as onboarding new employees and long-term innovation, and rather, this is supporting existing employees' remote work.

There are various opinions about whether remote work will expand amid the recession. What experts agree on is that there is no "right answer" in the intense discussions about the future of work since COVID-19. New work style experiments have been conducted worldwide, and perceptions of companies and economic actors have changed, so returning exactly to the past is impossible. If a certain work style is forced based on power logic without communication, conflicts are inevitable. Especially in difficult times, it is important to discuss together based on communication to find wise solutions.

Editor's Note[Jjinbit] is short for ‘Jeong Hyunjin’s Business Trend’ and ‘Real Business Trend,’ a corner that shows trends in corporate management such as organizational culture and personnel systems. We will deliver fresh and differentiated information and perspectives based on analyses from foreign media and major overseas institutions that have not received much attention so far.