As part of ongoing cost-cutting measures under new owner and CEO Elon Musk, Twitter is shutting down its Seattle offices and instructing employees to work remotely. That’s despite Musk earlier claiming that remote workers are only “pretending to work” and banning remote work at Twitter upon taking it over in early November.
So what explains his change of heart? Apparently, it’s the costs associated with the company’s Seattle office: rent and services such as cleaning and security.
The fact that Musk — an extreme skeptic of remote work — acknowledged its cost-cutting benefits illustrates the future of remote work for the U.S. economy. It highlights the misleading nature of many headlines about how an impending recession would lead to the end of remote work.
They claim that a cooling labor market will give executives more control to require employees to return to the office. That’s because many employees prefer to work remotely and most executives want their employees in the office.
However, the reality is much more complex. Of course it’s true that during a recession, employers have more leverage. At the same time, executives need to focus on maximizing the return on investment from their employees.
In times of economic growth, executives have more freedom to make decisions based on their personal preferences and intuitions. But during a recession, they may need to hunker down, be more disciplined, and rely on data to make decisions that make the most financial sense for the company — like Musk choosing to have Twitter staff work remotely for the sake of cutting costs. This focus on profitability over personal preferences benefits remote work.
Evidence shows that remote work is more productive than in-office work, which makes facilitating remote work especially important in a time of cutting costs, since higher productivity means companies need fewer employees to do the same amount of work. A study from Stanford University reported remote workers were 5% more productive than in-office workers in the summer of 2020. By the spring of 2022, this productivity gap had increased to 9% as companies continued to improve their remote work practices and invested in technology that supported remote work. A different study used employee monitoring software, and also found that remote workers are more productive than in-office workers.
In addition to being more productive, remote workers show a willingness to work for lower pay, another factor that will boost reliance on remote work in an upcoming recession. An NBER study illustrates that remote work lowered wage growth by 2% over the first two years of the pandemic, as employees often view remote work as a valuable benefit and decreased salary demands in exchange for remote work options. For a specific example, a survey of 3,000 workers at top companies such as Google, Amazon and Microsoft found that 64% would prefer to work from home permanently rather than receive a $30,000 pay raise. Companies that offer remote work opportunities also benefit from hiring employees from lower cost-of-living areas within the U.S. or even outside the country.
Thus, employees are more productive, and cost less to hire and retain, if they work remotely. These cost benefits add on top of the cuts in expenses for rent, cleaning and security due to giving up now-unnecessary office space.
In my conversations with clients, these cost savings have been increasingly important in recent months as a recession looms. And if even hard-line opponents of remote work like Musk see these obvious benefits, we can anticipate that a recession will prove a major boost to remote work.
The opinions expressed in reader comments are those of the author only and do not reflect the opinions of The Seattle Times.
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