Companies strategically include work from home flexibility in their job ads when labor markets are ... [+]
Companies strategically include work from home flexibility in their job ads when labor markets are tight, leading to greater hiring efficiency and employee satisfaction. However, companies advertising remote work in their job ads also subsequently experience reduced labor productivity and lower stock returns, according to a study available at ssrn.com.
In a study titled "Disclosing Work-From-Home Flexibility to Compete for Talent? Evidence from Job Postings” researchers analyzed more than 14 million job postings from 1,837 publicly traded companies between 2016 to 2021. The article is authored by Charles Ham from Indiana University, Rebecca Hann of the University of Maryland, Wenfeng Wang from Southern University of Science and Technology, China, and Jingwen Yang of the University of Maryland.
Ham notes that, “Companies’ attitudes towards employees working from home have changed dramatically over the past few years. When the COVID-19 pandemic began, the pendulum swung very quickly from working from home being a taboo subject to it being widely adopted and even praised by some. Now, we are seeing the pendulum swing in the opposite direction as more employers are requiring their employees to return to an office setting and for more days of the week.”
Importantly, while offering remote work options likely eases the corporation’s hiring process, such a disclosure could also be viewed by employees as a commitment that the company is expected to fulfill throughout their period of employment. Employees who were attracted by the opportunity to work remotely may be reluctant to return to the office in the long run.
“At the time we began this project, there was a lot of research being done on remote work from the employee’s perspective—whether people liked working from home and wanted to continue doing so—but there was very little research from the employer’s perspective. So, we wanted to contribute to the discussion from a different vantage point,” says Ham.
To perform their analyses, the research team parsed through the text of millions of job postings made by public companies to see how likely they were to highlight that the role was eligible for remote work. As one would expect, the percentage of job postings offering a remote working arrangement was very low in 2016, at roughly 2%. The study illustrates the sudden rise in remote work ads as the COVID-19 pandemic hit. By 2021, the last year examined by the study, the percentage had risen to approximately 8% of all ads and as high as 14% for positions where work-from-home arrangements are more feasible (e.g., positions in accounting and computer-related jobs).
Occupations with the highest percentages of remote work ads are legal, educational instruction, and, perhaps ironically, community and social service. Occupations with the lowest percentage of ads offering workplace flexibility are food preparation and serving, transportation and material moving, and building and grounds maintenance.
The study finds that employers are more likely to offer workplace flexibility in their job postings when they face greater labor market competition. Also, corporations in areas where housing prices are higher are more likely to advertise remote work options so that their employees can choose to live in areas offering a lower cost of living.
“We find this is an effective tactic to attract future employees. Companies that advertise the role as remote-eligible in the job posting hire employees at a faster rate,” reports Ham. The study also observes that employee satisfaction levels are higher for companies offering remote working options.
Still, the research identifies some very important tradeoffs with respect to advertising remote work options. Reflecting concerns recently expressed by many corporate executives, the researchers illustrate that companies offering work flexibility subsequently experience reduced labor productivity and lower stock market returns.
Ham concludes, “I think there are a lot of unknowns in this space regarding the extent to which work-from-home will persist and its effect on productivity. I’m also interested in understanding the long-term effects on new entrants to the labor market. A lot of soft skills are developed during the early years of one’s career through mentoring and interactions with senior colleagues. It seems to be more difficult to replicate these learning moments when working remotely so I wonder what impact this will have on the performance and career development of these individuals.”
