Here’s why forcing workers back to the office won’t have the desired effect

Working from home is sneakily becoming one of the biggest emerging fault-lines in our society. Scarcely a week goes by without a story about a major employer announcing a compulsory ‘back to the office’ order. 

From the perspective of employers, the equation seems simple. Many believe workers are less productive from home (an issue we will return to) so everyone must come back to the office. 

There is often an unspoken additional belief that workers not under direct supervision are just slacking off. Indeed, JP Morgan Chase CEO Jamie Dimon recently said that quiet part out loud. Dimon continued that those who don’t want to work in the office can quit. 

The case for returning to the office is not always couched in negative terms, though. Other often-cited benefits include increased collaboration between workers and greater opportunities for mentoring young staff. 

While the benefits of returning workers to the office may seem obvious to employers, they would do well to act with some caution. 

The context here is important. No doubt many employers see the working from home revolution as a necessary (and often unwelcome) by-product of the global pandemic. For many, their thinking has typically reflected the assumption that once the pandemic was over, everything would slowly return to ‘normal’. 

It is not at all clear that workers have been viewing things the same way. 

It is worth remembering that inflation began to take off worldwide immediately following the pandemic. This sent real wages plummeting, with many workers forced to take a significant real pay cut. 

In this environment, increased flexibility (including, but not limited to, working from home several days a week) may have acted as a salve to the pain of these real wage decreases. 

One obvious example is commuting. Commuting is quite expensive, both financially and in terms of time. Workers who can work remotely save on commuting costs and secure extra time. 

Some of that time is no doubt claimed by workers’ other interests; but for many working from home, they have the option to begin their work day earlier than they would otherwise. 

This is far from the only reason workers place a financial value on flexibility in working hours and location. 

The benefits of flexible working have long been self-evident for those with caring responsibilities or disabilities. But increasingly, other workers are seeing that working from home may no longer be merely as an accommodation grudgingly granted to those who lacked ambition for promotion (such as the often derided as the ‘mummy track’). 

Working from home became normalised for the first time for many during the pandemic. A lot of workers saw the appeal. 

Research backs up this point. A 2023 survey published in the Journal of Economic Behaviour and Organization found that the average worker would forgo roughly 4% to 8% of their wage for the flexibility to work remotely. 

Although around half said they would not take a pay cut to work from home, 20% were willing to forego more than 15% of their wages to do so. Some of those people would give up a considerably higher percentage of their wages. 

This is supported by recent research from the Committee for Economic Development of Australia, which found that individuals who work from home have experienced 5.8% lower wages than those who do not. 

This suggests that for a considerable proportion of workers, the impact of a cut in real wages may have been softened by a perceived increase of benefits ‘in kind’ through greater flexibility. 

There are additional considerations as well. For example, as technology and connectivity has improved, workers have been increasingly expected to blend their work life with their home life — answering calls and emails after-hours and on weekends for example. 

The working from home phenomenon is in some respects the mirror of this trend, the blending of home with work. 

Given the pushback already taking place in respect of expectations on employees outside of hours (for example ‘right to disconnect’ laws), it may be necessary for employers to tolerate the blending of home with work if they wish to continue taking advantage of the intrusion of work into home.   

One big looming point is the issue of productivity for those working remotely. There are passionate advocates on both sides: some workers insist they are more productive working from home while others, especially managers insist that their team is less productive. There is a marked generational divide as well. 

Evidence on this is frustratingly mixed. It is especially hard to parse out evidence at an economy-wide level. 

For example, Australia’s current productivity slump clearly predates the pandemic and the working from home revolution. Did working from home help or hurt productivity? Did it have no effect at all? Perhaps it is enough that those managing companies believe workers at home are less productive? 

Unfortunately, there is another recent example of that kind of thinking where the negative evidence is actually much clearer: open plan offices. 

For years, managers insisted that open offices promoted collaboration and idea generation between staff members. It also was supposed to do wonders for creating a team culture in the office. 

Unfortunately, a lot of these benefits didn’t materialise. Instead, studies such as the one by James, Delfabbro and King from Flinders University found that “working in open-plan workplace designs is associated with more negative outcomes on many measures relating to health, satisfaction, productivity, and social relationship.” 

At best they were cheap ways to make your workers miserable. One thing open plan offices did make clear was that, while some workers might be ‘working’ from home, there are plenty who are ‘working’ in the office too… 

Perhaps the broader point is that many workplace ‘revolutions’ are far more effective on a selective basis than on an economy wide basis. Part of the issue in Australia with working from home seems to be that everything in industrial relations is viewed through the lens of collective and broad workplace rights. 

However the views that ‘everyone should have a right to work from home’ and ‘if you aren’t in the office you aren’t working’ are almost equally wrong. Flexibility is beneficial in many different ways. 

At a minimum, employers should consider this: their staff won’t see their ‘return to office’ memo as just a return to normal. Many will see it as a 5% pay cut and act accordingly. 

Simon Cowan is Research Director at the Centre for Independent Studies.