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Can work from home expand your talent pool?

Once we stop thinking of location as a qualifier for employment, it makes it a lot easier to hire quality talent from a significantly larger pool. It even saves money. But it all starts with a shift to remote work.

A modern, distributed workforce experiences several cost-saving benefits, like a reduction in office expenses (linkback to Argument for Remote post), but it also expands the volume of available candidates.

Consider the following: nearly 70% of employers report shortages in talent, despite the fact that there are more skilled workers than vacant positions.

There’s a variety of reasons employees leave. Some of it is a large population of Boomers retiring out of the workforce. Some of it is due to pay. An employee in San Francisco faces cost-of-living expenses that are twice that of someone in Detroit, and as such demands a larger salary. But one of the top reasons is work-life balance. Simply put, burn out sends quality employees packing.

When 60-80% of American employees shifted to work from home, a majority reported an improvement in work-life balance. Of those surveyed, 60% say their work-life balance has improved without a commute. This is why remote workers typically register higher job satisfaction scores.

There are benefits beyond public safety and retention. Work from home presents opportunities for cost savings and talent acquisition.

Salary required for equal standard of living between Detroit, MI and San Francisco, CA.

Let’s revisit those two employees from San Francisco and Detroit. To facilitate the cost-of-living in San Francisco, an employer would need to pay their high-skilled talent upwards of $100,000 a year. Yet this same employee living in Detroit would be able to maintain the exact same lifestyle for less than $50,000 annually. Companies in the Bay Area are unlikely to even see a resume from a prospect planning to stay out in Michigan.

By binding employment to a geographical location, employers place themselves at an economic disadvantage. While the above example might be on the extreme end of cost of living, using averages from across the country, we can see a possible savings of 5-10% reduction in payroll costs when employees work from home.

Embracing a modern workforce, one that’s not tied to a physical office, also expands the pool of available talent. Work from home can help re-introduce employees who may have left due to location or office culture. Remote policies provide access to workers with disabilities. It can also help broaden your organization’s geographic, socioeconomic, and cultural diversity.

And all of this is possible on a global scale.

A study conducted in April of 2020 identified international regions best suited for work from home. They included the US, Canada, parts of Europe, and high-income areas within ASIAPAC.

The commonalities that make remote work viable in these regions include the level of economic development, high personal and corporate income level, the availability of infrastructure, and a cultural openness to remote work.

Regional viability of sustained work-from-home company structure.

Collectively, these areas represent a cohort of roughly one-billion people, with a working population of about 400 million. Around 80% of these workers are concentrated in 8 regions: The United States, United Kingdom, Australia, Germany, France, Spain, Italy, and higher-earning parts of ASIAPAC.

Making a physical location an occupational requirement limits the talent pool and increases costs.

 

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What’s the biggest obstacle to work from home?

 

Over the past six months we’ve learned the important role residential internet plays in our daily and professional lives. With a projected 55 million Americans expected to continue working from home post-pandemic, we are now seeing a permanent shift towards a distributed and modern workforce. This also means greater reliance on a strong and stable internet connection.

In March, new usage and Quality of Experience data emerged from the surge of shelter-in-place internet activity. By April, average monthly usage jumped to 402.8gb per household, a 26% spike from January and a 47% increase from the previous year.

2x increase in upload traffic from Feb-March, 2020.

To accommodate this new demand, ISPs and carriers took drastic steps to increase speeds and lift data caps on residential customers to support work from home. While most networks previously planned out additional capacity over years, the pandemic forced telecoms to act faster in order to maintain connectivity.

This spike in internet activity coincides with the large uptake in streaming, gaming, and teleconferencing. Average daily use in 2020 has already exceeded the highest usage peaks of 2019.

This includes single-day records for the major video conferencing applications, like a 2,900% increase in Zoom participants, 2.7 billion minutes spent in Microsoft Teams, and 3,800 years spent in Google Meet. Again, all in a single day.

Several of these applications saw triple-digit increases in search volume as work-from-home users sought out ways to maintain communication with colleagues and collaborators. Zoom witnessed a 1,562% increase in daily search volume over February and March.

Percentage of consumers experiencing connectivity issues following mass work-from-home company policies.

But most of these applications are running over connections that are not equipped to handle the heavy upstream demand of video conferencing. Over these periods of high use, upload traffic has doubled, rising at a faster pace than the infrastructure was built for. This is one of the reasons 52.9% of Americans experience monthly connectivity problems.

Daily, 15.5% of users encounter some degradation to Quality of Experience. Over a video call, these dips in connectivity manifest as delays, glitches, and breaks in communication. Eventually, poor Quality of Experience results in a loss of productivity. Not just for the user, but for everyone participating in the call.

With 42.8 million Americans living without access to stable broadband, it’s clear that most residential homes do not have the enterprise-grade internet needed to support the data-hungry apps of remote work. Around 10 million live with poor cell signal and daily internet connectivity issues, which will not be conducive to communications or productivity.

Teleconferencing requires uninterrupted transfers of data packets, a need that only grows for large groups and screen sharing. This will be a major challenge for employers who look to embrace the benefits of a long-term remote strategy (link to modern and distributed post).

More than half of all Americans say that the internet has been essential during COVID-19, especially for those who plan to work from home in the future. Nearly 43% of full-time employees hope to stay remote, if possible. To do so successfully, companies, carriers, and employees will need to see a boost in connectivity.

 

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Is the work from home economy here to stay?

Past, present and future of work-from-home trend.

On December 31st, 2019, there were around 25 million Americans working from home. That’s about 16% of the population in total, with 6% of the workforce holding full-time remote positions.

In March 2020, twenty million jobs were lost or furloughed, mainly due to an inability to transition into telework. Simultaneously, companies rapidly moved 60-80% of the remaining personnel to work from home.

But let’s talk about the future.

When offices open up again, most experts project 40-50% of American employees will spend a portion of their week working from home. Using a conservative estimate, this comes out to roughly 55 million Americans, more than twice the number of employees working from home than when we started the year.

Jonathan Dingel and Brent Nieman from the University of Chicago School of Business found that 37% of American jobs can be done entirely from home. Other studies, like World Bank Group’s Jobs’ Amenability to Working from Home, estimate the number of American work from home jobs to be closer to 61%.

The difference comes down to how you classify face-to-face occupational requirements. A waiter will be unable to fulfill their duties remotely, whereas an accountant is capable of doing many of their functions with only a computer and an internet connection.

As companies make adjustments and remove obstacles to remote work, the percentage of work from home jobs goes up. Some positions will be able to adopt work from home habits for at least part of the week. For example, a job that once required daily face-to-face interactions might rely more heavily on telecommunication and occasional, scheduled visits to the office.

Positions capable of pivoting to work from home typically garner higher pay than those unable to shift to telework. All in, remote-friendly positions account for 46% of all wages earned in the country. These affluent positions include tech, legal, financial, engineering, administration, and management.

Companies are already allocating significant portions of their budgets to promote a long-term work from home strategy, including monthly stipends for expenses. There’s an opportunity to meet the needs of organizations who want to keep these high-earning employees engaged and productive.

As occupational requirements change to better accommodate remote work, an even larger pool of employees will need support. Both Dingel/Nieman and the World Bank Group identified areas outside the United States with viable remote work opportunities.

So is work from home economy here to stay?

 

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What’s driving employers to remote work?

We’re witnessing a long-term shift towards working from home. Nearly three in four CFOs plan to shift a portion of their on-site employees to permanent remote positions. Beyond public health and safety, there are several financial drivers incentivizing work from home.

  • A reduction in operating expenses.
  • Payroll savings associated with lower cost of living.
  • Productivity gains.
  • An expansion of the labor pool, including access to a global workforce.

We’re already seeing companies alter their leases and on-site contracts as part of a permanent adjustment. A recent Gartner survey revealed that in April of 2020, 13% of respondents had already made cuts to real estate expenses, with an additional 9% planning to do so in the near future.

This coincides with the cost saving efforts we’re seeing companies make in technology spend and other on-site overhead that have become less critical in a predominately distributed, work from home environment.

Projected annual savings for workers and employers with remote work.

Multiplied across a workforce, savings associated with reduced operational expenses translates to significant numbers. According to Global Workplace Analytics, companies will save an average of $11,000 a year per employee when employees work from home at least part-time.

Rent and utility costs. Maintenance. Travel expenses. It all adds up, and not just for the employer.

The same Global Workplace Analytics report demonstrates cost savings for employees who work from home. This includes a reduction in transportation costs, fewer lunches bought out, and less need for professional wardrobe and accessories. Annually, employees who spend a portion of their week working from home are saving between $2,500 and $4,000.

But it’s more than just cost savings, employees who work from home are actually happier and more productive.

A Harvard Business Review study found a 4.4% increase in productivity when employees work from home. This boost comes from a variety of sources, including better work-life balance, a decrease in commute time,  quieter noise levels, and fewer interruptions.

Projected savings over the next five years for remote work companies.

The shift towards a modern and distributed workforce is proving to be incredibly popular with employees. 44% of employees would take a pay cut to permanently work from home. One 2019 study shows that remote employees work an average of 1.4 days more than their office counterparts. Another shows a dramatic reduction in absenteeism.

The positive response from employees demonstrates a bigger benefit than a reduction in costs. It shows demand for a modern approach to work.

 

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How much value can be created with remote work?

Over the next five years, $8 trillion in value gains will be realized by companies migrating to a modern and distributed workforce.

Globally, a viable work from home population exists within eight regions, the United States, the United Kingdom, Australia, Germany, France, Spain, Italy, and higher-earning portions of ASIAPAC.

A few common and specific traits make these regions strong candidates for work from home, such as high personal and corporate income level, availability of infrastructure, the level of economic development, and a cultural openness to remote work.

Collectively, these eight viable geographies have a population of one billion. The working populace consists of 400 million people, and of those, 160 million will be permanent work from home.

Not only does this translate to a massive talent pool of remote workers, it’s also a major economic benefit to organizations interested in adopting a modern workforce.

Each remote worker saves their employer an average of $10,000 a year on workspace and related expenses. And these benefits are realized by employees as well, who can save between $2,500 and $4,000 a year spending part of the week working from home.

Twitter, Facebook, Slack, Shopify, and more have already announced long-term plans for permanent work from home. Shopify has permanent plans for employees to be remote-only and intend to rework office spaces to reflect this change.

Reducing the importance of a centralized location makes it easier for companies and organizations to re-allocate operational budgets to other areas. Gartner found that 22% of companies have either made or are planning to make cuts to real estate expenses in coming months as a response to work from home. Moody’s Analytics is already forecasting 20% vacancies for commercial real estate by 2022.

But the economic benefits are not just in rent, utility, and maintenance. Companies with remote work already see 25% lower employee turnover, lower payroll expenses, and higher productivity.

Across 160 million remote workers, these savings translate to $1.6 trillion in annual value creation. Over five years, that’s $8 trillion.

 

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