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Home / Publications / Research / Economic Brief / 2024 Return-to-O ce Orders: A Survey Analysis of Employment Impacts By Grey Gordon and Sonya Ravindranath Waddell Economic Brief May 2024, No. 24-16 How did employers expect return-to-o ce (RTO) orders to a ect employment? Were those expectations correct? We use special questions from the Richmond Fed business surveys to shed light on these questions. Overall, RTO orders were expected to reduce employment, but there was both substantial uncertainty and heterogeneity in expectations. Some employers even expected that RTO would increase employment. Ex post, employers believe RTO orders had a muted e ect on employment. We nd that the service sector was more likely to both issue RTO orders and expect and experience a reduction in employment. T he COVID-19 pandemic changed the way that both employers and employees think about the location of work.1 T he advent of remote work en masse in 2020 has been followed by a gradual implementation of requiring workers to work from the o ce, at least for some of their workweek. T hese forced return-to-o ce (RT O) orders have come with controversy: Many employers have implemented these policies, while many employees have resisted. In this article, we attempt to shed light on the e ects of RT O by reporting on special questions we asked in the March Richmond Fed business surveys. Speci cally, these questions shed light on both the anticipated and realized employment outcomes of RT O orders from the employer's perspective. We nd that uncertainty in the decision-making process was prevalent, but also that realized outcomes were generally muted. RT O did have an expected and actual negative e ect on employment, but only in some sectors and for some employers. For others, RT O was a means of increasing employment. Our results highlight the large uncertainty in the pandemic, the heterogeneity of rms and the large heterogeneity of workers. Why Examine the Impacts of RTO Orders? / T his survey builds on a recent literature investigating the implications of remote work for workers, businesses and local economies. Uniquely, it attempts to discern how business leaders anticipated RT O policies would impact their rms as well as the actual impact on employment within their rms. Although there is work evaluating the bene ts and costs to employers in terms of productivity or labor/non-labor costs,2 there has been little work to understand the rm-by- rm implication of articulating and enforcing an RT O order. Research indicates that hybrid options are highly valued by employees,3 but how many separations can be attributed to an RT O policy? T here is evidence that managers value inperson work more than employees,4 but does that result in actual separations when RT O orders are implemented? Our results suggest the e ects of these policies were muted. T here is also evidence of wide variation in employee hybrid-work preferences and in their willingness to pay for the option to work from home5 as well as evidence that the value workers place on the "amenity" of remote or hybrid work has implications for aggregate wage changes in the macroeconomy.6 Our work indicates this heterogeneity in preferences may have dampened the e ect of RT O orders on employment. Our results are consistent with a literature that is still relatively mixed about the net e ect on employers and workers of remote or on-site policies. Methodology T he Federal Reserve Bank of Richmond has surveyed CEOs and other business leaders across the Fifth Federal Reserve District7 for almost 30 years, currently gathering around 200-250 responses per month. T he survey panel underweights the smallest rms and, due to the history of the survey, manufacturing rms make up about one-third of respondents even though they make up a much smaller share of establishments in the Fifth District or the nation. In addition to a series of questions about variables such as demand, employment and prices, respondents are commonly asked a set of ad hoc questions. Here, we focus on a set of questions asked in March 2024 regarding the extent to which respondents articulated and enforced a mandatory RT O policy and what they expected upon its implementation. Emily Corcoran reported on employers' on-site general expectations for employees and how those have changed. But here, we focus on business leaders' expectations of RT O policy e ects, providing insight into the anticipated and unanticipated employment e ects of RT O orders. We begin by assessing whether the establishment implemented RT O. T hese results are tabulated in T able 1. Overall, explicit RT O orders were relatively rare, with only 20 percent of respondents articulating RT O orders in the last three years. T his small percentage is partly because 37 percent of respondents — many of them manufacturing rms — were fully on-site before the end of 2020, and an additional 26 percent of respondents said RT O wasn't applicable / for their companies.8 Of the remaining companies, there is a roughly equal split between rms that have an explicit RT O policy (20 percent of the full sample) and those that do not (16 percent of the full sample). Table 1: Did your company, if at all, articulate to employees a mandatory return-too ce policy (for employees whose work can be done remotely)? Overall Manufacturing Services We were fully back in o ce before the end of 2020 37% 42% 34% We articulated a return-to-o ce policy 20% 16% 23% Do not have a return-to-o ce policy 16% 8% 21% Not applicable for my company 26% 34% 22% N 220 80 140 Note: These results are aggregated from a question that included timing. The question was "When did your company, if at all, articulate to employees a mandatory return-to-o ce policy (for employees whose work can be done remotely)? This is when you noti ed employees, and not when the policy took e ect." The row "we articulated a return-to-o ce policy" aggregates across those who implemented an RTO order in 2021, 2022, 2023 or 2024. Source: Federal Reserve Bank of Richmond business surveys (March 2024). We asked these 20 percent of employers about the expected consequences of issuing RT O orders. Did they expect workers to quit because of these policies? Were they sure about the e ect on employment? We also asked employers about their assessment of realized outcomes. Did workers quit as anticipated? Did RT O help the rm recruit workers? What Did Employers Expect, and What Actually Happened? Perhaps surprisingly, we found two-thirds of employers expected no impact on (net) employment from RT O orders, while 16 percent were too unsure of the impact to answer (T able 2). Among the 18 percent that expected some impact, the anticipated outcome was split between those that expected a decrease in employment (11 percent) and those that expected an increase (7 percent). Table 2: How did you expect your return-to-o ce policy to impact employment at your org anization? Overall Decrease 11% Source: Federal Reserve Bank of Richmond business surveys (March 2024). Manufacturing 0% Services 16% / Overall Increase Manufacturing Services 7% 0% 9% No impact 67% 85% 59% Not sure 16% 15% 16% 45 13 32 N Source: Federal Reserve Bank of Richmond business surveys (March 2024). Why might employment increase? One possibility derives from employees feeling more connected to their co-workers with greater mentoring opportunities when in the o ce.9 T his could reduce quitting and improve hiring, as one survey respondent reported that, "...the employees that [formerly] chose to work remotely decided that they were more productive in the o ce. We are [now] 90+ percent in the o ce." Additionally, RT O orders have often been hybrid,10 potentially allowing the bene ts of o ce culture to be obtained without sacri cing all of the exibility associated with remote work. We also asked employers about their evaluation of outcomes, and the results are given in T able 3. Here, a greater percentage reported no impact (82 percent), while 4 percent assessed that RT O had decreased employment, and 4 percent assessed that RT O had actually increased employment. (Nine percent were still unsure.) Table 3: How did your return-to-o ce policy actually impact employment at your org anization? Overall Manufacturing Services Decreased 4% 0% 6% Increased 4% 0% 6% No impact 82% 92% 78% 9% 8% 9% 45% 13 32 Not sure N Source: Federal Reserve Bank of Richmond business surveys (March 2024). Sectoral level analysis reveals employment impacts (both expected and realized) were concentrated in the service sector. In manufacturing, no rms concretely expected a change in employment (though some were unsure), and ex post they believe RT O did not / cause them to lose workers. In services, however, only 59 percent expected no impact, while 16 percent expected a negative impact on employment. Ex post, impact on employment was less than expected. Conclusion While our analysis is suggestive, there are a few limitations. Foremost, our e ective sample size was small, meaning some of these results could be driven by sampling error. Second, it has been years since some employers implemented RT O policies, so their memories of their expectations could be inaccurate. T hird, our survey did not control for any other rm changes — such as changes in wages or product demand — that could confound our ndings. Fourth, although our ndings provide insight into net employment gains and losses, they do not speak to hiring and ring separately.11 With these caveats in mind, however, our results show that RT O — while still a common topic of conversation — is not necessarily important to employers' and workers' employment decisions. Concerns about employment e ects ex ante mostly did not materialize. Employment e ects that did materialize were concentrated in services and resulted in a net gain of employees in some cases, rather than a loss. Grey Gordon is a senior economist and Sonya Ravindranath Waddell is a vice president and economist, both in the Research Department of the Federal Reserve Bank of Richmond. T he authors thank Jason Kosakow for helping to develop and execute the survey and for providing the tabulations underlying this analysis and thank RC Balaban, Zach Edwards and Claudia Macaluso for providing feedback on an earlier draft. 1 See, for example, the 2023 paper "The Evolution of Work From Home" by Jose Maria Barrero, Nicholas Bloom and Steven Davis. 2 See, for example, the 2024 working paper "The Big Shift in Working Arrangements: Eight Ways Unusual" by Steven Davis. 3 See, for example, the 2023 working paper "How Hybrid Working From Home Works Out" by Nicholas Bloom, Ruobing Han and James Liang. 4 See the previously cited paper "How Hybrid Working From Home Works Out." 5 See, for example, the 2021 working paper "Why Working From Home Will Stick" by Jose Maria Barrero, Nicholas Bloom and Steven Davis. 6 See, for example, the 2024 working paper "Job Amenity Shocks and Labor Reallocation (PDF)" by Sadhika Bagga, Lukas Mann, Aysegul Sahin and Giovanni Violante. 7 The Fifth District comprises the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. / 8 Those who answered "not applicable" are presumably rms where work is necessarily done in person. 9 See, for example, the 2023 article "About a Third of U.S. Workers Who Can Work From Home Now Do So All the Time" by Kim Parker. 10 The previously cited article by Emily Corcoran noted that 38 percent of rms are in the o ce in between one and four days a week. 11 See the 2022 article "Changing Recruiting Practices and Methods in the Tight Labor Market" by Claudia Macaluso and Sonya Ravindranath Waddell for an analysis of how hiring practices have changed in the tight labor market that has prevailed since 2020. 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