A tale of two US labour markets: How remote work could help break down barriers to employment

A tale of two US labour markets: How remote work could help break down barriers to employment

This blog was originally published on the World Economic Forum.

  • The US labour market still shows signs of tightness, with conditions for remote work appear to be cooling down faster than for non-remote jobs.

  • Workers are demanding more from employers than ever, so firms must build a value proposition that takes into account work/life balance and upskilling.

  • A tight labour market and growth of remote work could boost jobs for workers from all backgrounds, and also benefit employers.

The labour market continues to show signs of substantial tightness. More workers have been leaving their jobs, and a good number of them have been quitting in less than a year. This level of turnover reflects a significant shift in the workforce.

Workers are demanding more from employers than ever before. And now, more than ever, companies must redefine their attraction and retention strategies and build a value proposition that takes employees’ whole lives into account.

According to our recent Global Talent Trends report, we know things like compensation, work/life balance, flexible work arrangements and upskilling top the list of things that candidates are looking for from today’s employers.

However, LinkedIn data also reveals that there are two labour markets today. There’s the market for people who have been only seeking remote work, and the market for people who have been applying for on-site jobs.

The former is cooling down very quickly, and the latter appears to be exceptionally tight. This is what we see at LinkedIn when we decompose labour market tightness by whether a job is remote or not.

How do we measure labour market tightness?

At LinkedIn, we measure the degree of tightness by looking at the ratio of active job openings to active applicants. A higher ratio suggests that employers are finding it more difficult to find skilled workers, thus indicating that the labour market is tighter.

Chart 1 shows that the US labour market has become increasingly tight throughout 2021 and continues to be tight today by historical standards.

Several factors are behind this development: many workers moved during the pandemic and aren't where jobs are available; the economy itself shifted, leading to jobs industries such as warehousing that aren't in areas where workers live or suit the skills they have; or many have changed their preferences, for instance by pursuing remote work.

If this broader trend of plentiful jobs and not enough workers continues, it could have major implications for growth, inequality, and inflation.

The figure below shows how conditions in the labour market differ vastly for remote work compared to what is happening in the market for on-site work. As of October 2022, there are nearly two on-site openings for every applicant looking for on-site work.

In contrast, conditions are very different when we look only at remote work. The blue line suggests that there are two active applicants for every one remote opportunity available in the US. That is, the labour market for on-site work is four times tighter than that of remote work.

Remote jobs still getting half of total applications

One reason for the slack we see in the remote labour market is driven by both a slowdown in remote openings. In March 2020, only one in every 67 paid US jobs posted on LinkedIn offered remote work. By the start of 2022, that number ballooned to about one in six, and fell recently to 14% of total openings.

That is, only one out of seven job postings in the US offered remote work in October. This is obviously much higher than where things were pre-pandemic, but it has started to drop, ever so slightly.

Another reason for the increased slack is an uptick in the number of people who want more remote work. Our data show that the percentage of applications that went to remote jobs reached over 50% in October – slightly lower than its peak of 53% in July.

Hence, workers continue to prize flexibility and work-life balance even as the economic outlook darkens. While this number has been slowing down, it is still more than triple the rate in October 2020 and up nearly 10-fold from remote work’s meagre 2.8% share in January 2020, before the COVID-19 pandemic began.

Remote work can help employers fill gaps and improve diversity

Rather than threatening productivity growth, remote work provides us with the opportunity to close labour market gaps and reduce spatial mismatch. Remote work also has great potential in helping spread productivity across different geographies, rather than hoarding economic opportunity into a handful of geographies with costly housing markets.

This isn’t just getting job seekers what they want in a tight labour market. The shift to remote work provides an opportunity for employers too to hire candidates who were previously out of reach. Removing geographic and time constraints means employers can cast a wider net of qualified candidates–a compelling solution to diversifying their workforce.

If a recruiter knows that their company has historically struggled to find underrepresented candidates locally, they can use data to identify areas where this talent is plentiful — then reach out to far-away candidates with remote opportunities.

A new study at LinkedIn found that there was a 20% increase in share of women applying for remote jobs, and a 10% increase in share of women who accepted a job offer for a remote position using LinkedIn. When we look at remote jobs by race, we see that there was a 16% increase in the share of Latino applicants and a 17% increase in the share of Black applicants.

The rapid growth of remote work has created more opportunities for all workers, but in particular people with disabilities. In the US alone, 61 million adults — roughly one in four — live with a disability and, for many, the workplace is a daunting predicament.

But when recessions hit, opportunities quickly dry up and this pool of job seekers are usually among those who lose out. Remote work, however, has the potential to break that cycle and open up new possibilities for people to re-enter the workforce without excess difficulty.

Tight labour market and remote work can boost employment

A tight labour market and the availability of remote work are two key factors that appear to be boosting the employment rate for workers with disabilities and other groups that face obstacles to employment.

While the current hiring declines cloud the near-term economic outlook, both factors bode well for the longer-term prospects of helping create economic opportunity for those who face significant barriers navigating the job market.

So, as we face ongoing uncertainty and a possible downturn, we are at risk of going backwards and a retrenchment from progress on diversity, equity, and inclusion in the workplace – remote work can be a powerful way to attract, support and retain great talent from all backgrounds.