Workers and managers will face twin challenges in the coming years: adjusting to what we’ve learned about remote work, and the demographic change to low growth of the working age population. Each will be a challenge, and the interaction of the two will require managers to test their assumptions, adapt, and re-test.

Change in working age population from 1850-2030. DR. BILL CONERLY BASED ON DATA AND PROJECTIONS FROM U.S. CENSUS BUREAU

Demographics is the less recognized issue for the workplace in the 2020s. Baby boomers will retire in greater numbers in the coming years. The boom in births lasted from 1946 through 1962, so the later boomers will hit age 65 in 2027. The group turning 25 years old this decade is about the same size as the preceding cohort. So we in the U.S. will see no increase in young people entering their working years and more boomers retiring. Other countries will have similar experience, though magnitudes and timing vary around the world.

The only hope for growth of the working-age population is immigration—which in the U.S. has plunged in recent years. As a percent of the existing population, net international migration was 0.15% for the year ending July 1, 2020, half as much as five years prior. And most of the last data year was pre-pandemic. When we get the next data point, it will certainly be lower.

President Biden’s administration has not changed immigration policy from the Trump era, though the president is far more polite than his predecessor. Nobody in Washington seems to want a significant increase in foreign immigration. That means the working age population won’t grow over this decade. (Growth will resume in the 2030s.)

Businesses hoping to expand in size—and employment—will find that employee recruiting and retention are their greatest challenges.

Into that environment is our discovery during the pandemic that people can work from home successfully. A Stanford economist estimated that 51% of all jobs could be done remotely. Some workers liked working from home while others were eager to return to offices, with another significant portion wanting both: some days working from home and some days in the office.

Managers are spread out on the question of the ideal balance of office and remote work, according to a PWC survey. Employees, too, vary widely in their preferences according to the same study.

Most analysts expect a hybrid model, in which the office is available to everyone every day, and mandatory some number of days a week. Managers seem more eager to have their workers back in the office, while many workers are much less eager.

The varying preferences for remote work by managers will collide with the demographically-driven tight labor market. Managerial preferences cannot dominate unless they are related to productivity, though some managers probably don’t realize that now.

If remote work is less productive than office work, then managers will need to balance ease of recruitment of remote workers against higher productivity of office workers.

But if remote work is just as productive, then managers will have to cater to employees who prefer to work remotely. Otherwise they’ll have to pay up in salary, as well as office expenses, with no productivity gain to offset the cost.

Managers will then be challenged to figure out just how much more productive office workers are, if at all. Right now many business executives are working from anecdotes and preconceptions, pretty much guessing about productivity. The best managers will use hard data when available, and good judgment the rest of the time.

In the executive suite, top leaders of the organization need to understand the challenges that line managers face. One-size-fits-all company policies about remote work will limit managers’ ability to fit the rules to the work. Companies that force the work to fit the rules will have lower productivity and higher costs. They will fail in the hyper-competitive market for workers.

Either of these two challenges, demographics and remote work, would tax even the best managers. Having them intertwine requires that employee retention and recruitment become top priority for leaders of all companies.