Wharton’s Peter Cappelli expects incremental changes in the workplace this year, a continuation of bigger trends that began during the pandemic.
He’s not trying to be cryptic. It’s just that the big changes ushered in by the COVID-19 pandemic five years ago are still unfolding – remote and hybrid work, a tight labor market, and a renewed focus on office culture and employee wellness. Those trends that began in 2020 will continue into 2025, so any shifts will be incremental, he said.
“If you go out a few years, it could look like a big change. If you’re in the middle of it, it doesn’t feel like quite so much,” Cappelli said in an interview with Wharton Business Daily on SiriusXM. (Listen to the podcast.)
But he is keeping an eye on politics and how President Donald Trump’s second term could alter the labor landscape. The professor said Trump’s election presents a paradox. He won the working-class vote from Americans who feel disenfranchised by their employers, yet his administration promises to be corporate-friendly and claw back some of the union gains made under President Joe Biden.
“It’s now a full employment project to try to understand why President Trump won. And it all centers around working-class people and complaints about not getting what they felt they should get from the workplace and from jobs,” said Cappelli, who is also director of the Wharton Center for Human Resources.
During the interview, Cappelli shared his predictions about various aspects of work in 2025. Following are some highlights:
On Remote Work and Office Culture
Remote and hybrid work are still hot topics in the media, but the reality is less exciting. Only about a quarter of the U.S. labor force works from home, and more companies have called employees back into the office over the past year.
Cappelli said the recall is happening because cracks have begun appearing in the smooth pavement of remote work. It was great during the pandemic, when everyone was invested in its success. But as time has passed, it’s become clear that remote work comes with unique problems. Management, collaboration, and innovation are more difficult. And office culture takes a hit.
“You learn culture by observation, by seeing what’s rewarded and, particularly, what’s punished. You don’t even have gossip anymore to figure out who got fired for what,” he said.
Business executives understand this erosion of culture, Cappelli said, but they are reluctant to spend time or money to fix it. For example, they want managers to be more engaged with employees but not take time away from other duties, such as meeting with clients or investors.
“I think they all believe and understand that culture kind of matters. They don’t have much of an idea of what their culture actually is, and it’s often not nearly as great as they think it is,” he said.
A Tight Labor Market and High Employee Turnover
Cappelli thinks perhaps the biggest change for American workers is the low unemployment rate, which has hovered around 4% for the last several years. It’s enabled employees to leverage their low supply with more demands, including better salaries and flexibility.
“You have more choices. People can quit and go someplace else. That has shaken up a lot of things,” he said.
Yet most employers are doing little to stem the corresponding high rates of turnover. They don’t track their turnover numbers, much less share them with investors. Cappelli refers to it as a “financial accounting issue.” Companies easily measure compensation costs, but they don’t manage turnover costs because nobody sees them. However, those costs eventually show up in lower employee wellness and operational effectiveness, he said.
“We’re seeing employee life-related issues, health issues, perceived well-being, mental health problems, all that stuff really getting worse and worse and worse,” Cappelli said. “And companies aren’t doing much of anything about it. They’re giving you more chair yoga programs, but they’re not dealing with the things that are causing the stress in the first place, like constant restructuring and downsizing.”
Entry-level Jobs Are No Longer for Novices
After the Great Recession, employers took advantage of the depressed labor market by ramping up requirements for positions. Cappelli said that has led to some unrealistic hiring expectations, especially for entry-level graduates.
“On our campuses, you discovered that students couldn’t get internships unless they had already had an internship, because nobody wanted to be the first person to break them in,” he said.
Some employers are just “sloppy” about hiring, he added. They hire by committee, asking everyone what qualifications are needed for a position, then adding them into an impossible wish list.
“You end up with this Christmas tree that nobody is qualified for,” Cappelli said.
With the recession long over, companies are now paying a price for their pickiness. They are taking longer to fill vacancies or simply deleting them.
“CFOs often think that saves money. It hurts performance. It hurts economic costs,” he said. “It’s this dilemma between, are you trying to run an effective organization? Or are you trying to run one that looks good on paper?”
The Real Costs of Artificial Intelligence
Cappelli seems rather underwhelmed by the transformational promises of artificial intelligence. The hype comes from the companies building the tools, he said, not the people who use them.
“This is a story about vendors,” he said. “If you ask the people who are creating [an AI tool] what it can do, you get this incredible story. And it might be true, but it turns out that not everybody wants them. And to [add] them sometimes costs an unbelievable amount of money.”
Free AI, like ChatGPT, can automate low-value tasks like writing forms, for example. But the professor said that’s not useful, especially when those forms still need human review. Meanwhile, automating high-value tasks is quite expensive.
“To automate a particular job takes a ton of work. Somebody’s got to be willing to front all that money,” he said. “And you’re in competition with all these other investment deals for it. So, I think the problem here is, again, expectations.”
