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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

November 2022

Workers would rather work from home than get a raise

Summary written by: Eleni X. Karageorge

The ability to work remotely has become so valuable to workers that they are willing to trade off pay raises for the option to work from home, according to a recent study. In “The shift to remote work lessens wage-growth pressures” (National Bureau of Economic Research Working Paper 30197, July 2022), authors Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent H. Meyer, and Emil Mihaylov show that some workers are choosing to earn less by forgoing raises or taking pay cuts, as long as they can choose where they work at least a few days a week.

Barrero and colleagues base their research on the Federal Reserve Bank of Atlanta’s Survey of Business Uncertainty. The authors estimate that remote work, which is considered a job amenity, slowed wage growth by 2 percentage points over the first 2 years of the pandemic. This finding may be good news for inflation since the remote-work-for-less wages tradeoff indicates that wages will not keep rising and businesses will stop passing those higher labor costs on to customers. The researchers argue that by employers capping wages, remote work has helped ease high inflation. The decrease in wage growth mostly occurred in the higher-paid white-collar positions that could be done remotely. Companies that were more likely to offer at-home work instead of raises were those in the finance, insurance, and real estate industries.

Barrero and coauthors surveyed more than 500 companies to determine if they had expanded their remote work over a 12-month period, ending in May 2022. Of these companies, 38 percent reported that to alleviate what they called “wage-growth pressures,” they expanded opportunities for employees to work from home or from other remote locations. In addition, another 41 percent of companies expect to do the same over the next year. This percentage was particularly concentrated among larger companies, in which approximately 52 percent said that they made remote work more available to offset potential wage growth.

The researchers add that remote work is likely decreasing business costs and overall inflation in other ways. By offering remote work, companies may help lower the number of people who quit. Remote work can reduce potential turnover and in turn reduce hiring costs. Many companies are capitalizing on remote work by using it as a substitute for pay raises, to the point that it will help offset inflationary pressures. Companies found that offering remote work retains workers and keeps them happy. Barrero et al. also provide a glimpse into how employers are balancing their needs with workers’ desires in the labor market. Many workers still prefer to work from home, and some will even quit if forced to return to the office.

The authors conclude that although many workers have enjoyed improved quality of life with less stress, commute-free workdays, and better work-life balance from expanding remote work opportunities, their employers have also benefited by paying lower wages to their employees than they may have otherwise.