Remote Work and the Wage Gap

Over a year ago, the workforce experienced one of the most dynamic and time sensitive changes that it has ever seen.  88% of businesses required their workers to transition to remote work in order to deal with the COVID-19 pandemic.   Of those businesses over 67% say that remote work will be a permanent feature of their company beyond the pandemic. 

Leading companies such as Twitter, Facebook and Nationwide Insurance have already publicly stated that the transition from in-person to remote work will be a permanent fixture of their business model.  This decision could have a lasting impact on the industry as a whole.  If this is truly the case for our business society moving forward, then we may see vast differences and changes in employee behavior based on this decision.  One of the biggest changes will be location. 

Between fourteen million and twenty-three million people will migrate throughout the United States if remote work becomes permanent.  Remote work gives employees the flexibility to move wherever they want and many employees want cheaper affordable living in other states.  People will also trend towards moving to places that are beyond the traditional commute.  54% of people surveyed said they would move two or more hours away from the office, while 42% said they would be comfortable moving four or more hours away.  Those who live in cities are two times as likely to move if remote work becomes permanent. 

There are three main reasons that businesses actually prefer remote work to traditional in-person work. 

The first is the decreased need for real estate.  With minimal people attending an in person office space companies can relinquish some of their property leases and save money.

Secondly, they can also consolidate their offices into smaller spaces.  This would reduce the large price tag associated with large office buildings and help reduce some corporate expenditures. 

Third, because employees can work anywhere there is no need to have a central hub or headquarters.  This means that businesses can reallocate to cheaper industrial markets so that they can maximize the money spent of real estate. 

However, the benefits may not outweigh the losses.  Industry leaders have announced that they may pay remote employees less than those who come into the office.  They may do this by having a variable wage based on the cost of living in each city or they may subsidize a move but then cut pay. This could result in an unfair wage gap for women and racial minorities.  Women currently earn 82% of what a white man earns in the current market.  An African American man earns 87% of what a white man earns.  Women and racial minorities may not have an option to work remotely and as such may be unfairly biased against. 

However, this wage gap may be mitigated by the financial gains that remote working brings to everybody.  Research reports that employees who work from home could save an average of two thousand five hundred to four thousand dollars a year from working at home. 

And there may be some credence to docking pay for remote works.  Working from home is seen as an opportunity that allows for people to have increased free time and lower the need for childcare and other expenses.  A location based pay cut may also depend on the type of job you have. 

If your job is one of high demand or if it receives significant benefits and salary you may actually be doing a disservice to your title by working at home.  Therefore, it is within the companies rights to make decisions based on your suggested productivity. 

Companies still value executives and the location of Silicon Valley, but they are hoping that cost of living based wages can entice fresh talent from these higher cost areas down to lower cost housing markets.  This could directly benefit the company because they can control where their talent is. 

Cities like New York, San Francisco, and Washington DC are 1.5x as expensive as cities like Dallas and Cleveland.  This means that the purchasing power is the same but the standard of living is vastly different.  In order for companies to persuade employees, they need to find a solution to this problem. 

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