COMP NEWS – Employers may be using remote work as a bargaining chip to drive down wages, according to a new report from the National Bureau of Economic Research.
Same job. Same experience. Same pay? Not necessarily. What you earn will likely depend on two things: where you live and whether you work from home.
While most workers in today’s job market have the upper hand, thanks in large part to a labor shortage, remote workers might be at a disadvantage when it comes to negotiating wages.
Remote hiring has boomed in the past few years, skyrocketing 223% between March 2019 and March 2022, according to a new report by payroll and benefits firm Gusto. This new frontier of working from home has prompted employers to rethink how they compensate remote employees.
Employers know people want remote flexibility, and they also know that some job seekers may be willing to take pay cuts in exchange for it. Research has shown some employers are offering remote work flexibility in exchange for lower pay.
Employers may be using remote work options as a way to keep compensation levels down, according to a July 2022 report from the National Bureau of Economic Research.
The report found that larger companies were more likely to compensate less in exchange for allowing remote work. Even smaller companies report using remote work opportunities to “moderate wage growth pressures.”
The economists behind the report surveyed 500 U.S.-based companies and found that 38% used remote work opportunities to “keep employees happy and to moderate wage growth pressures.”
Brent Meyer, one of the report’s authors, assistant vice president and economist in the research department at the Federal Reserve Bank of Atlanta, said the huge surge in inflation caught businesses and policymakers flat-footed.
“There’s a notion in macroeconomics that workers will fight hard to get higher wages during times of inflation—they will bargain for a real wage catch-up,” Meyer says. “But, that could be a problem from a monetary standpoint. Some employers have used working from home as an amenity value instead of paying higher wages.”
The report found that larger companies—those with more than 250 employees—were significantly more likely to pay less in exchange for the remote-work “amenity” (52.4%) than smaller companies or those with less than 250 employees (35.3%).
Remote workers will have to fight an uphill battle against companies’ negative perceptions in order to gain the wages they deserve.
This perception that remote workers require less pay and may be less valuable are two hurdles job seekers and employees who want to transition out of the office may have to overcome.
Employers may be reluctant to offer fully remote opportunities even if they think they can save money, says Nicholas Bloom, one of the report’s authors and a professor of economics at Stanford.
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