Workers Will Accept Lower Wages to Work From Home, Study Shows

Remote working has provided a lifeline to millions of US workers. But are WFH benefits worth sacrificing higher wages?
Isobel O'Sullivan

If the events of the past two and a half years have proved anything, it's that workers love flexibility. So much so that some are willing to ditch their high-flying Silicon Valley jobs if their requirements aren't met.

However, as working from home (WFH) remains at an all-time high, new research reveals that five-second commutes may be coming at a cost — with 38% of US companies using remote benefits as a substitute for fairer wages.

While the impact this is having on inflation is positive, the researchers also believe that this could explain why national wage growth has fallen 2% year on year. Here's what impact this trade-off could have on the workforce.

Companies Are Trading Salary Benefits for the Option to Work Remotely

Since the remote working boom first took hold in 2020, the way we work in the US has changed dramatically.

Even now, as social distancing measures no longer remain in place, 58% of Americans still have the option to work from home at least once a week.

With the WFH lifestyle providing a healthier work-to-life balance and eliminating rush-hour commutes, it's unsurprising that employees are turning to it in their droves.

Interestingly, according to new study by the National Bureau of Economic Research (NBER), the perks of remote working appear to extend to employers, too.

Some Industries More Likely to Offer Flexible Working

The study, which surveyed more than 500 American companies, found that 38% of business leaders have expanded opportunities to work remotely over the past year as a replacement for raising workers' wages.

It was also found that a further 41% of companies plan to adopt flexible working to “moderate wage-growth pressures” within the coming year.

But this practice isn't being rolled out evenly among industries. The research revealed that large companies and those specializing in finance and insurance, real estate, information, and business services are more likely to offer flexible working as a carrot for their workers.

This action is so widespread in fact, that the paper argues it could explain this year's 3% drop in hourly earnings that was reported by the Bureau of Labor Statistics in May.

But what does this mean for those currently working remotely ⁠— as well as the rest of the US workforce?

A Win for Inflation and Income Equality?

According to the study, the impact this could have on US workers is complex.

On one hand, stalling the incomes of remote workers has the potential to curb the spiraling cycle of inflation. This is because by keeping salaries the same, businesses aren't forced to raise the price of their goods and services ⁠— a response that could see the inflation rate rise to damming levels.

“This moderation shrinks the real-wage catch-up effect on near-term inflation pressures.” – Researchers from NBER

With US inflation already hitting 9.1% — and rising at its fastest rate for 40 years — the impact of this on the wider economy could be colossal.

What's more, research has shown that while the top 10% of earners in the US saw their incomes fall between 2020 and 2022, the bottom 10% saw their wages increase.

Therefore, as flexible working continues to be offered as a substitute for higher wages, economists argue that this trade-off could be behind the recent decline in income inequality.

How Long Can Remote Workers Deal With Income Freezes?

However, while this salary freeze may benefit certain subsets of the population, it's remote workers who will be losing out.

Working from home can shave down the costs of daily commutes and on-the-go lunches, but leaving the office behind doesn't necessarily save workers money.

With 41% of workers still working pay check to pay check and the average American spending $23 more on monthly gas bills since the start of 2022, the cost of living rise continues to be a pressing issue for all US citizens – even those on higher pay checks.

Combine this with stagnated wages, and it's likely the benefit of remote working won't be enough to entice workers in the long haul.

While it may be a hard time for businesses too, the onus remains on them to protect the best interests of their workforce.

This is no easy feat, but affordable business technology can be a great way to keep teams connected while keeping overheads low. Take a look at our best free conference call services here to discover the best complementary remote working solutions on the market.

 

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Isobel is a writer at Tech.co with a wealth of experience covering business and technology news. Since specializing in Digital Anthropology at University College London (UCL), she’s been a regular contributor to Market Finance’s blog and has also spent time working as a freelance tech researcher. As a writer, Isobel takes a particular interest in issues regarding data security, social media, and emerging business technology.

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