Remote work leads to slower wage growth for workers

The ability to work remotely, which increased in popularity throughout the pandemic, has become so valuable to employees that they are willing to negotiate salary increases to keep the option of working from locations outside of pandemics offices. their employers, according to a new research paper from the National Bureau of Economic Research (NBER).

Some workers actually choose to earn less by giving up increases or lowering wages, as long as they can choose where they work at least a few days a week, NBER research shows.

The study’s authors estimate that remote work, considered a work comfort, will curb wage growth across the economy by two percentage points for two years.

“[Remote work] it moderates wage growth because it’s a cooperative outcome between workers and employers, rather than something that is imposed on workers, ”Steven Davis, co-author of the paper, told CBS MoneyWatch.

“Benefits for both parties”

Many workers value being able to work from home because it provides them with a better reconciliation of work and family life and a greater sense of autonomy. “Labor agreements have changed in a way that many workers value,” Davis said.

For employers, there are also benefits, such as increased employee retention and savings in employee incorporation and real estate costs.

“Employers say that if it’s a way to keep workers happy and moderate wage growth pressures, it’s compensation we are willing to do,” Davis said. “There are benefits for both parties.”

Decreased real compensation

But high inflation it could cause workers to rethink the compensation between remote work and a higher salary, as they notice that their money no longer goes that far.

Higher prices for goods and services can cause workers to demand greater-than-usual increases from their employers.

“Inflation soared and took most people by surprise. You can see that nominal wages have advanced more slowly than nominal prices over the last 18 months,” Davis said.

It is expected that the increase in distance work as a convenience for employers will moderate wage growth.

“The wage-price spiral effect could be weaker than it would otherwise be,” Davis said, referring to the causal relationship between rising wages and rising disposable income, which in the in turn it increases the demand for consumer goods and causes prices to rise.

When you can’t work remotely

Of course, not all jobs can be done remotely, so the moderating effect of wage growth does not apply to all industries. Workers in well-paid jobs and industries tend to have a greater ability to work remotely than low-wage workers.

Hospitality workers, for example, have seen their wages rise faster than inflation.

“Most jobs in hospitality and leisure don’t lend themselves to remote work,” Davis said. “Wages have risen more for low-end jobs than for high-end jobs, which is consistent with the idea that the increase in remote work is concentrated in high-end jobs.”

“This has helped curb the growth of pocket pay for higher-wage workers relative to lower-wage workers where this effect is not really present because jobs do not lend themselves to remote work.”

To cope with inflation, many Americans are taking advantage of their pandemic savings to cover their rising costs.

He only group of workers who did not take advantage of their pandemic savings during the first quarter of the year it was 20% lower in revenue, according to Moody’s Analytics.

This is because workers in industries such as hospitality, retail and healthcare have seen their wages rise faster than inflation.

“They haven’t started cutting their savings because of the very strong wage growth of low-wage workers,” said Moody’s economist Mark Zandi. “They have been receiving wage increases that are larger than inflation increases.”