Employers are ordering workers back to the office. In recent weeks Dell, a hardware-maker, and JPMorgan Chase, a bank, have issued such decrees. They join a growing list that includes AT&T, Amazon and even the American government, where Elon Musk—who has called remote work “morally wrong”. Bosses insist that mandates will boost productivity. Workers see them as a way to cut staff without mass firings.
If the goal is to reduce costs, there may be a simpler way: lower pay for remote workers.Zoe Cullen of Harvard Business School, Bobak Pakzad-Hurson of Brown University and Ricardo Perez-Truglia of the University of California, Los Angeles, find that tech workers are willing to accept a pay cut of 25% in return for fully or partly remote jobs.
The authors reached this estimate by analysing real-world job offers and acceptances, controlling for company type, benefits and the local cost of living, so as to isolate the impact of remote work. Their findings contrast with those from a survey by Nicholas Bloom of Stanford University and co-authors, which found that American workers, on average, would accept only an 8% pay cut for a hybrid schedule, with just one in five willing to take a hit of 15% or more. The discrepancy may stem from methodology.
Firms are reluctant to create visible pay gaps between remote and in-office workers. Human-resource policies generally aim for internal equity to prevent resentment. There may be legal risk, too. As women are more likely to work remotely, cutting pay for remote jobs could indirectly lead to a gender wage gap, which firms prefer to avoid.
Another explanation is that remote work has become a bargaining chip. Rather than lowering wages, firms use flexibility to attract and retain top performers. Take an artificial-intelligence specialist earning $250,000 at Amazon. If the tech giant orders them back to the office, a less prestigious rival may not match the salary but could attract them with a remote-work offer. Flexibility also helps with retention. Mr Bloom finds that hybrid policies reduce quit rates among engineers by a third.
But what happens when labour-market conditions worsen? If workers have fewer options, firms may no longer need to compete by offering remote work. Instead, they might begin offering lower salaries for remote roles, knowing that job seekers have fewer alternatives. Some signs of this shift are already evident. Employment rates among middle-aged women and disabled individuals have risen, as many have newly gained access to remote work, yet wages for these roles are falling.
Workers hate return-to-the-office mandates. When JPMorgan announced the shift, it had to disable comments on its online post after a fierce backlash. At Dell nearly half of employees opted to stay remote last year, even when bosses made it clear they would not be promoted if they did so. All the same, workers might like what comes next even less. ■
Adapted from The Economist
