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” and its supporters “detached from reality”—has championed the shift. 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. A new study indicates many would take the deal. 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. That suggests remote work is much more than a perk. If workers value it more than bosses dislike it, there should be scope for bargaining.
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. Surveys reflect what workers say they want; Ms Cullen and her co-authors track the trade-offs they actually make. Sample differences may also matter. Tech workers, who tend to be higher earners, may place a greater premium on flexibility than the general workforce.
Historically, perks with clear monetary value have come at a cost to wages. Jonathan Gruber of the Massachusetts Institute of Technology and Alan Krueger of Princeton University have found that when American states in the 1980s raised mandatory compensation insurance for workplace injuries, wages fell to offset the cost. Price Fishback of the University of Arizona and Shawn Kantor of Florida State University found a similar pattern when workers’ compensation laws were introduced in dangerous industries such as coal mining or lumber milling. If remote work is, like the provision of benefits, costly to companies but valuable to workers, wages should follow the same pattern.
Yet in most cases so far they have not. One explanation may be that 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 would 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 lure 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 may begin pricing it in—offering lower salaries for remote roles, knowing job-hunters have fewer alternatives. Some signs of such a shift are already evident. Employment rates for middle-aged women and disabled folk have risen, with many newly able to take up remote work, yet their wages in these new remote 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. ■
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