Employers Pay Remote Workers Less, Worsening Inflation's Impact On Wage Growth

The switch to remote work for office-using employees imposed by the pandemic has proven incredibly resilient, but it has also played a factor in wage growth falling behind the pace of inflation.

Employees’ preference for the flexibility of remote and hybrid work has resulted in companies treating work-from-home as an amenity in hiring, partially offsetting the upward wage pressures from the tight labor market and inflation, according to a new study from the National Bureau of Economic Research.

Remote work's moderating influence on wage growth has been a cumulative 2% over the first two years of the pandemic, which has canceled out more than half of the wage growth in the U.S. labor market over that time, the study from the nonprofit consortium of economics researchers and professors found. The amenity value of work flexibility ate into wages more for lower-tier workers, causing a 1.1% decrease in labor's share of national income.

Thirty-eight percent of companies surveyed by NBER said they expanded remote work over the past year to moderate wage-growth pressure, and 41% said they plan to do so this year. NBER then asked businesses how much they estimated remote work allowed them to restrain wage growth. Businesses said remote work allowed them to offset wage growth by 0.9% over the last year, and they predict it will keep wage growth down 1.1% over the next year for a total of 2%.

Although the economy's recovery from the first shock of the pandemic sent employment to record highs, the inflation that followed has fully overtaken the effects of that growth, with the Bureau of Labor Statistics finding that wage growth in June was negative when adjusted for inflation on both a monthly and year-over-year basis, Fortune reports.

Though office landlords and many major employers have consistently argued for the value of the physical office for building company culture, a decreased reliance on the office has allowed a large portion of tenants to reduce their footprints when signing new leases in the past year.