There is no disputing the coronavirus’ impact on the economy and labor market. Economists, healthcare professionals, and others have speculated about the lasting effects of this pandemic. However, one thing that is certain is that millions of workers worldwide have been working from home (WFH) since mid-March. With confirmed cases surpassing 4 million in the U.S. this week, working remote might be a permanent transition. So, how will this shift to remote work affect salaries? It’s a little early to tell, but here is what may happen if this trend continues.
WFH workers are relocating
According to a recent study from Pew Research Center, nearly a fifth of U.S. adults has moved due to COVID-19 or know someone who did. The survey found that 37% of those ages 18 to 29 say they moved, someone moved into their home, or know someone who moved because of the outbreak. Many of these young professionals are relocating away from big cities, such as New York City, and escaping to less populated locations, such as the Midwest. These rural locations offer quiet, wide-open spaces and an affordable cost of living. But will your employer continue to pay your massive big-city salary in cheaper rural areas? Are employers going to start cutting wages for workers that move to regions with a more reasonable cost of living?
The price of the big cities
Living in big metropolitan areas definitely have their appeal – more culture, restaurants, activities, nightlife, and of course, larger salaries. According to a recent study, employers in America’s costliest cities pay at least 40% more for white-collar jobs than the average wage in other regions of the country. For example, a graphic designer makes an average of $31.67 an hour in the top 15 biggest cities versus an average hourly wage of $21.09 in all other regions. Yet, according to the report, “When firms in the highest-priced cities hired workers living in cheaper towns, they tended to pay almost 19% more than the person would earn locally.”
To break this down, workers make more in larger cities, regardless of whether they work locally or remotely. However, that salary range is still enormous. Using the pay scale for a graphic designer, a professional in that field would make 19% more working remotely for a company in a big city. That’s a little more than $4 more an hour, which is a much lower wage than the local workers of big cities making over $10 more an hour.
How will remote work affect wages?
This begs the question: will employers begin to change wages for remote workers to reflect their employees’ cost of living? Facebook is already moving its hiring efforts to focus on remote work to lower its payroll costs. Will other large companies follow through? More professionals working from home may reduce or even fix the insane pay disparity our country faces in some areas. As a result, professionals may consider moving out of expensive cities like NYC and moving to locations with a better quality of life, affordable rents, and overall better happiness ratings.
Time will tell how this virus will ultimately impact our wages across the country. Still, it is worth considering if you are currently working remotely and considering a move to a different region.