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The shift to remote work lessens wage-growth pressure

Author

Listed:
  • Jose Maria Barrero
  • Nicholas Bloom
  • Steven J. Davis
  • Brent Meyer
  • Emil Mihaylov

Abstract

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catch-up effect that Blanchard (2022) highlights in his analysis of near-term inflation pressures. The amenity-values gains associated with the recent rise of remote work also lower Labor's share of national income by 1.1 percentage points. In addition, the "unexpected compression" of wages since early 2020 (Autor and Dube, 2022) is partly explained by the same amenity-value effect, which operates differentially across the earnings distribution.

Suggested Citation

  • Jose Maria Barrero & Nicholas Bloom & Steven J. Davis & Brent Meyer & Emil Mihaylov, 2022. "The shift to remote work lessens wage-growth pressure," POID Working Papers 060, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:poidwp:060
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    References listed on IDEAS

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    Cited by:

    1. Cevat Giray Aksoy & Jose Maria Barrero & Nicholas Bloom & Steven J. Davis & Mathias Dolls & Pablo Zarate, 2022. "Working from Home Around the World," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 53(2 (Fall)), pages 281-360.
    2. Steven J. Davis, 2024. "The Big Shift in Working Arrangements: Eight Ways Unusual," NBER Working Papers 32363, National Bureau of Economic Research, Inc.
    3. Giannakopoulos, Nicholas & Nicolitsas, Daphne, 2022. "Employers' associations and trade unions: co-existence or more?," GLO Discussion Paper Series 1140, Global Labor Organization (GLO).
    4. Steven J. Davis, 2024. "Extraordinary Labor Market Developments and the 2022-23 Disinflation," NBER Working Papers 32584, National Bureau of Economic Research, Inc.
    5. Biro, Aniko & Boza, István & Gyetvai, Attila & Prinz, Daniel, 2024. "Health Shocks, Social Insurance, and Firms," IZA Discussion Papers 17069, Institute of Labor Economics (IZA).
    6. Masayuki Morikawa, 2023. "Productivity dynamics of remote work during the COVID‐19 pandemic," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 62(3), pages 317-331, July.

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    More about this item

    Keywords

    remote work; wage-growth pressure; shift; compensation; empirical; inflation; productivity;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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