Hicks: Remote work and labor markets; there are more remote workers today than there are immigrants in the U.S.

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Michael Hicks

In the decade prior to the COVID pandemic, work from home rose steadily to 5.6 percent of all workers. Most of this growth was likely attributable to technology that made remote work possible, but work at home pre-dated the personal computer and internet. In 1980, a modest 2.2 percent of workers worked at home.

Today remote work has exploded. As of February, 22.4 million Americans reported working from home full time, and another 22 million working remotely at least one day a week or more. Numbers like this are so large, they are difficult to fully appreciate. A full 28.3 percent of American households had at least one person working remotely full time, and more than half had someone working remotely at least 1 day a week.

The post-pandemic shift to remote work has spawned the largest potential shock to household location decisions in our nation’s history. In terms of affected families, this is larger than the exodus of Americans from farms since 1900 and the Great Migration of African-Americans to the North, combined. The number of remote workers is today larger than all the migration from Europe, Asia and African from 1600 to World War II. There are more remote workers today than there are immigrants in the U.S.

This is a very large and increasing number of people who can now live wherever they wish. The fact that 22.4 million U.S. workers can now keep their job and move anywhere ought to be the number one long-term concern for elected leaders in every state, county and municipal government in the U.S. Remote work should precipitate massive change in economic development policies, workforce training, business attraction spending, and local focus on public services. But, alongside the real likelihood of stark changes to local population growth, it is important to think a bit about what remote work will do to labor markets.

There was a growing body of research on remote work before COVID. The best known study was a randomized control trial of Chinese workers that reported modest productivity gains from remote work. The post-COVID studies of remote work report both managers and workers are responding well to the new environment.

My colleagues and I are researching, writing and speaking about the geography of remote work, so readers can expect that issue to grace this column frequently in the years ahead. However, there are likely significant, emergent labor market changes that are worthy of discussion.

Remote work is popular, and there are large differences between and educational attainment and remote work. About half of college graduates report working from home, while 12 percent of high school graduates do so. There’s also a stunning income difference. A full 70 percent of families earning more than $200,000 per year have someone doing remote work, while just 15 percent of those earning $35,000 to $50,000 do so.

Today, remote workers are better educated and better paid than average. If remote remains popular, this will increase the demand for higher education. Importantly, we know most migration in the U.S. is among workers who are better educated and better-paid. Remote work will compound that trend.

Remote work also changes the task mix of jobs. Remote workers might find themselves doing fewer different tasks, and instead focusing on just one or two. Over the past few centuries this has boosted worker productivity and pay. Some workplace tasks might largely disappear as the number of offices shrink substantially. This also results in demand for workers to do support for remote workers. The best example I have is IT support. Once a firm’s workforce is dispersed across the country, an in-house IT staff will have different skills than in the past.

It is easy to imagine new IT businesses that emerge to operate locally, but service remote workers from many different firms. I can also imagine that larger businesses might aggregate some tasks, such as productivity monitoring, in ways they have not done in the past. Other tasks, such as routine administration, might experience significant changes, with some being more centralized and requiring fewer workers. Workers may need to attend more training to improve skills that become rusty with remote work or were unnecessary in a business office.

These sorts of changes challenge the boundaries of the traditional firm. Indeed, remote work itself might be a place where independent contractors doing work for several different firms can thrive. Training, travel and pay processing, onboarding, managing technology and productivity, even mentoring might be outsourced to other businesses.

These changes will challenge the legal and managerial considerations in firms, offering opportunities for entrepreneurs and workers alike. Other opportunities also exist for new commerce. Remote workers miss out on social contact of work. There is emerging interest in ‘Third Places” that are neither work nor home. Remote workers will likely look for these when they relocate, and this might be a domain that both the public and private sector consider.

Remote work might be cheaper than commuting. Smaller wardrobe of suits, lower gas or toll costs, and less wear and tear on the automobile are all potential savings. However, homes must be modified to include a workspace, and broadband often must be more robust. If remote work remains popular, these cost savings might be slowly built into wages. At the same time, if workplace duties remain less popular, there may be a premium for workers willing to staff an office, warehouse or classroom. Economists call these ‘compensating differentials,’ and they are sure to emerge across some occupations.

There’s at least the possibility that families will be able to more easily manage children, pets and home duties. This is especially true if workers labor across different time zones. At least one recent research paper suggests this will boost fertility among families who engage in remote work. The implications for population change among places favored by remote workers is pretty clear.

It is possible that a focus on pure productivity in remote work will lead to clearer connections between pay and work quality or quantity. This might mean less workplace discrimination, but larger income inequality. It’ll be years before this is clear. Also, if there is a wage premium for the inconvenience of being in the office or onsite, this should close some of the very large college wage premiums. Because better-educated workers are more likely to work remotely, a larger share of less-educated workers will receive that in-person bonus.

Remote work is now the largest ‘industry’ in the country and seems poised to grow. It will have lasting change on where people live and work. It will also impose change across a wide range of margins, from pay and benefits, to the size and scope of firms, and how families juggle childcare to the type of education they choose.

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. His column appears in Indiana newspapers.