International Finance
Economy Magazine

Should remote workers settle for less?

Is location based-pay really justified or are corporations trying to squeeze their employees?

The pandemic has permanently altered how humans work, with many employees refusing to return to offices.

Workplaces were toxic and contagious long before the pandemic, but very few realize how much covid-19 has changed our lives.

So many cultural revolutions have followed in the aftermath of the coronavirus. There was the great resignation of 2021 when millions of Americans resigned together. The world’s workers have made it evident that they will quit if not afforded flexibility.

The post-pandemic wage debate
Debates on location-based pay have reached a fever pitch. Many organizations have already adopted a work-from-anywhere model. At establishments like Google and Facebook, salaries could be slashed by up to 25%, if employees decide to move away from big cities like New York and California. Senior management at these companies said location and market rates have always determined payment. Someone in Kansas City is historically paid less on average than someone in New York.

However, workers are questioning if their quality of work or productivity has not diminished, then why pay them less for the same job.

There was a 10% reduction in corporate property prices last year, leading to significant shifts in the use of coworking and office spaces. Many workers moved away from the city to the suburbs to save on rent and the cost of living.

The move spiked property demand in the suburbs at the expense of city centers. City planners might redesign downtown districts to make city life more alluring.

The Mckinsey Global Institute estimates that almost 1/4th of workers will follow a hybrid work model in advanced economies. Hybrid work is a compromise between remote work and office work, where employees work from home several days a week. The discourse on returning to work is increasingly polarising, with no consensus.

Sensible or sleazy?
A study two years in the making, on 800,000 employees at fortune 500 companies revealed improved worker stability and productivity while working remotely. To deduct the salary of a workforce performing much better than before seems excessive.

Companies call it a fair adjustment, but it seems unfair to the workforce, who make less money for the same job, merely because they aren’t in the office.

CEOs struggle with employees who negotiate the ability to work from wherever they choose, at whatever time they choose- all without a pay cut. Worker classification in the future will shift from ‘white-collar’ or ‘blue-collar’ to ‘hybrid worker’ or ‘office worker.’

Moreover, by 2030, half of the jobs in the US are projected to be freelance work. Two-thirds of employers also see remote or hybrid work as the new norm. Some companies are luring high-quality professionals by offering fully remote work. It gives them an advantage over companies insisting on presenteeism.

Is this regressive?
They say only the rich can afford unpaid internships. The poor or middle-class who can’t afford to live in cities are affected the most by such policies. Imagine a stay-at-home mom raising her children in the suburbs while working online. These policies will only hurt people in precarious situations and widen the income equality and wage gap.

With remote work, many these days can choose their approach to work. People have begun working hours when they feel more productive and from locations where they are most comfortable. The traditional 9-5 is slowly phasing out, and a four-day work week is one of the most debated topics. Yet, we are far off from John Maynard Keynes’ 15-hour work week prediction in the 1930s. People are finally seeing their work and time as commodities and are finally getting a say in how, when, and where they sell it.

Despite mounting social pressures, industry leaders cannot agree on the right course of action. CEOs are dividing themselves into two camps. Some CEOs label remote workers as ‘work-shy’ and wish to penalize those who opt to work hybrid.

CEO of Morgan Stanley, James Gorman, sent a memo to his staff saying that if his employees wanted payment in New York rates, they would have to work in the city. He said he doesn’t want his employees saying that they are in Colorado with a New York salary. David Solomon of Goldman Sachs echoed the sentiment by saying that remote work was an ‘aberration.’

William Cohen, a veteran at Wall St., advised his colleagues and staff to return to the office. However, in the other camp are employers like Kevin Ellis, chair of consultancy firm PWC with over 285,000 workers in 155 countries. He said he wanted to create new working patterns that outlast the pandemic.

Whichever camp CEOs and other business leaders are in, it is evident that offices have immense social capital. Kevin Ellis also said he worries if companies are creating a glass ceiling for those who work from home, as their careers might have stunted careers. Most employees don’t understand the advantage a physical presence can give them in terms of career growth.

Perhaps, this is some resentment from big businesses which can’t accept workers of the same quality as they used to before the pandemic. It seems mobility and freedom are the new goals of the post-pandemic world. Businesses must allow workers flexible work schedules from any location or struggle to find quality workers for their force.

Some leaders looking to cut costs wonder if they even need an office or one as big as before. They aren’t following trends. Managers and owners want to increase their profits through improved productivity and fewer expenses like rent.

CEO of Moneypenny, a PA and communication provider, said she questioned her perception when all work went remote instantly during the pandemic. She said she thought they had beautiful offices everybody loved but soon learned it was never about the physical environment. It was always about the community feeling fostered within an organization.

Chris Thurling, chair of a design firm, Armadillo, stated that he is open-minded about the need for traditional offices. His business boomed during the lockdowns, and he doesn’t see the incentive to revert to the old ways.

Bruce Daisley, who presents the Eat Sleep Work Repeat podcast, and an authority on work, have been following shifting working patterns closely. He remarked about Dropbox, which in late 2020 figured out the futility of persuading people to return to offices. He added that people are wondering why they are going to offices just because it’s a Wednesday. In the future people will come to offices when they need to and offices will be redesigned as a place to make experiences.

Coercing employees into offices is futile. In the summer of 2021, employees announced their displeasure at Google paying them according to their proximity to the office.

Sarah O’Connor wrote in the Financial Times questioning the fairness of different pay for two workers from the same office working from home. In her example, one receives more salary because she has inherited an expensive house in the city, while the other has lesser wages because she lives in a commuter town.

The trouble brewing in big tech
Google, Facebook, and Twitter have all made their stance clear. Employees with long commutes who opt to work from home permanently will have reduced remuneration.

Different companies have different stances on the subject, but the tech industry leaders are steadfast on location-based pay. Smaller companies like Reddit and Zillow have embraced a location-agnostic pay mode, which they claim has many advantages regarding hiring, diversity, and retention.

Alphabet Inc., Google’s parent company, introduced a calculator for employees to determine the degree of their pay cut depending on where they live.

A Google spokesperson said the location was always a factor in determining compensation packages, and their salaries were at the top of the local market.

An anonymous Google employee said commuting to a Seattle office from a nearby country would likely see a pay cut of 10%. Despite his two-hour commute, he returned to the office because the pay cut for remote work was too steep.

Professor of Sociology Jake Rosenfeld from Washington University has extensively researched pay determination. He remarked that Google’s pay structure change is alarming because they had been paying their staff 100% of their salaries and can continue to do so. The move is likely to impact employees’ families adversely, he added.

Google’s internal salary calculator indicates that someone living in Stamford, Connecticut, an hour away from New York, would be paid 15% if they work from home. But if an employee residing in New York City chooses to work remotely, they won’t be paid any less.

An interview with Google employees revealed that employees face pay cuts up to 25% if they left the Bay Area for an equally expensive region like Lake Tahoe.

The calculator uses the CSBA or the US Census Bureau Metropolitan Statistical Areas to determine location-based pay. Stamford, Connecticut, is not in New York, though many who reside there work in the big city.

Google announced that there would be no alterations to salaries if employees continue residing in their office-based city. Office employees and remote workers would be paid the same at Google.

Mark Zuckerberg of Meta, in a video, told his employees that his company would adjust salary to location and threatened dishonest employees with severe ramifications. Many companies are struggling to understand the unprecedented cultural shift. Only time will tell if employers will adapt to the new value systems or coerce or persuade employees to be at the office even when they are unwilling.

A Parisian broadcaster and columnist, Anne-Elisabeth Moutet, describes presenteeism as a feature of power politics. She believes there is a strict hierarchy in French commercial institutions where the boss wants to surveil and micromanage all his employees. The organizational structure in French systems, which she compares to the court of a minor Borgia, makes transitioning into remote or hybrid work slow and difficult. Even colleagues vying for the boss’s attention can sabotage any attempt at remote work in Paris.

The future of work
The pandemic has changed the very nature of work. The three noteworthy changes were remote work, eCommerce booms, and automation.

In a study, Mckinsey and company found that the pandemic took a lot of work that didn’t require physical proximity to work remotely.

Someone who just had to attend calls, write copies, code, etc., realized they could do their work from anywhere. Teachers went online, therapists went online, and many such professions have seen a positive shift towards working remotely.

E-Commerce changed the way we buy and sell things. Many countries saw astronomical growth in their eCommerce sectors after the pandemic. The US, for example, saw 3.3 times the previous year’s growth, while Spain saw 4.7 and the UK witnessed 4.5x growth.

It will be a continuing trend with digital marketplaces replacing brick-and-mortar shops. The traditional economy is at peril due to these developments, and there are worries about market monopolization by giants like Amazon. However, the future of eCommerce seems bright, with many competing websites offering people quality goods for competitive prices.

These phenomena also opened up something called the ‘gig’ economy. The US Bureau of Labor Statistics reports that companies are no longer loyal, and neither are employees. The average American might have changed over ten jobs before turning 40.

In a Forbes article, the number of freelancers in America went up 8% within three years. Experts predict by 2027, about 50% of the workforce will be either independent consultants or freelancers. The change that led the world to remote work and valuing freedom and flexibility will also push them away from salaried full-time obligations.

The third change in human work and behavior is perhaps the scariest. It has rung many alarms in the past but has turned out to be for nothing in the end. We are referring to ‘automation anxiety.’

The new McKinsey & Company report states that most work that didn’t need physical proximity went remote. It also reported that jobs with the highest physical proximity are more likely to be automated first.

Businesses saved up on costs in the past by either redesigning their workspaces or outsourcing or automating their work. In a 2020 survey of 800 senior executives, 2/3rd said they were increasing investments in AI and automation. In China, robotics production has outpaced the pre-pandemic levels.

Some companies are already utilizing AI in grocery stores, manufacturing plants, warehouses, and call centers to mitigate demand and workspace density.

Pre-pandemic, it was just middle-income occupations that saw net job losses; Now, low-wage jobs in transportation, warehousing, and delivery will see the most disruption. While high-wage, skilled work opportunities in fields like STEM might grow further.

Low-income earners will need skill acquisition to join a higher-wage bracket or might be left behind. All this has rattled companies, economists, and governments. Introducing a new technology has always created a fear of losing human jobs.

The study estimates that a low-wage worker uses foundational cognitive function and physical labor 68% of the time, while middle-wage groups use them 48% and high-wage earners use them 20% of the time. The average German use of basic cognitive skills at a workplace will shrink by 3.4%., while time spent on emotional and social skills will increase by 3.2% in the next year.

It is undoubtedly clear that our societies reward cognitively challenging work more than it does physical labor or basic cognitive functions. And through machine learning computers and robots are reaching a point where they can perform these functions better than an average human being.

No one knows why there is so much pushback from corporate offices. Is it because they do not understand the magnitude of the cultural shift? Is it because of the legal complexities? Is it the financial issues in regulating work from home? Or is it simply the need for the visibility and use of large corporate mega-structures that hardly anyone will inhabit if remote work becomes the norm?

The great Chicago poet Carl Sandburg once said the workers came to the cities from the streets, prairies, and valleys only to be “poured out again back to the streets, prairies, and valleys.”

However, the internet has changed everything. None need to venture out from his streets, prairies, and valleys. All the work you will ever do will be done where you stand.

Humankind is changing in ways that would have once rivaled the realm of science fiction. Perhaps, corporations shouldn’t resist this change and focus instead on making every individual more productive, irrespective of where they choose to work.

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