Wednesday, February 8, 2023
  • Login
CEO North America
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
CEO North America
No Result
View All Result

Could Remote Work Help Curb Inflation?

in Opinion
Could remote work help curb inflation?
Share on FacebookShare on Twitter

The ‘amenity value’ of working from home may moderate demands for higher pay.

The rise of remote work eases the challenge confronting monetary policy makers in their efforts to bring the inflation rate down to acceptable levels, according to a team of researchers that includes Chicago Booth’s Steven J. Davis.

Many workers like to work from home one or more days per week because it saves on the time and monetary costs of commuting. Work from home also offers more flexibility in time use and greater personal autonomy.

Employers can moderate wage-growth pressures by offering work-from-home privileges in lieu of bigger pay hikes. What’s more, it’s now practical in some jobs (e.g., software coder, IT specialist, and call-center worker) to offer positions that are mostly or entirely remote. That enables employers to reduce labor costs by hiring workers who live in places with lower prevailing wages. For both reasons, the rise of remote work can benefit employers by helping them restrain the growth in their labor costs.

How does this observation relate to inflation and monetary policy? The Consumer Price Index, which measures US consumer prices, rose 8.6 percent over the 12 months ending May 2022, a jump of several percentage points relative to previous years. Nominal wage growth failed to keep pace. Real average hourly earnings in the US private sector fell 3 percent over the 12-month period ending May 2022, after adjusting for CPI inflation. Since real hourly earnings rose by an average of 0.7 percentage points per year before the pandemic struck, the inflation surge drove a surprise loss in real wages of 3.7 percentage points.

Some economists argue that pressures for a catch-up in real wages stoke inflation, as workers demand more money to make up for the purchasing power they’ve lost. In effect, the surprise component of recent price inflation raises future wage inflation. Higher wage inflation, in turn, raises labor costs and thereby feeds into higher price inflation. Thus, a bigger wage-catchup effect implies the need for tighter monetary policy to bring the inflation rate down to a desired level, raising the likelihood of recession in the process.

Remote work has moderated wage growth

In surveys fielded by the Atlanta Fed, business executives estimated that expansions in remote work have enabled them to moderate wage growth by about 2 percentage points over two years, more so in sectors with a larger share of jobs that can be performed remotely, because employees accept smaller pay hikes for the opportunity to work from home.

That’s a sound argument, but the wage catch-up effect on inflation is lessened if employers use the rise of remote work to moderate wage-growth pressures. Davis­—along with Mexico Autonomous Institute of Technology’s Jose Maria Barrero, Stanford’s Nicholas Bloom­, and the Atlanta Fed’s Brent Meyer and Emil Mihaylov—developed evidence on the force of this wage-growth moderation effect. The researchers find that “the rise of remote work shrinks the real-wage catchup effect by an estimated 54 percent.”

To reach this assessment, they crafted new questions for the Survey of Business Uncertainty, which is conducted by the Atlanta Fed in partnership with Booth and Stanford. The researchers asked nearly 500 US business executives whether, over the past year, their companies expanded work-from-home and other remote-location opportunities “as a way to keep employees happy and to moderate wage-growth pressures.” Thirty-eight percent answered yes, while 41 percent said they would let employees work from home at least one day a week over the next year to restrain wage-growth pressures.

When the executives said their company expanded remote work to moderate wage growth over the past year, or would do so in the coming year, the researchers followed up with questions about how much moderation they saw or expected to see. Averaging over all companies in the sample, they find that the rise of remote work moderated wage growth by 0.9 percentage points over the past year and that the executives predict it will do so by an additional 1.1 percentage points over the coming year.

Over two years, that adds up to wage-growth moderation of 2 percentage points. The wage-growth moderation effect is greater in industries with more scope for remote work, such as finance, insurance, real estate, social services, and education. It is smaller in industries with less scope for remote work, such as retail, transportation, and hospitality. Because of increased employee satisfaction, expanded remote-work opportunities can also lower employee quit rates, reducing turnover costs.

Courtesy Chicago Booth Review. By Rebecca Stropoli. Article available here.

Tags: inflationremote workU.S. Economy

Related Posts

4 surprises all leaders face
Opinion

4 Surprises All Leaders Face

Women get “nicer” feedback — and it holds them back
Opinion

Women Get “Nicer” Feedback — and It Holds Them Back

Does it feel like your department has been sidelined?
Opinion

Does It Feel Like Your Department Has Been Sidelined?

How to test if your interview process is a nightmare
Opinion

How to Test If Your Interview Process Is a Nightmare

Helping gen z employees find their place at work
Opinion

Helping Gen Z Employees Find Their Place at Work

Four key competencies for new world leadership that your c-suite needs now
Opinion

Four key competencies for New World leadership that your C-Suite needs now

Work has changed, but leaders aren’t ready, deloitte says
Opinion

Work has changed, but leaders aren’t ready, Deloitte says

Want better leaders this year? Make sure they genuinely listen to staff
Opinion

Want better leaders this year? Make sure they genuinely listen to staff

Should we give extra sick days to employees who can’t work from home?
Opinion

Should we give extra sick days to employees who can’t work from home?

America’s new era of industrial policy
Opinion

America’s New Era of Industrial Policy

No Result
View All Result

Recent Posts

  • Super Bowl betting projected to reach $16 billion this year
  • EV batteries getting second life on California power grid
  • 4 Surprises All Leaders Face
  • What’s hot this year in supply chain technology
  • Microsoft investigates Outlook outage as users face issues

Recent Comments

    Archives

    Categories

    • Art & Culture
    • Business
    • CEO Interviews
    • CEO Life
    • Editor´s Choice
    • Entrepreneur
    • Environment
    • Food
    • Health
    • Highlights
    • Industry
    • Innovation
    • Issues
    • Management & Leadership
    • Multimedia
    • News
    • Opinion
    • PrimeZone
    • Printed Version
    • Travel
    • Uncategorized

    Meta

    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org

    • CONTACT
    • GENERAL ENQUIRIES
    • ADVERTISING
    • MEDIA KIT
    • DIRECTORY
    • TERMS AND CONDITIONS

    Editorials – stuart.james@ceo-na.com

    Editor-In-Chief – caroline.sposto@ceo-na.com

    Editorials – editorials@ceo-na.com

    Advertising – media@ceo-na.com

    NEW YORK

    110 Wall St.,
    3rd Floor
    New York, NY.
    10005
    USA
    +1 212 432 5800

     

    MEXICO CITY

    Paseo de la Reforma 296,
    Floor 38
    Mexico City
    06600
    MEXICO

    • CONTACT
    • GENERAL ENQUIRIES
    • ADVERTISING
    • MEDIA KIT
    • DIRECTORY
    • TERMS AND CONDITIONS

    Editorials –
    stuart.james@ceo-na.com

    Editor-In-Chief –

    caroline.sposto@ceo-na.com

    Editorials – editorials@ceo-na.com

    Advertising –
    media@ceo-na.com

    NEW YORK

    110 Wall St.,
    3rd Floor
    New York, NY.
    10005
    USA
    +1 212 432 5800

    MEXICO CITY

    Paseo de la Reforma 296,
    Floor 38
    Mexico City
    06600
    MEXICO

    CEO North America © 2022 - Sitemap

    No Result
    View All Result
    • Home
    • Business
      • Entrepreneur
      • Industry
      • Innovation
      • Management & Leadership
    • CEO Interviews
    • CEO Life
      • Art & Culture
      • Food
      • Health
      • Travel
      • Environment
    • Opinion
    • News
    • Multimedia

    © 2023 JNews - Premium WordPress news & magazine theme by Jegtheme.

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In