slide image

How remote work increases inequality

By Jeni Kramer on the LinkUp Blog

In March of 2020 as the pandemic was beginning its widespread shutdown of non-essential workplaces, economists at the University of Chicago’s Booth School of Business decided to conduct a remote work study. Newly homebound themselves, professors Jonathan Dingel and Brent Neiman assessed more than 800 occupations to determine which ones could be performed remotely and which could not.

The pair concluded that up to 37% of jobs in the US could be done from home. In addition, the study found that the majority of jobs able to be performed remotely involved “knowledge work”, similar to duties associated with a typical office setting, leaving positions that involve manual labor or direct interaction with customers excluded. In other words, the jobs best suited to remote work were overwhelmingly well-paid, white collar occupations in large urban centers.

These findings highlight a concerning gap in how different occupations and geographic areas may experience the long term economic impact of the pandemic. Areas with high concentrations of white collar jobs like legal work, business and finance operations, or technology are more easily able to accommodate a large scale shift to remote work than areas with economies more dependent on agriculture, hospitality or other manual or customer-facing jobs. With wealthier cities better positioned to keep the majority of their economies running amid COVID restrictions, this leaves the less well off disproportionately impacted.

Those in occupations that cannot easily shift to remote work are more likely to lose their jobs amid a pandemic, where business is interrupted by shutdowns or distancing measures. These losses are felt in both the short and long term. Career disruptions experienced now can negatively impact workers’ earning potential for years after, even decades after, as we’ve discovered when examining the issue along gender lines. Such setbacks in individuals’ career trajectories cause widening inequality in the workforce and leave disproportionately impacted geographies with severe economic scarring.

Beyond job security, there are other advantages for those able to participate in the remote work revolution. Not commuting to an office means more time, reduced transportation costs, and potential for a better work-life balance. But when such benefits only accrue to the already privileged, the gap between working classes only widens.

Many are grappling with how to level the playing field now that more companies are extending their work-from-home policies. Tech leaders like Twitter, Square and Facebook are offering remote work options for employees even after the pandemic ends, which means companies in other white collar industries will likely follow suit. Though the staying power of the remote work movement has yet to be observed, many experts are sounding the alarm to ensure it doesn’t leave people behind.

To this end, financial giant Deutsche Bank has released a report proposing a 5 percent income tax for individuals who choose to continue working from home rather than in an office. Those who are self-employed and lower-paid staff would be excluded, and it would not apply to situations where the government has mandated people to work from home. Deutsche Bank says the tax has the potential to generate $49 billion per year in the U.S. alone, which could be used to support lower income workers who do not have the ability to stay home.

The proposed ‘privilege’ tax, is meant to off-set the effects of a working class that has reduced their participation in the economy (think back to those reduced transportation costs, as well as other savings that stem from a work-from-home setup like fewer meals out or non-existent dry cleaning bills) while still experiencing its benefits. Deutsche Bank’s calculations show that, with these substantial cost savings, the average worker would be no worse off paying this tax.

Whether remote work will evolve to a permanent part of the labor landscape remains to be seen. But we see the disparities in access playing out currently. Proactively planning for how we can democratize this new way of working will be key in providing opportunities and preventing inequality in the future.