In this rapidly changing job market today, it seems that salaries are gravitating downwards due to the flexibility of allowing employees to work from home in the corporate world and tech industry. And with COVID-19 layoffs, this global pandemic has put downward pressure on pay.
Employees from software giants such as Microsoft, Facebook, Google and Twitter — were given the option to work freely from home forever, even when their offices open back up.
With this new Work From Home/Remote standard, employers have the freedom to hire from any geographic location that they desire to. This will heavily affect areas with high costs of living because they will not account for higher salaries. Basically, compensation will change drastically depending on where you live in the country as they will do regionally-based salaries. We can see that this is already impacting the tech industry, which will generate an approach to more supply because it opens up the competition significantly. In the long run, this method of compensation will drive down employee salaries. This will also result in mass migration because people will no longer be tied down to living where they work. If you think about it, working remotely versus going into an office will not only impact the salary, but also promotions and growth.
For example, companies in the Silicon Valley are lowering the salaries of employees based on where they relocate.
“Even a move within the state of California will result in lower pay: workers who decamp for San Diego or Los Angeles will take an 8% pay cut”, Bloomberg reports.
— Business Insider
Many tech firms are cutting labor costs for employees who move to less expensive areas. This isn’t fair for other employees who get paid less for carrying the same job title and performing the same amount of work. This is where the cost of living brings out the factors for these companies. The factors of the economic principles of supply and demand come into play.
Pro #1. The employers that are incentivizing this “WFH permanently” option, are widening their talent pool within their area – which can be great for folks who are highly talented. So therefore, the ability for an employer to hire at a lower cost due to the larger talent pool might compress the wage for that particular position, but if it allows the candidate to apply and potentially earn that position at a salary that is higher than what’s available in their current geographic labor market, then their respective salary has increased. Let’s not forget that WFH is not a mandatory thing for everyone. This is optional as there is still people who still prefers to go to back to their workplace and cubicles.
Pro #2. WFH offers more flexibility. WFH if you want, come in if you want. As long as you get the work done, your company will benefit from happier employees, wider talent net, smaller buildings and so on. For some folks, they may have a dedicated office space in their home or studio where it makes them feel much more productive as it has given them greater freedom to have a healthier lifestyle with less stress, and to be able to take care of their children.
Pro #3. WFH also improves ecology and prevents the contamination of the spread that’s still going around. Yes, it is nice to have an opportunity to work from home as this reduces carbon footprint! This reduces time in the traffic as there will be less cars on the road, and you won’t have to feel dreadful about waking up early. Not having to commute or paying for a $20 lunch meal daily, saves you a lot. Working from home is a great idea for both employees and employers who can save on their biggest expense, which is real estate and payroll.
Pro #4. This is a big step to reduce unemployment. Think about certain populations who have been out of the workforce for so long. For example, there are individuals who have disabilities or chronic health issues that limit their work options. And individuals who had to take care of their children because they do not have anyone else to look after them. But they are ready to enter the working world again and are still in search of employment. If they have the skills to do so, all they need is to set up their dedicated work space and equipment at home. With an unemployment rate of 8.4%, there are far more potential workers who are available to bring their valuable assets to the right employer.
However, it is not possible to fully live without the face-to-face interactions. As the world and labor trends continue to change and adapt, this brings us to the cons.
Con #1. If employers are extending offers to anyone in the country versus the local area, the demand for talent may decrease. This is a huge disadvantage for job seekers that lack digital skills. Fewer and fewer opportunities are available to those lacking a baseline of technology access as well. Studies also show that for many employers, working from home from time to time will likely continue as the new normal once the pandemic subsides.
Con #2. This is something that nobody has ever thought about, but employers would need to consider the time zone difference if conference calls/team meetings/client calls are needed. This can result in burnouts since there is no micromanagement. So the key variable here is engagement, where employees should feel supported and valued even behind the screen. Leaders would need to be willing to invest in software and hardware to make it work and build realistic protocols and accountability measures to ensure the work is being done. And this would require change in the design of workflow, teams and functions, as well as clear communication of expectations.
Con #3. In the long run, this can negatively affect some of the younger generations who are beginning their careers as some are visual learners. If they do not get to interact with their team or colleagues, this can limit their development since they won’t have the opportunities to learn from others on a daily basis. We need the face-to-face interactions to stimulate our communication with both internal teams and with our clients.
Con #4. Many employees (support staff, office admin staff, security staff, transport staff, etc.) who can’t work from home will lose their employment. This goes for jobs in the hardest hit sectors (hospitality/retail) — they are becoming obsolete, such as administrative assistants, receptionists, sales associates, etc. And, what will happen to the office space once that is all gone?
Con #5. Concerns have also been raised about work/life balance — where working from home only works if your environment is adapted. In other words, not all folks live in a place that is suitable for working from home. For instance, not everyone will have access to good WiFi, office supplies, ink, technology, etc. How many companies are willing to cover for that? And if they do cover that, how are they going to pay for all of their employees? Stipends?
Con #6. Mental health. An employee’s health matters too to ensuring a productive workforce! If employees do not make time for their wellness, they will be forced to make time for their illness. It’s true. This is a hot topic that has been discussed since the beginning of the lock down because many employees prefer office interactions and collaborations. We are humans. We develop the positive energy from being around people and the relationships/interactions are definitely not the same when working from home. In many cases, in-person discussions make a bigger difference and building solid relationships is more effective when done face-to-face.
Con #7. As you draw the big picture in your head about living situations when permanently working from home, some individuals will have the idea of selling their current property just to move back to be with their families because they will save more costs on rent, utilities, electricity, gas, etc. It is a nice recourse that many of these employers are offering, however things may/will always change. What if the employer reverts their decision and decides to make their employees come in to the office permanently? Or for a specific project/collaboration? This could be a logistical disorder for some individuals who are affected by their living situations. Not many folks are willing to pay an arm and a leg to live in areas that they cannot afford.
All in all, existing gaps between the haves and have not’s may be further heightened and it’s not hard to imagine folks being passed up for positions just because they simply don’t have the infrastructure to work from home and prefer working in the office instead. This pandemic is going to have far reaching impacts to many of our cities. But also, in a positive way in that here is an opportunity to close the wage gap between have and have not’s.
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