Yves right here. That is the form of examine I like. It focuses on an fascinating matter and teases out findings which have broader implications. Right here, the query is why do work-from-home staffers truly make greater than these of their roles typically, when most would settle for decrease pay for the perceived privilege of work-from-home? That conundrum already makes one marvel why supposedly very backside line oriented bosses are sometimes insisting that everybody flip up on the workplace, after they may merely impose wage reductions on those that wish to proceed work-from-home and let everybody type themselves out.
That transient dialogue and the examine findings beneath spotlight how wage and worker-boss relations don’t hew as tidily to organizational stereotypes as one would suppose. IMHO a if not the large purpose managers are so eager to get everybody again within the workplace is that with the ability to wander round and make their presence identified and name sudden conferences is an train of energy that they lose if many work-from-home. One other is that the boss class must change their habits a bit to make work-from-home as productive as it may be, like having in-person conferences solely sometimes however on a set schedule. Can’t have the highest canine altering their lives to accommodate the subordinates!
Right here we see extra proof of the arbitrariness of wage relations, however right here of at the least a extra logical type, that greater producers and/or higher negotiators can lower higher offers even in a supposedly structured work setting.
By Huiyu Li, Analysis Advisor Federal Reserve Financial institution of San Francisco, Julien Sauvagnat, Professor of Finance Bocconi College, and Tom Schmitz, Reader Queen Mary College of London. Initially printed at VoxEU
Research have discovered that employees usually worth the choice to do business from home and are prepared to just accept sizable wage cuts in alternate for it, but a rising literature finds that employees who do business from home earn on common greater wages than employees who don’t. This column combines French survey knowledge, registry data, and social safety data to indicate that the primary driver of this work-from-home wage premium is choice. Employees who’re extra productive, or have higher negotiation expertise, seem in a position to get each greater hourly wages and the suitable to do business from home extra typically.
Because the COVID-19 pandemic, do business from home (WFH) has turn out to be a fixture of the labour market in lots of nations. As an illustration, Aksoy et al. (2024) report that throughout 34 nations, a 3rd of full-time employees engaged in hybrid or absolutely distant work preparations in 2023. This widespread adoption has sparked appreciable curiosity from policymakers searching for to grasp the implications of WFH for productiveness, inequality, employment dynamics, and metropolis construction (e.g. Eurofound 2024).
The implications of do business from home on wages are significantly fascinating. A rising literature finds that employees who do business from home earn on common greater wages than employees who don’t. An essential a part of this premium displays occupational and academic variations, since higher-paying occupations and better-educated employees usually tend to do business from home. Nonetheless, current proof exhibits that an economically significant wage premium persists even amongst employees with the identical occupation, schooling, and different observable traits (Rossi-Hansberg et al. 2023, Pabilonia and Vernon 2025).
At first look, this discovering is puzzling. A big physique of analysis exhibits that employees usually worth WFH as an amenity and are prepared to just accept sizable wage cuts in alternate for it (Mas and Pallais 2017). One potential clarification is that working from residence raises employee productiveness, prompting companies to pay greater wages (Pabilonia and Vernon 2025). But this raises an additional query: if productiveness positive factors are substantial, why don’t all employees in teleworkable jobs do business from home?
An alternate clarification for the noticed work-from-home wage premium is choice: employees with greater unobserved productiveness or better bargaining energy could also be extra probably each to safe greater wages and extra versatile WFH preparations. In current work (Li et al. 2026), we offer proof that choice is certainly the primary driver of the work-from-home wage premium in France.
Information and Methodology
Our evaluation combines three administrative knowledge sources. First, the French Labour Power Survey supplies info on employees’ WFH standing, self-reported earnings, hours labored, and key particular person traits akin to schooling, occupation, gender, and age. From this, we calculate hourly wages as earnings divided by hours labored. Second, we hyperlink these knowledge to the universe of agency registry data, which permit us to watch employer traits together with gross sales, workforce measurement, and agency age. This linkage is essential, as a big literature paperwork substantial and chronic wage variations throughout companies (Card et al. 2013, Track et al. 2018). Lastly, we match employees to social safety data, which give detailed info on their earnings and employer histories. Collectively, these knowledge enable us to review wage variations related to do business from home whereas accounting for each employee and agency heterogeneity.
Work From House and Wages
We start by documenting the connection between WFH and employee wages within the post-pandemic interval, from mid-2022 – in spite of everything COVID-related restrictions had been lifted – via the tip of 2024. On this pattern, we first doc a sizeable uncooked wage hole between employees who do business from home and those that don’t. As proven within the first bar in Determine 1, on common, the hourly wages of WFH employees are 35% greater than these of on-site employees.
A lot of this hole, nevertheless, displays occupation and schooling variations. In France (as in different developed economies), distant work is much extra frequent in higher-paid occupations and amongst extra educated employees. As soon as we glance inside occupation, schooling, and placement, the wage premium related to WFH shrinks considerably, to about 12% (second bar in Determine 1). Controlling additional for different observable employee traits – akin to age, gender, and job tenure – reduces the wage premium to six.6% (third bar in Determine 1). Whereas decrease, that is nonetheless a major quantity. This end result survives quite a few robustness checks together with utilizing different measures of hourly wages and WFH standing.
Determine 1 WFH hourly wage premium (%)
What could possibly be driving this substantial distinction in wages? One doable interpretation is that the distinction is pushed by employers. Certainly, it would nicely be that higher-paying companies are additionally extra prone to supply extra versatile work preparations. Nonetheless, we discover that this clarification just isn’t borne out by the info: the premium stays even after controlling for agency traits, or when evaluating employees throughout the similar agency. The fourth bar in Determine 1 exhibits that including controls for agency age, measurement, and income productiveness solely brings the premium down from 6.6% to six.4%. This implies that firm-level pay insurance policies alone can not account for the work-from-home wage premium.
Subsequent, we discover whether or not the premium could possibly be pushed by choice. To take action, we leverage the social safety knowledge to extract employee’s wages earlier than COVID-19. This reveals a putting sample. Employees who do business from home after the pandemic had been already incomes greater wages earlier than the COVID-19 pandemic. Even after controlling for a wealthy set of employee and agency traits, pre-pandemic hourly wages – measured as the typical wage in 2018–19 – can account for just about the complete remaining wage premium. The final bar of Determine 1 exhibits that including the pre-COVID wage management brings the premium all the way down to 1.1% and isn’t statistically important.
In different phrases, the employees who’re working from residence post-pandemic had been already paid greater wages earlier than WFH grew to become widespread. We additionally discover that WFH just isn’t related to greater post-pandemic wage progress, as one may need anticipated if one of these work led to important productiveness positive factors. Total, this proof factors to choice as a central driver of the WFH wage premium: employees who’re extra productive, or have higher negotiation expertise, are in a position to get each greater hourly wages and the suitable to do business from home extra typically.
Our findings have a number of essential implications. First, they counsel that typical wage measures could understate inequality in a world with widespread WFH, as higher-paid employees are additionally extra prone to obtain the amenity of with the ability to do business from home. Second, they place a certain on potential productiveness positive factors from working from residence (or, alternatively, counsel that employers haven’t shared these productiveness positive factors with their employees). Third, by highlighting the position of choice, they indicate that modifications in WFH insurance policies – akin to return-to-office mandates – can have an effect on the allocation of expertise throughout companies and, doubtlessly, combination productiveness.
