Upwork (Nasdaq: UPWK), the leading online talent solution, today released a new report, “When Work Goes Remote,” from Upwork Chief Economist, Adam Ozimek. With remote work on the rise as companies adapt to the changing times of COVID-19, many question the larger implications of remote work on the economy.
Using data from Upwork and the U.S. Bureau of Labor Statistics (BLS), the report finds remote work has the potential to help reduce the growing wage gap, and ease some of the housing, traffic and inequality issues that come with market concentration, by spreading economic opportunity across the U.S.
Over the past few decades, businesses and opportunities have become increasingly concentrated in a handful of expensive cities. The spread of wages between these high-priced metros compared to the rest is nearly 40%, meaning two people doing the exact same job in different parts of the country will earn very different wages. This is in large part due to the high cost of living in some of the country’s top metros and the necessity to live near work. The broad adoption of remote work, however, presents a structural change to this equation.
“Remote work has the potential to help lean against the wage and opportunity gap that has been steadily growing for decades across the U.S.” said Adam Ozimek, Upwork Chief Economist. “Instead of businesses and professionals concentrating in a handful of cities, remote work can help spread opportunities and increase pay to professionals across the U.S.”
Key findings from the report reveal:
Remote work can help solve the wage and opportunity gap:
- The wage and opportunity gap is large:On average, wages in the top 15 most expensive cities for skilled occupations were $40.54 per hour, compared to $28.36 for the average location, a premium of over 40% for the exact same occupation.
- Remote work is already spreading economic opportunity across the country: Despite having only 19% of the U.S. population, businesses are highly concentrated in the top 15 most cities. However, with remote work, we see that 49% of the business spend is going from the top 15 most expensive cities to the lower cost locations.
- Independent professionals can make more working remotely: Upwork project data shows, when independent professionals engage with businesses located in the top 15 most expensive cities, they will make, on average, 18.6% more than average wages in their local market, and 8-11% more than the rates Upwork clients in their local labor market pay.
- Professionals looking to relocate can benefit in more affordable metros: Despite having a higher pay in the top 15 most expensive cities, the extremely high cost of living means that a high percent of earnings are eroded by housing costs. The price to income ratio in those top 15 cities is, on average, double than the rest of the country, bringing it to an average range of 680% to 1,260%.
Remote work is beneficial for businesses
- Businesses engaging remote professionals will have greater access to talent: With the employment rate for college grads aged 25 to 64 at a substantial 1.5 percentage points above average in the highest cost places, businesses will find more highly skilled talent in other metros.
- Businesses can also see productivity increases from remote work: With less office distractions, no commute, and more flexibility, remote work has led to increased levels of productivity.
- Businesses can see cost benefits from engaging remote professionals: While earnings by independent professionals on Upwork are higher than hourly earnings in the freelancer’s local labor market, with pay lower than in the expensive cities, businesses can also expect savings of at least 4.3%.
For the full report, please visit our site.