Employees willing to take a 25% pay cut to work remotely
The American workforce’s appetite for remote work is proving stronger than previously estimated. A new working paper from the National Bureau of Economic Research (NBER) finds that employees are willing to accept an average pay reduction of 25% in exchange for the ability to work from home—a figure three to five times higher than past estimates.
The study, titled Home Sweet Home: How Much Do Employees Value Remote Work?, provides fresh insights into how the shift toward remote work has reshaped employee preferences.
The authors, Zoe B. Cullen, Bobak Pakzad-Hurson, and Ricardo Perez-Truglia, analyzed the behavior of U.S. tech workers, a group at the forefront of flexible work arrangements, to understand the trade-offs employees are willing to make for location independence.
Despite the high value employees place on remote work, the study found no significant wage differential between remote and in-office jobs. In other words, employers are not, on average, paying remote workers less than their in-office counterparts. This contradicts the traditional economic theory that workers should earn lower wages when accepting perks such as flexible work arrangements.
Why, then, have salaries for remote roles not fallen in line with employee preferences?
The study points to market frictions, such as optimization challenges and worker sorting, as possible explanations. Companies may still be figuring out how to price remote jobs effectively or may be competing for a smaller pool of highly skilled remote workers, maintaining competitive wages.
The research suggests that prior studies significantly underestimated the extent to which workers value remote arrangements. Previous methodologies, which largely relied on survey responses or employer-side data, may have missed the deeper sentiment driving employee preferences.
This data presents a challenge for employers. If remote jobs are undervalued in compensation models, businesses risk alienating talent by limiting flexible work options.
The study’s findings imply that workers view remote work not just as a preference, but as a highly desirable benefit—one they are willing to make considerable financial sacrifices for.
As the labor market continues to evolve, companies will need to reassess their approach to remote work. If employees are willing to accept pay cuts of this magnitude, firms that embrace flexible work policies may have a distinct competitive edge in talent acquisition and retention.
On the flip side, companies that revert to full-time office mandates without compelling reasons may struggle to attract top talent.
While hybrid work models remain a dominant strategy for many firms, this study underscores a key takeaway: remote work is no longer just an employee perk. It is a valued benefit with measurable economic trade-offs, and employers who recognize this may be better positioned for the future of work.