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Study suggests telecommuting employees may have lower wage growth

March 30, 2017

By Kristen Cifolelli, courtesy of SBAM Approved Partner ASE

Telecommuting offers numerous positives for both employers and employees.  A few of those benefits include increasing employee productivity due to fewer distractions, improving employee satisfaction and retention rates, saving employee commuting costs, and offering employees more flexibility with their schedule.  According to Global Workplace Analytics, a San Diego-based consulting firm that specializes in flexible-workplace strategies, 20-25% of U.S. employees are estimated to telecommute at least once per year.  

Global Workplace Analytics will be releasing a report later this spring entitled “The State of Telework in the U.S.” It analyzes data collected by the U.S. Census Bureau through their 2015 American Community Survey, and it provides a picture about today’s teleworking employees.

Some of their findings include:

  • 2.9% (3.9 million individuals) consider their home their primary workplace
  • A greater proportion of older employees telecommute relative to the total population (50.3% of employees over 45 compared to 41.3% of the total workforce)
  • Teleworkers are more educated than non-teleworkers – 53% have a bachelor’s degree or higher
  • IT and mathematical occupations have the highest telecommuting rate (half time or more) at 8.2%, military-specific occupations came in second at 7.2%, and arts, design, entertainment, sports and media occupations 5.9%

Global Workplace Analytics has estimated 56% of all jobs would be compatible with some amount of telecommuting. If 85% of individuals in those roles were to telecommute at least some of the time, there would be a savings of $750 billion a year nationally as a result of reduced real estate needs, lower absenteeism and turnover, and increased productivity.  This would average $12,000 per year for each half-time telecommuter. For the telecommuting employee, it is estimated that they could save between $2,500 and $6,000 a year and avoid the equivalent of spending 11 days in traffic.

According to Kate Lister, President of Global Workplace Analytics, the sweet spot for both real-estate and work innovation is in a 2-3 days per week telecommuting schedule with “the home becoming a place of concentration and work the place for collaboration.”  Lister also indicated that companies will see spikes of productivity between 15% and 55% amongst their telecommuters and a decline in absenteeism.

While there are plenty of positives about telecommuting, a study authored by Mary Noonan, associate professor in sociology at the University of Iowa along with Jennifer L. Glass of the University of Texas Austin, called “Telecommuting and Earnings Trajectories Among American Women and Men 1989-2008,” suggests that telecommuting employees have lower wage growth over time.

Their study analyzed data from the National Longitudinal Survey of Youth, from the U.S. Bureau of Labor Statistics, which polled American workers with a standard 40-hour workweek at regular intervals from 1989 to 2008.  The researchers looked at workers who had worked for the same employer and had telecommuted at least some of the time.  They found that employees that telecommute at least part of their week ended up working an average of three hours more per week than employees who solely worked in the office.  It is no surprise that they found it encroached on home and family time.

When it came to wage growth for a standard 40-hour week, there was little difference between salaried telecommutes and traditional non-telecommuting office workers.  Both groups received an $8-$9 per hour increase in weekly pay for a standard 40-hour workweek.  But for every hour worked over 40, telecommuters only saw a weekly pay increase of $3 per hour compared to $6.50 for workers who work in the office.

According to Noonan “it’s one of the unintended negative consequences of telecommuting.  I don’t know if people are aware that they are trading home work time for lower wage growth.”  On the positive side, women did not see an earnings decrease by working at home.

“To think that telecommuting eases the burden may be a little simplistic,” stated Mary Noonan, in the journal Social Forces. “It cuts down on commuting time, and it appears to add more flexibility to the work day.  But it can extend the day, and it doesn’t get you much more in terms of wage growth.”

For many employees, the benefits of telecommuting may be worth the tradeoffs.  According to Lister, 40% of people in her company’s study said they would give up pay to work remotely.  Employers should continue to evaluate telecommuting options as a way to attract and retain key talent.

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