The shift to remote work lessens wage-growth pressure

Barrero, Jose Maria, Bloom, Nicholas, Davis, Steven J., Meyer, Brent and Mihaylov, Emil (2023) The shift to remote work lessens wage-growth pressure. CEP Discussion Papers (CEPDP1926). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catchup effect that Blanchard (2022) highlights in his analysis of near-term inflation pressures. The amenity-values gains associated with the recent rise of remote work also lower Labor's share of national income by 1.1 percentage points. In addition, the 'unexpected compression' of wages since early 2020 (Autor and Dube, 2022) is partly explained by the same amenity-value effect, which operates differentially across the earnings distribution.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2023 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J0 - General > J00 - General
Date Deposited:	16 Jan 2024 09:48
Last Modified:	16 Jan 2024 15:21
URI:	http://eprints.lse.ac.uk/id/eprint/121376

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