What

hasn't really emerged yet is this idea of a tax. Basically give workers the option that if you want to continue working from home, you can do so, but you're going to get paid a little bit less than you're currently getting paid. So

spell that out for me, Alex. do you really mean by taxing working from home?

So jobs often come with certain benefits or certain drawbacks. And perhaps it actually makes the most sense first to think about a job that comes with a drawback. Think about a job that requires a night shift or a job that is dangerous. These jobs typically pay workers more in order to compensate them. Well, work from home is sort of the opposite side of that coin. Work from home is a perk. It's a benefit. And because of that, really, workers should get paid slightly less with their base salary for a job that incorporates this benefit. So

where's the idea of a work from home tax come from?

So if workers really, really value working from home and working remotely, the natural question is, how much do they value it? And economists have been trying to answer this question for the past few years. Back in 2021, 2022, there are a number of studies that showed that workers typically valued working from home about at the equivalent of 8% of their salary. It's significant, but it's not huge. A more recent study that came out a few weeks ago from academics at Harvard Business School, at Brown University, and at UCLA actually found that workers might value working from home at the equivalent of a 25% pay cut from their current wages. And what these academics did to find this evidence is they looked at workers in the tech industry, and they actually directly observed the jobs that these tech workers were being offered and the jobs that they ended up taking. Now, some of the job offers included the option to work remotely or to have a hybrid work schedule, and some of the job offers did not. Some of them required that workers work full-time in the office. 25% less and allowed flexibility to work remotely as a job that paid 25% more and required that workers be full-time in the office. So

workers might accept lower pay. Are companies actually offering lower pay for the same jobs? So

far, we're not seeing a lot of evidence. What we are seeing instead is companies doing these return to office mandates rather than thinking of adjusting the salaries. And maybe there are a couple of reasons that can explain this. First off, from a human resource perspective, companies typically don't like to pay workers who are doing the same work different wages. They're concerned that this will create internal inequities that might cause resentment among some workers. Then there might also be some legal issues. Because women tend to work remotely more often than men, there are some legal concerns that implementing a work-from tax will unfairly penalize women, and that can worsen the gender pay gap. However, what we've also been seeing at this point is we've been seeing a labor market that has really been tilted in favor of workers over the past many years. And what this means is that work from home tends to be a incentive or bargaining chip in order to get the top talent to come to your company. Right.

So what happens when labor market conditions worsen? If

labor market conditions worsen and more workers become available and are looking for jobs, then firms might not need to compete for workers the same way that they used to by offering them flexibility and remote work options. Instead, what we might see is that firms begin to price in this perk because the companies have the sort of leverage in the bargaining power because there are more workers available. They might say you can work remotely, but it's going to be at a slightly lower wage than if you were to come in and work in the office full time.

But it sounds like for the moment, we're really stuck with these return to office mandates rather than incentives.

Yeah. And return to office mandates are really something that workers really, really don't like. In fact, when JPMorgan recently announced their return to office mandate, they had a comment board where workers could basically respond and, you know, voice their views on the return to office mandate. And after a couple of days, JPMorgan had to shut down the comment board because it became so overwhelming with workers who were very, very upset at the return to office mandate. Similarly, in 2023, Dell offered its workers basically the option to continue to work remotely full time. But if they were to do so, they would no longer be eligible for promotions. They thought that this would be enough of an incentive to get workers to return to the office. However, around 50% of the workers who were given this option chose to continue to work remotely, even if it meant sacrificing their eligibility for promotions. And so we have found ourselves in this very strange equilibrium where it's sort of a tug of war between the workers and the employers to try to settle on what is the best outcome in terms of remote work. And we might see a new equilibrium emerge, an equilibrium where the employers say, gee, well, if you want to continue to work remotely, then we're going to pay you less to do so. And this might be an outcome that workers dislike even more than the current return to office mandates.

Alex, thank you for coming into the office to talk to me. Thank

you very much. It's been a pleasure.