Remote workers outearn in-person workers

No wonder everyone wants in.

Within the professional services industries in the U.S., remote workers are twice as likely to earn above the local median pay for non-remote workers in the same industry: 17% to 58% more, found a recent study of nearly 36,000 companies by payroll and benefits firm Gusto.

It’s a trend that extends beyond the U.S., at least in some industries: According to job site Hired’s 2022 State of Tech Salaries report, remote workers made more than local workers in 15 of 17 global markets. This year, global remote roles pay an average of $3,000 more than in-person roles.

Gusto’s analysis points to a few factors—none to do with productivity, proximity bias, or the ballooning cost of living—that could explain the salary gap. Remote workers also have the flexibility to work for the companies, wherever they may be, that best align their skills, which could translate to higher pay. 

There’s also the possibility that jobs that can be done remotely generally pay better. Gusto cites an example in the consulting industry—an environmental consultant who can’t work remotely tends to make less than a management consultant who can.

And, third, workers with high-paying jobs took them to lower-income areas, where their new neighbors in the same industry haven’t received a salary boost to match. As the pandemic catapulted remote work into the mainstream, many workers decamped from major hubs like New York and San Francisco to quieter, more affordable locations, where their metro area salary would undoubtedly go much further. Gusto anticipates that this could create new opportunities for non-remote workers to get a new job at a “remote-capable” company in the area and earn more money.

But that has a stronger chance of happening if companies don’t adjust their pay geographically.

“We would expect that companies will continue to set different pay rates or ranges for their different workforce segments such as remote, hybrid, or on-site workers,” Mariann Madden, North America Fair Pay co-lead at WTW, told Fortune last week. “What this may look like in practice depends on the company’s geographic pay policy, which will define each type of workforce segment as well as identify how each segment’s pay will link to a national or geographic pay structure.”

Consider Google, which has always paid differently in different area codes. That approach has taken on “heightened meaning as some 17,000 Googlers have either relocated during the pandemic or gone fully remote,” Fortune’s Beth Kowitt wrote. “The premise of having your salary adjusted for doing the same exact thing, just in a different zip code, has become perhaps the biggest sticking point for employees—even those who are grateful for the option.”

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