The COVID-19 pandemic has accelerated the trend towards remote work, forcing organizations to quickly adapt to a new way of working. Remote work policies are becoming more common, but their implementation can be challenging. Navigating the complexities of remote work policies requires a comprehensive analysis of their effects on productivity, work-life balance, organizational culture, and employee engagement. This paper aims to provide a critical evaluation of the impact of remote work policies.
What are the benefits for remote working?
- Flexibility: Remote work allows employees to have more control over their schedules and work-life balance, which can improve job satisfaction and reduce stress.
- Increased productivity: Studies have shown that remote workers can be more productive than office-based workers, in part because they can avoid distractions and interruptions that can occur in a busy office environment.
- Cost savings: Remote work can reduce the costs associated with office space, commuting, and other expenses that are typically associated with traditional office-based work.
- Improved diversity and inclusion: Remote work can help to increase diversity and inclusion by allowing people with disabilities or other circumstances that make it difficult to work in a traditional office to participate in the workforce. With remote work, companies are no longer limited to hiring employees who live within a certain geographic location, which can expand their talent pool and increase diversity among their workforces. In addition, remote work can help to eliminate biases that may exist in traditional office environments, such as unconscious biases towards certain demographics or cultures. By working remotely, employees are judged on their work performance and results, rather than on their appearance, background, or other non-work-related factors.
- Environmental benefits: Remote work can reduce the carbon footprint associated with commuting and office-based work, helping to mitigate the effects of climate change. According to Global Workplace Analytics, the average American spends around 55 minutes commuting each day and emits about 2.7 tons of carbon dioxide per person per year. By saving half an hour of commuting through remote work, more than 51 million tons of carbon emissions can be reduced each year.
Basic insights of the problems through different perspectives:
- From a labor law and immigration perspective: Does the employee have the legal right to work outside the country? How does he need to apply for the relevant legal rights, and should the company provide any visa support to obtain his right to work there? Does it pose a legal risk to the company if an employee works remotely from abroad on an unlawful visa (e.g. tourist visa)?
- From a corporate policy perspective: Does the company provide support if an employee triggers a compliance issue offshore and needs to take action and incur additional expenses?
- From the perspective of payroll management and foreign exchange management: Can the company send salary directly to the employee's offshore bank account considering his need to use funds abroad? What applications does company need to submit to the Foreign Exchange Bureau, bank or tax office? And if the company supports the employee's visa to work abroad, does the company need to pay the salary locally?
- From an individual tax perspective: What are the implications of this remote working arrangement for the employee's personal income tax in the home country and abroad? Does the company have any corresponding withholding obligations? If the employee has tax filing obligations in both the home country and abroad, does the double taxation avoidance agreement between the two jurisdictions apply?
Supporting employees to work remotely is a new trend for companies to adapt to the future. How to provide employees with the flexibility to work across borders while managing risks is an issue that more and more companies need to face. Compared to the traditional office-centered work model of expatriates based in the country of assignment, or those who frequently travel across borders, cross-border remote work will bring greater challenges and more difficulties to corporate management.
Cross-border remote working requires companies to be more up to date with the tax laws and regulations of the relevant countries, adjust the company's current welfare policies, reasonably arrange and manage the employment contracts, salaries, social security, commercial insurance and job duties of telecommuting employees, and communicate with employees on the possible tax implications in a timely manner, etc.
As a result, companies may need to devote more staff and time to remote working in order to ensure the smooth operation of remote working.
Influence for the economic issues-Take instances in US
As of today, the remote working model, which quietly emerged during the pandemic, has gradually revealed its drawbacks, and even developed into a complex economic issue.
In high-end office buildings in Manhattan, it is surprising how few people are left in the office on Mondays and Fridays. On February 12th, local time, Bloomberg reported that a team of economists led by Nicholas Bloom at Stanford University sampled 2.7 million commuters in Manhattan. The analysis showed that due to the remote working model, they spent 30% fewer days in the office on average per year than before. The resulting consequence is that the total personal spending of Manhattan commuters has decreased by at least $12.4 billion per year, which has a negative impact on city tax revenue and construction. This means that each employee in Manhattan spends $4,661 less per year on dining, shopping, and entertainment near the office. In San Francisco, the daily expenditure decreased by $3,040, and in Chicago, it was $2,387.
Saving money is one of the reasons why many people support remote work. For most Americans, commuting is expensive in terms of time, and the daily round trip to the office takes nearly an hour. Especially last year, many people avoided commuting due to high oil prices and inflation. Nate Diaz, a 24-year-old worker in Manhattan's financial district, said that working from home every week saves him at least $100. On Fridays, he stays at home instead of spending $20 eating with colleagues in the district. In New York, there is a significant difference in consumer spending between weekdays. According to Mastercard Spending Pulse data in October 2022, on each Friday of that month, daily spending by Americans was about 23% higher than usual, while in the greater New York area, it was 20%, and in Manhattan, it was only 11%. This indicates that fewer people go out to consume in Manhattan on Fridays.
Even bankers, lawyers, and other executives have adjusted their commuting schedules and focused on Tuesday through Thursday, according to data from transportation service provider HQ Corporate Mobility. This difference is particularly evident in Manhattan's financial district, where most offices are empty on Mondays and Fridays, many restaurants have shortened their opening hours, and subway passengers have sharply decreased. Due to remote work, New York's transportation system is facing huge losses, with an expected revenue gap of more than $2 billion by 2026 . As pandemic assistance runs out, the New York subway will cut the operation of seven lines on Mondays and Fridays. Although New York Mayor Eric Adams has required government employees to work in-person on Fridays, he cannot push business leaders to do the same.
Ironically, the white-collar workers have benefited from remote work, as they have gained a flexible lifestyle and have not seen any reduction in their salaries. For some of them, the subway lines on Mondays and Fridays are optional. Meanwhile, the workingclass in New York will be hit harder, as they cannot afford a $10 taxi ride and are unable to work remotely. Michelle Meyer, the Chief Economist for North America at Mastercard Economics Institute, said that people's lifestyles and behaviors have changed, and it is challenging to return to the way things were.
In the long term, remote work will also affect the future development of New York City. In the fourth quarter of 2022, the attendance rate of employees in New York offices had recovered to around 43% of pre-pandemic levels. Researchers simulated that office vacancies in commercial real estate would decrease market value by 40%, resulting in an annual loss of $5 billion in commercial property taxes, which is equivalent to 5% of the city's annual budget. In addition, New York's future sales tax revenues may also decrease. “This is a huge loophole that needs to be filled with new taxes,” said Stijn Van Nieuwerburgh, a professor at Columbia University. Every public service incurs a cost, but people often overlook this fact. The New York City government has stated that if the tax revenues decrease, it will affect maintaining the subway, investing in schools, and ensuring city safety and cleanliness.
In an internal email sent to Tesla employees, Elon Musk, the world's richest person, berated workers who don't want to work. He demanded that all Tesla employees work on-site for at least 40 hours per week, which translates to at least 8 hours per day. The internal email, titled “Hiring Suspension,” was sent to executives on June 3rd. The email stated that Tesla would lay off 10% of its employees, causing the company's stock price to drop by more than 9% in a single day. Musk later explained that Tesla's total workforce would still increase over the next 12 months, but the number of salaried employees would be reduced by 10%, and more hourly workers would be hired instead.
To eliminate remote work, the richest man has his reasons. He stated on Twitter: “Having employees work from home will make them feel like they're not really working hard." In addition, “Tesla hasn't released any great new products in a long time, and this can't be achieved by making phone calls.” He gave two positive examples, one of which was himself: “The higher your position, the more visible you are. That's why I often live in the factory. This way, those on the production line can see me working alongside them. If I didn't do that, Tesla would have gone bankrupt long ago.”
Tesla is one of the few companies in the US that prohibits remote work, while companies like Google, Microsoft, and Amazon allow employees to work from home. Amazon has even turned part of its Seattle headquarters into a permanent homeless shelter. Remote work has also led to slow recovery of office occupancy rates. According to the National Association of Real Estate Investment Trusts (Nareit), as of the end of
2021, the occupancy rates for residential, retail, and industrial properties owned by listed REITs had recovered to over 95%, while the occupancy rate for office space was still below the pre-pandemic level in March 2020. According to the Tony Blair Institute, as of April 2022, commuting in Paris, Berlin, Chicago, and Los Angeles has recovered very slowly compared to pre-pandemic levels, while commuting in San Francisco is still down by half. Remote work has become a global cultural phenomenon, but its impact has already exceeded the cultural sphere.
Decolonize the reality, for self-interest?
Nearly one-third of respondents said they would switch jobs even if they had to take a pay cut if they couldn't work remotely, according to a nationwide remote work survey report released by an Irish university at the end of May. It is worth noting that the entire land area of Ireland is only equivalent to Ningxia, China. Even in such a small European country, remote work has become a necessity for workers. Researchers from the Whitaker Institute at NUI Galway and the Western Development Commission collected more than 8,400 questionnaires from employees about their remote work experience in late April and early May. Among the respondents, 47% of those who switched jobs after the pandemic said remote work was a key factor in their decision.
A recent global survey by EY also showed that 54% of employees may resign if they don't have a say in their work hours and location. Octavius Black, founder and CEO of MindGym, believes that one of the reasons for the global "Great Resignation" trend after the pandemic is remote work, as it weakens workplace connections and makes people forget why they love their job.
Throughout the Western world, remote work is becoming a new type of civil freedom. In France, some companies have received lawsuits from employees because requiring them to return to work on site was deemed to violate their rights. In the UK, rail department employees went on a major strike in the summer of 2021 after being asked to return to the office, leading to half a million people being unable to obtain their driving licenses on time and causing supply chain disruptions and economic stagnation. In the United States, which has been criticized by Musk, remote work has already changed the urban landscape. Data shows that in January 2020, less than 3% of people applying for US jobs on LinkedIn required remote work. Now, in small and medium sized cities such as Wilmington, North Carolina and Sarasota, Florida, the proportion has risen to over 50%.
On the contrary, according to LinkedIn data, the number of remote job applications from big cities such as Seattle, San Francisco, and New York ranks at the bottom. The working population in big cities is shrinking, and there is varying degrees of urban hollowing out in cities like New York, San Francisco, and Seattle, just like the auto city of Detroit that never recovered after the global financial crisis in 2008. People from small cities can apply for jobs nationwide and usually get higher salaries while enjoying a low-cost living. However, the complexity of the problem lies in the fact that remote work has not only boosted wages and purchasing power but also indirectly led to the most severe inflation in the past forty years and continuously rising housing prices. Especially in the United States, the situation is close to getting out of control.
Uncontrolled inflation, insane housing prices
In May, 2022, Ian Goodfellow, the head of machine learning at Apple, jumped ship to Google, reportedly expressing in a farewell email that he did not like Apple's return-to work plan. In an environment of pandemic fluctuations and labor shortages, many American employees are considering or already making job changes. Remote work and salary increases have become important tools for companies to attract talent. In late April 2022, job search website ZipRecruiter conducted a survey of 2,064 successfully employed US workers who had recently changed jobs. The results showed that approximately 64% of those who had changed jobs in the past six months had received higher salaries. Among these people, nearly half received a salary increase of 11% or more, and nearly 9% earned at least 50% more than before.
To retain employees, most American companies choose to raise salaries. From April 4th to 12th, the National Association for Business Economics (NABE) surveyed 84 members and found that in the first quarter, the proportion of American companies raising salaries soared to 70%, the highest level since the first survey was conducted in 1984. About 71% of respondents expect labor costs to continue to rise in the next three months. Among economists surveyed by The Wall Street Journal, nearly 27% said that wage increases were the biggest inflation risk this year, higher than those who viewed the Russian-Ukrainian conflict and supply chain interruptions as the main inflation threats. But workers shouldn't be too happy too soon, as rising wages are being offset by rising prices. According to the NABE survey, most companies have already raised prices and successfully shifted higher labor costs onto consumers. About 45% of surveyed companies said they had passed on some of the cost increases to consumers, and 15% said they had passed on all or most of the increases to consumers.
In April, according to data from the National Association of Realtors (NAR), the median price of a single-family home in the United States reached a record high of $391,200, up 14.8% from last year12. Since the pandemic, low interest rates and low inventory have been the backdrop for rising house prices, but not the whole story. A paper by Johannes Wieland, an economics professor at the University of California, San Diego, concluded that remote work has driven up housing prices. At the same time, the regions with high housing demand also overlap heavily with popular remote work areas.
Vieland's explanation is that remote work has led to a doubling of housing demand. According to his mathematical regression model, from December 2019 to November 2021, US house prices have risen by 24%, and remote work factors have contributed at least half of this increase. If remote work continues, the cost of housing will further increase, which will affect inflation and current monetary policy.
Another set of evidence is that the increase in the housing price index of 20 cities in the United States after the epidemic has consistently lagged behind the median housing price in the United States as a whole. The former mainly describes the prices of apartments in the core areas of the city, while the latter can better represent the prices of single-family homes in non-urban areas. Remote work has intensified the demand for large-scale relocation for improvement - people need more spacious houses, more rooms, larger lawns and even swimming pools.
The rise in house prices has led to a serious deterioration in housing affordability, and now is the most difficult time to buy a house in US history. Mortgage technology and data provider Black Knight's data provided in May shows that in the 100 largest real estate markets in the United States, 95% of housing affordability is lower than the long term level, while at the beginning of the epidemic, this level was only 6%; the housing affordability in 37 sub-sectors is lower than ever before.
Reflection: Who is benefit from remote working, Win-win or fake?
Researches in Japan has proposed that working from home has led to a decrease in work efficiency, which is a very rare occurrence in Japan. From a non-medical perspective, remote work may be the biggest aftereffect of the COVID-19 pandemic. However, not everyone has the “right” to suffer from this aftereffect. According to data recently released by the UK Office for National Statistics, 38% of employees earning £40,000 or more per year have a mix of office and remote work, while another 23% work completely from home. For those earning less than £15,000, only 14% have a mix of office and remote work.
Airbnb, the global homestay platform, is becoming the biggest beneficiary of the remote working trend. High-paying employees of Wall Street investment banks and Silicon Valley tech giants are no longer bound by their office desks, resulting in a huge demand for long-term stays. According to its Q1 2022 financial report, Airbnb's fastestgrowing booking category is still 28-day or longer stays, accounting for 21% of total bookings in the quarter. Meanwhile, bookings in non-urban areas are also showing the strongest growth since 2019. Airbnb founder Brian Chesky is thrilled, publicly stating that the office is a product of the pre-digital age, and the past two years of remote work have been the most productive period in Airbnb's history. He also announced that employees only need to meet offline for one week per quarter, and that permanent remote work is allowed without a pay cut. Employees can also live and work in more than 170 countries and work for up to 90 days per year in each location.
The common denominator among those who advocate for remote work is that they are not from the lower echelons of society and do not feel the impact of rising prices of cooking oil, bread, milk powder, or even toilet paper, which can be traumatic for lowincome families. It brings temporary joy to some, but it is wreaking havoc on humanity as a high accomplice of inflation. To describe it, we can borrow a classic line from the movie “The Shawshank Redemption”: “At first, you hate it, then you get used to it, and later, you can't live without it.”
The Institute for Youth in Policy wishes to acknowledge Gwen Singer, Brady Zeng, Paul Kramer, Carlos Bindert and other contributors for developing and maintaining the Effective Discourse Department and associated Fellowship programming.
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