Personal Finance

A pay freeze vs. returning to the office: Workers equally hate both options

Key Points
  • Forty-five percent of people who work from home would be likely to look for a new job if required to return to work in person, according to a recent Federal Reserve survey. A similar share said they'd do so if their employer instituted a pay freeze.
  • Less time commuting, better work-life balance and more productivity are the top reasons employees prefer remote work.
  • Workers equate remote work to an 8% pay raise, according to one study.
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Employees who work remotely don't look favorably on the notion of returning to the office.

To that point, 45% of people who work from home said they'd be at least somewhat likely to look for a new job if required to return to work in person, according to a recent Federal Reserve survey. Meanwhile, a similar share (42%) said they'd look for another job if their employer instituted a pay freeze, according to the survey.

This parity demonstrates both workers' antipathy to reverting to pre-pandemic work policies and the benefits they see in flexible employment arrangements.

Many companies were forced to shift to remote work models in early 2020 to try to limit the spread of Covid-19. Employees continued to be productive, though, changing how employees and businesses view work, according to Julia Pollak, chief economist at ZipRecruiter.

"That's opened the floodgates for people to be able to reevaluate the things they do," Pollak said. "Norms have shifted."

In 2021, 22% of employees worked entirely from home, according to the Federal Reserve survey, published last week, which polled 11,000 adults in late October and early November. Another 17% worked from home part time in 2021.

The share of full-time remote workers is up from 7% pre-pandemic (in 2019), though down from 29% in 2020.

Hybrid work is here to stay.
Bhushan Sethi
joint global leader of PwC's People & Organization practice

Less time commuting, better work-life balance and more productivity working remotely were the top reasons employees prefer to work from home, according to the Federal Reserve.

"That time savings alone is enormous," according to Pollak, who said people use that extra time to socialize, sleep and exercise more, for example. "It gives people more of what they want."

The typical worker equates the value of working from home to a pay raise of about 8%, according to a 2021 paper published by researchers at Stanford University, the University of Chicago and Instituto Tecnologico Autonomo de Mexico.

The relative value skews higher for employees younger than 50 years old, those with more education and higher incomes, and households with kids, according to the study.

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A recent PwC survey found 41% of workers would prefer to be working remotely full time a year from now; another 49% want some sort of hybrid arrangement, with some time at home and some in the office.

The finding coincides with a hot labor market for job seekers. Job openings in March were at record highs, as was the number of people voluntarily quitting their jobs. Wage growth is at its highest level in decades as businesses compete for workers amid high demand for their labor.

"In today's talent market, employees want to have choice: choice of location and schedules," said Bhushan Sethi, joint global leader of PwC's people and organization practice. "The top talent ... can walk anywhere and vote with their feet, virtually or physically.

"Hybrid work is here to stay," he added.

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However, there seems to be a disconnect between worker preferences and employer action: Just 10% of online job ads across the U.S. offer remote work, according to Pollak. (Of course, there are jobs, like many in the service sector, that can't be done from home.)

But employers have also cited benefits to hybrid work arrangements, including a reduction in employee absenteeism, more predictable staffing, cost savings on real estate and overhead, and recruitment, Pollak said.

For example, employers that advertise jobs online as "remote" get 2.6 times as many clicks on their ads and receive a much larger share of high-quality applications (as measured by employer feedback), she added.