Expanded work-from-home boosts income for select few, worsening inequality

December 10, 2020
Working from home appears to most benefit already high-earning workers, according to a new study. (Marta Filipczyk, Unsplash)

Working from home appears to most benefit already high-earning workers, according to a new study. (Marta Filipczyk, Unsplash)

Giving employees greater ability to work from home increases average income, but the benefit goes mostly to already high-earning workers, new research shows, indicating how policies implemented in response to the coronavirus pandemic could widen economic inequality.

Published in the Journal of Population Economics, the paper authored by Italian economists Luca Bonacini, Giovanni Gallo and Sergio Scicchitano found that increasing overall ability to work from home primarily helps workers who are male, older, highly educated and already highly paid. 

Before the pandemic, employees who typically worked from home were often female, older, highly educated and living in metropolitan cities.

Using data from Italy’s 2018 Survey on Labour Participation and Unemployment and the 2013 Italian Survey of Professions, the researchers tested what would happen if work-from-home became the modus operandi rather than a forced innovation. By swapping a 10 percentage point share of employees from a “low feasibility” level of working from home to a “high feasibility” level, average income increased by 1% while the Gini index, a measure of income inequality, increased by 0.4.

A Gini index of 100 is the maximum level of income inequality; Italy had a Gini index of 35.9 in 2017, according to the World Bank.

Italy was used as a case study for the paper, published Sept. 12, because it was the first Western country to adopt an economic lockdown to prevent the spread of the coronavirus. The country also showed a particularly dramatic shift toward work-from-home as a result of the pandemic. 

Prior to the coronavirus, Italy’s share of remote workers was the lowest of any European country at 1%. As of June, roughly 90% of the country’s public sector workers were working from home, according to the Italian Minister of Administration.

Although the researchers relied on data from Italy, they said their findings “may be useful to policymakers in other developed countries as well” as governments rethink production processes to incorporate more robust work-from-home policies.

In the U.S., for example, the pandemic quadrupled the number of people working from home to nearly 50% of the total workforce, and many countries are developing pandemic exit plans with continued high levels of work-from-home at the center.

Many companies, having invested time, energy and money into training and equipment for remote employees, are also likely to expand work-from-home policies even after the threat of COVID-19 has receded. Workers, managers and entrepreneurs have also spent months developing remote-working skills that they are unlikely to give up on, Scicchitano said.

If working from home becomes the new normal, the researchers said, “temporary income support measures,” such as direct financial payments to citizens, “will not be sufficient anymore” to prevent remote work from exacerbating income inequality.

Instead, officials need to focus on policies that could better assist employees who work from home, Scicchitano said, such as increased child care facilities and financial support for families, increased the school enrollment rates and improved training courses for employees. Further worsening inequality from large-scale shifts, not every job can be done from home, creating classes of workers lacking in additional benefits that come from doing jobs remotely. 

Jobs in finance and insurance, communication and information and professional services — typically some of the higher-paying professions — can more easily be done remotely than jobs in hotels, restaurants and agriculture, which typically pay less, according to Scicchitano.

“And obviously in some sectors, there is a higher share of workers who are able to work from home,” he said in an interview with The Academic Times. “Even in this case, there are huge inequalities in the labor market.”

The researchers are currently working on a follow-up paper, set to be finished in the next month, investigating the impact that working from home has specifically had on the gender pay gap during and after the pandemic, Scicchitano said.

“During the pandemic, it is quite obvious because we have children at home and obviously more or less all the care of children is on women,” he said.

Some previous studies have found the productivity and wages of women have fallen during the pandemic, Scicchitano said, but it’s unclear whether the gender pay gap would increase if working from home became the new normal.

The study “Working from home and income inequality: risks of a ‘new normal’ with COVID-19,” published Sept. 12 in the Journal of Population Economics, was authored by Luca Bonacini, University of Modena and Reggio Emilia; Giovanni Gallo, University of Modena and Reggio Emilia and the National Institute for Public Policies Analysis; and Sergio Scicchitano, National Institute for Public Policies Analysis and the Global Labour Organisation. 

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