José Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent Meyer, and Emil Mihaylov
Working Paper 2022-7
The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of US employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catchup effect that Blanchard (2022) highlights in his analysis of near-term inflation pressures. The amenity-values gains associated with the recent rise of remote work also lower labor's share of national income by 1.1 percentage points. In addition, the "unexpected compression" of wages since early 2020 (Autor and Dube, 2022) is partly explained by the same amenity-value effect, which operates differentially across the earnings distribution.
JEL classification: J3, E31, D22, E24, E25
Key words: remote work, amenity value, wage growth, inflation dynamics, recession risk, business expectations, labor's share of national income, wage compression
The authors thank Kevin Foster for outstanding assistance in designing and fielding the survey instrument. They gratefully acknowledge the Federal Reserve Bank of Atlanta, the Alfred P. Sloan Foundation, and the University of Chicago Booth School of Business for financial support. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.
Please address questions regarding content to José Maria Barrero, Instituto Tecnológico Autónomo de México Business School; Nicholas Bloom, Stanford University; Steven J. Davis, University of Chicago Booth School of Business and the Hoover Institution; Brent Meyer and Emil Mihaylov, Federal Reserve Bank of Atlanta.
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