Main Street Macro: The New Geography of Remote Work

At the ADP Research Institute, I collaborate with an incredible team that stretches from Hawaii to Poland, with several stops along the way.

Teams like ours have become more prevalent since the pandemic. While well-deserved attention has been to hybrid work arrangements and their associated compromises and challenges, the fact remains that hybrid work requires employees to live within commuting distance from a work location.

This limits the geographical impact of hybrid work. Employees might move further away from the office, but rarely will they live across the country from a job that requires them to show up in person two or three days a week.

Remote work, on the other hand, has a singular economic impact because geographic proximity to a location is not required. That opens up options for companies to source talent nationally or even globally.

It also gives individuals new freedom to work for companies far removed from where they live or embrace a geographically flexible lifestyle that allows them to live in choice locations that have no overlap with their employers.

In this respect, remote work likely will have ramifications for the economy and employers.

In the first of three articles on this subject, ADPRI research fellow Dr. Issi Roman delivers three important findings.

Cross-metro work skyrocketed after the pandemic.

When a worker lives in a different metro area than their manager, we refer to them as a cross-metro worker and to the work they do as cross-metro work.

The share of cross-metro workers jumped from 22.9 percent in February 2020 to 31.2 percent in June 2023.

The wage premium is falling for remote workers.

Until the pandemic, the wages of cross-metro workers were approximately 1.1 percent higher on average than those of their site-based teammates.

Why? Before the pandemic, cross-metro workers tended to skew older. Since then, their ranks have had an influx of younger workers. As a group, remote worker composition and pay are more in line with their site-based colleagues.

The number of young remote workers is growing fast.

About 48 percent of cross-metro workers were younger than 45 before the pandemic. That group now makes up 53.8 percent of remote workers.

Moreover, the 25-to-35 age group has seen the greatest increase in its share of cross-metro work. 

My Take

In the post-pandemic economy, labor shortages and skill gaps have become more common. The aging of the U.S. workforce is likely to prolong these deficiencies well into the future. Hence, employers increasingly might be forced to rely on remote workers to complement their local teams.

This new development brings opportunity, but also challenges. Employers will need to find new ways to nurture compliance, engagement, productivity and retention with a far-flung workforce, goals that are difficult to accomplish even with in-office employees.

We’re optimistic about the tradeoff. The ability to work anywhere could inspire a new era of labor market dynamism.