The benefits of working from home — including skipping a long commute and having a better work-life balance — have been well documented, but employees are literally paying for the privilege, according to a study from the National Bureau of Economic Research.
"People will need to dedicate space to working from home," said Christopher Stanton, a Marvin Bower Associate Professor at Harvard Business School who co-authored the study. "And, for many folks who are in smaller apartments and the like, before the pandemic, that wasn't so realistic for long-term solutions, and so that means that you end up needing folks to upgrade to larger houses."
The researchers analyzed data from the U.S. Census Bureau to reach their conclusions. They found that between 2013 and 2017, households with at least one teleworker spent on average more of their income on rent or a mortgage to pay for the extra room they need to work from home.
"A household that was spending about $1,000 a month on rent would be spending around $1,070 on rent. So, it's about a 7% increase, on average, across the income distribution," Stanton said.
The researchers estimate that about 10% of people who worked in an office before the pandemic could permanently transition to working from home full time. A recent Upwork survey suggests that 36 million Americans will be working remotely by 2025 — an 87% increase over pre-pandemic levels, and these workers could potentially take on the additional costs.
The added expense is easier for high-income households to bear but puts an increased burden on workers who earn less money.
"And so, for those households, you might have gotten an increase of 20-ish percent in housing expenses for households with remote workers compared to households with no remote workers," Stanton said. "So that's a pretty big chunk of expenditure for those households who were in the bottom half of the income distribution."
Employees, however, might get a little help from their employers to cover some of those costs.
"I would guess that firms are going to pick up part of this tab and will probably rebate some of their office space savings to workers to handle the increased housing expenses," Stanton said.
Firms could be motivated by the recognition that having an adequate home office setup promotes higher productivity.
"I think having nonergonomic setups in small places will ultimately end up leading to fatigue and wear and tear and less productive employees in the long run," Stanton said. "And so, I suspect that employers are going to want to make sure they have people with reasonably good work setups."