Yves here. This is the sort of study I like. It focuses on an interesting matter and teases out findings that have broader implications. Here, the question is why do work-from-home staffers actually make more than those in their roles generally, when most would accept lower pay for the perceived privilege of work-from-home? That conundrum already makes one wonder why supposedly very bottom line oriented bosses are often insisting that everyone turn up at the office, when they could simply impose wage reductions on those who want to continue work-from-home and let everyone sort themselves out.
That brief discussion and the study findings below highlight how wage and worker-boss relations don’t hew as tidily to organizational stereotypes as one would think. IMHO a if not the big reason managers are so keen to get everyone back in the office is that being able to wander around and make their presence known and call sudden meetings is an exercise of power that they lose if many work-from-home. Another is that the boss class would have to change their habits a bit to make work-from-home as productive as it can be, like having in-person meetings only occasionally but on a set schedule. Can’t have the top dogs changing their lives to accommodate the subordinates!
Here we see more proof of the arbitrariness of wage relations, but here of at least a more logical sort, that bigger producers and/or better negotiators can cut better deals even in a supposedly structured work setting.
By Huiyu Li, Research Advisor Federal Reserve Bank of San Francisco, Julien Sauvagnat, Professor of Finance Bocconi University, and Tom Schmitz, Reader Queen Mary University of London. Originally published at VoxEU
Studies have found that workers typically value the option to work from home and are willing to accept sizable wage cuts in exchange for it, yet a growing literature finds that workers who work from home earn on average higher wages than workers who do not. This column combines French survey data, registry records, and social security records to show that the main driver of this work-from-home wage premium is selection. Workers who are more productive, or have better negotiation skills, appear able to get both higher hourly wages and the right to work from home more often.
Since the COVID-19 pandemic, work from home (WFH) has become a fixture of the labour market in many countries. For instance, Aksoy et al. (2024) report that across 34 countries, a third of full-time workers engaged in hybrid or fully remote work arrangements in 2023. This widespread adoption has sparked considerable interest from policymakers seeking to understand the implications of WFH for productivity, inequality, employment dynamics, and city structure (e.g. Eurofound 2024).
The implications of work from home on wages are particularly interesting. A growing literature finds that workers who work from home earn on average higher wages than workers who do not. An important part of this premium reflects occupational and educational differences, since higher-paying occupations and better-educated workers are more likely to work from home. However, recent evidence shows that an economically meaningful wage premium persists even among workers with the same occupation, education, and other observable characteristics (Rossi-Hansberg et al. 2023, Pabilonia and Vernon 2025).
At first glance, this finding is puzzling. A large body of research shows that workers typically value WFH as an amenity and are willing to accept sizable wage cuts in exchange for it (Mas and Pallais 2017). One potential explanation is that working from home raises worker productivity, prompting firms to pay higher wages (Pabilonia and Vernon 2025). Yet this raises a further question: if productivity gains are substantial, why do not all workers in teleworkable jobs work from home?
An alternative explanation for the observed work-from-home wage premium is selection: workers with higher unobserved productivity or greater bargaining power may be more likely both to secure higher wages and more flexible WFH arrangements. In recent work (Li et al. 2026), we provide evidence that selection is indeed the main driver of the work-from-home wage premium in France.
Data and Methodology
Our analysis combines three administrative data sources. First, the French Labour Force Survey provides information on workers’ WFH status, self-reported earnings, hours worked, and key individual characteristics such as education, occupation, gender, and age. From this, we calculate hourly wages as earnings divided by hours worked. Second, we link these data to the universe of firm registry records, which allow us to observe employer characteristics including sales, workforce size, and firm age. This linkage is important, as a large literature documents substantial and persistent wage differences across firms (Card et al. 2013, Song et al. 2018). Finally, we match workers to social security records, which provide detailed information on their earnings and employer histories. Together, these data allow us to study wage differences associated with work from home while accounting for both worker and firm heterogeneity.
Work From Home and Wages
We begin by documenting the relationship between WFH and worker wages in the post-pandemic period, from mid-2022 – after all COVID-related restrictions had been lifted – through the end of 2024. In this sample, we first document a sizeable raw wage gap between workers who work from home and those who do not. As shown in the first bar in Figure 1, on average, the hourly wages of WFH workers are 35% higher than those of on-site workers.
Much of this gap, however, reflects occupation and education differences. In France (as in other developed economies), remote work is far more common in higher-paid occupations and among more educated workers. Once we look within occupation, education, and location, the wage premium associated with WFH shrinks substantially, to about 12% (second bar in Figure 1). Controlling further for other observable worker characteristics – such as age, gender, and job tenure – reduces the wage premium to 6.6% (third bar in Figure 1). While lower, this is still a significant number. This result survives numerous robustness checks including using alternative measures of hourly wages and WFH status.
Figure 1 WFH hourly wage premium (%)
What could be driving this substantial difference in wages? One possible interpretation is that the difference is driven by employers. Indeed, it might well be that higher-paying firms are also more likely to offer more flexible work arrangements. However, we find that this explanation is not borne out by the data: the premium remains even after controlling for firm characteristics, or when comparing workers within the same firm. The fourth bar in Figure 1 shows that adding controls for firm age, size, and revenue productivity only brings the premium down from 6.6% to 6.4%. This suggests that firm-level pay policies alone cannot account for the work-from-home wage premium.
Next, we explore whether the premium could be driven by selection. To do so, we leverage the social security data to extract worker’s wages before COVID-19. This reveals a striking pattern. Workers who work from home after the pandemic were already earning higher wages before the COVID-19 pandemic. Even after controlling for a rich set of worker and firm characteristics, pre-pandemic hourly wages – measured as the average wage in 2018–19 – can account for virtually the entire remaining wage premium. The last bar of Figure 1 shows that adding the pre-COVID wage control brings the premium down to 1.1% and is not statistically significant.
In other words, the workers who are working from home post-pandemic were already paid higher wages before WFH became widespread. We also find that WFH is not associated with higher post-pandemic wage growth, as one might have expected if this type of work led to significant productivity gains. Overall, this evidence points to selection as a central driver of the WFH wage premium: workers who are more productive, or have better negotiation skills, are able to get both higher hourly wages and the right to work from home more often.
Our findings have several important implications. First, they suggest that conventional wage measures may understate inequality in a world with widespread WFH, as higher-paid workers are also more likely to receive the amenity of being able to work from home. Second, they place a bound on potential productivity gains from working from home (or, alternatively, suggest that employers have not shared these productivity gains with their workers). Third, by highlighting the role of selection, they imply that changes in WFH policies – such as return-to-office mandates – can affect the allocation of talent across firms and, potentially, aggregate productivity.
See original post for references
Anecdata, but….
I let my senior data analyst work at home 4 days a week, because I trust him to work productively (he’s been with me for over a decade), even though he is unsupervised – I know how long things should take to get done, and they do. He is also my highest-paid employee (for retention). I would not have similar confidence for newer hires who I also pay much less.
Congratulations
Let’s note that those who work from home have, in effect, higher pay even if their take home pay is not affected. That’s because 1. they have no ‘transit and/or parking financial costs’ getting to and from work; 2. they also have ‘transit time’ savings to and from work which is important if one values one’s time and how it is allocated*; and 3. the presence of (2) means that they have fewer ‘fast’ food costs (breakfast, lunch, and other ‘break’ costs). This set is probably why many would consider a pay reduction if they had to in order to work from home.
*Note: Everyone has the same number of hours daily. Freeing up transit time and associated costs allows for more time and monies to accomplish other objectives during one’s day.
Bravo! This times a million. It is truly astonishing how much more time you have available and how much your costs go down when you work from home. Though, because you are home more, some of that cost reduction is offset by the increased cost of using more utilities (water, electricity, heating / cooling). Overall I would say a NET gain.
Definitely a NET gain.
funny, i’ve always been aghast at the perverse correlation between pay and precisely these amenities. that is, as salaries go up (at least in NYC) the more likely the following living costs are to be covered (in order of salary bump) despite the easier ability to afford them oneself:
+ commute costs
+ daily meals (breakfast and lunch, likely dinners too)
+ private car service
+ first or business class travel
+ housing
if you’re on the lower end of the wage scale, need not apply!
Yup, this is something I was pushing for during flexible work arrangement discussion at my last workplace during the pandemic. Many of the staff were commuting 30+ minutes a day, and by working from home even a couple days you are seeing quite an effective raise when considering less fuel costs, maintenance costs, potentially food costs if you aren’t buying food. Field staff who didn’t have that option missed out big on this factor.
I’ve WFH most of my life. When possible, it should be required. Are we not contending with a climate crisis? How many vehicles can we get off the road? How much will this cut Dept of Trans costs. Clothing comes into play, as well. Change of shirt. Cheap pair of shorts. Although off topic, quality of life improves. More family time. The elites don’t want this. They fear the ancillary impact. Commercial RE, downtown restaurants, other business, etc. .
Thanks for this, Yves!
I worked in engineering which should be ripe for WFH. We don’t need to be in an office to do our work. I specialized in CAD, which makes it even easier. Sure made it a bunch easier for the company to outsource our jobs overseas. We have this thing called the internet, and some guy sitting half way around the world is doing the same thing as I am. And cheaper no less, imagine that.
In the end, in our case at least, I think many times it’s nothing more than arrogant management enjoying grinding their thumbs on our head. They love being the all powerful boss. Remember Office Space the movie. The TPS reports type thing. They love that stuff.
One job I had, I took sales orders from one group and created the necessary drawings for the shop floor to manufacturer. I wasn’t allowed to talk to the customer if I had any questions. I would have tell the boss, and he would talk to the customer. I wasn’t allowed to change anything without permission, or I would get in trouble. Once, I changed the name of a part at the written (via e-mail they sent me after I sent them a drawing for approval) request of the customer (200k dollar job, damn straight I’m going to change the name for them) and I got in trouble. Of course the name was changed, but I was still in trouble. I didn’t ask.
I could have done my work in the middle of the night, or half way around the world, given the circumstances, but no. No siree. I had to be at work at 8 am. Lunch was from 12 to 1, and you got out at 5. No exceptions, none, unless you begged, gave up two kids, a car, and half your house. And you will be forever grateful for such kindness. Note: the bosses didn’t play by the same rules, imagine that.
Management was on a huge power trip and that’s how they treated everyone. It was like boot camp and an asshole boss. If you could do the work, and do it from home, their widdle feelings would be hurt because they couldn’t play micro-manager and get their mirco-nuts off humiliating us each and every day. Efficiency didn’t matter, power and control did. End of story.
Same place had a thing where if you sent something to the printer, you would have to enter in your own personal 4 digit code to get the printer to print your stuff. This caused lines of people at the printer, and a total waste of time. Why? Why would we do this? Because someone lost an order, so now we all had to suffer.
If they are that incompetent, fire them. Or, buy them a small printer for their desk, if you think these were documents for certain eyes only. Nope, more rules for the serfs, more control and power for the power hungry managers.
I lasted 6 months to the day and told them to stick it. But they make money in spite of themselves.
Office Space, from 1999, and a timeless set of memes.
My god, the printing security at the bank has gotten completely out of control. It was completely fine…then they suddenly started running us through a huge obstacle course to print…4-digit codes, badge swipes, half the printers not working…
How many of those surveyed are PMC types, with an emphasis on the “M”?
The methodology depends on self reported data, and they calculate hourly wages as total earnings divided by hours worked. Managers are often paid a salary and not an hourly wage. If a person reports their total salary, but then lists their actual hours worked honestly, it seems quite possible that this will skew the hourly wage upward because perhaps this manager is being paid as if they might need to put in a 60 hour week, but are only actually working 30 hours. If your management job mostly consists of going to meetings to decide what actual work other people should be doing, you don’t need to go into the office at all now that zoom has been widely adopted, while the generally lower paid people who do the actual work often need to come into the workplace to accomplish what needs to be done.
Some office drones I am familiar with get paid quite handsomely by their employers when “working from home” to mow their own lawns, do their own laundry, clean up their own kitchen, etc., in between answering work emails.
In short, this study may simply be reaffirming that management gets paid more to do less in general.
There is the other side to this.
As a worker bee, and considered management, even though I didn’t manage anyone, I was on salary. I constantly had 3 or 4 projects, each with a deadline. To make those deadlines, I had to do what I had to do. That might be 50 hours in front of my screens during the week, and take the laptop home on the weekend to make sure I made my dates.
It was not uncommon for us to work 60+ hours between at work and home. Of course, the people we reported to didn’t do this. However many hours it took us to make our deadlines – they didn’t care – just don’t be late.
I’m retired. I miss corporate America about as much as a root canal.
Oh sure – my comment was probably too much of a generalization. I have definitely also met people on salary who get completely overworked because of it. But I also see a lot of people who just hold meetings all day. Probably depends on what level of management you are – the stratifications have become legion.
Yes, absolutely. Your comment just reminded me of those times.
I was on a cost savings project and we gathered a bunch of data and found out some ridiculous amount of corporate time was meetings. Imagine that.
Kinda goes back to Office Space the movie and the two guys who are going to fix things. What do you do here? We should already know that…
That’s one thing I do like about my company culture. There isn’t a ridiculous amount of meetings.
I learned to cherish that recently when comparing my day to my father’s. He works for a pentagon contractor. Meetings all day, listening to colonels and generals who like the sound of their own voices.
When I worked from home I happily took less pay. No commute. If my kid was sick, not a big deal, workout/walk the dogs at lunch, and an hour more free time not driving to work.
A company I worked for that was very San Francisco tech in office went full remote during the pandemic. That lasted so long that people moved out of the bay area. The company announced that remote workers could stay in non SF locations, but that salaries would reflect cost of living changes. Specifically they said we aren’t paying Bay Area wages for Cleveland coat of living. In a way that was forcing employees take a pay cut to not only remain remote, but also relocate outside of commuting distance of HQ or satellite offices.
I remember this, from these pages back in real time. Some period humor,
Stay Home! Back to Work! A Dog
and Cat Debate Reopening
America, WSJ, archived at covid-19archive.
So, they are not paying the same wage or salary rates for the same skills, depending on where you work from home from? I would argue that the base pay should not change just because I changed where I live. That appears to be a violation of contract … if you’re a contract employee (and who isn’t?).
In short, it this was not specified in your employment contract, it violates that contract.
I’ve done a lot of remote and remote-hybrid over the years. When you do a startup one of the major expenses is office space. Have a remote workers can greatly reduce office location costs. Not mention employee cost if they are in another state or out of the country. One major advantage working remote, is working across multiple time zones. One project I was working across twelve time zones.
I haven’t had any problems managing people being remote. The only problem being remote deals when you need physical lab time for hardware test and analysis. On hybrid work, being to do both is a real advantage. When I was developing Windows NT at Microsoft my average billing time was 90 hours a week. I’d go in to the office at 5:30 AM work till about 3 or 7 PM. I’d have latest builds on CD and do another 2-4 hours. On weekends it was all remote. Anyway, I it allowed me to do some normal stuff like my son’s swim meets. I did this for a year.
Good study. I had a hypothesis based on my own experience, and the study results seemed to bear this out. Put simply, for the best employees working in in-demand fields, WFH is increasingly a non-negotiable requirement.
The finding that there’s no productivity gain doesn’t surprise me. While there are things that suit WFH (notably anything requiring focus time) some things like workshops definitely work better in person. The issue is that working physically from the office 100% of the time has always come with a lot of externalities and inconveniences that are borne by the employees – commuting, child care/school pickups, etc. Employees put up with it because they didn’t have a choice, and would have needed to act in overwhelming numbers to effect any kind of change. COVID made that happen overnight, norms changed, and now workers – at least the ones with leverage – have no intention of losing that gain.
I think this is a good thing on balance, but it does act as a further driver of inequality. Many lower wage jobs involve physical work or presence, and can’t be done remotely by definition. COVID led to a meaningful improvement in working conditions for the middle class, thanks to the normalisation of work from home arrangements, but it largely bypassed the working class.
I don’t think it’s a DRIVER of inequality. I think it’s a REFLECTION of inequality.
It’s good to put figures to this phenomenon, but I feel like the better jobs – more amenities thing was staring us in the face vis a vis WFH. The mayor of my city – which will go unmentioned but it may be obvious if you’re from here – ordered all city employees who’d previously worked remotely to return to the office full time about 2 years ago. She professed various motivations for this, including the economic health of downtown businesses, but I distinctly remember equity amongst city workers being cited as well – in the sense that it was palpably unfair for those workers who physically must do their jobs in person that white collar desk creatures be permitted to stay home.
Of course this is true in the same way that it is true that many jobs which require you physically be present to do them are less pleasant than jobs you can do from your sofa.
Anyway, I have it on good authority that the mayor’s requirement experiences less than complete compliance from the city’s PMC types.
Finally have time for comment … :)
Firstly, there is one thing I wish this survey had included or broken out, and that is: for companies who offer both a RTO (return to office) and a WFH option, what does the pay differential look like? I suspect that remote workers get paid less, but per some comments made above, that may be to offset transit/commute expenses.
Secondly, WFH folks may have more time to handle personal issues, but their commute time tacitly becomes work time. Have heard many speak about having to show up to Zoom meetings before 8AM more as WFH than say, when they had that time unavailable because of commuting. There’s basically a “you’re not commuting, so you’re available” tax of sorts.
And finally, remember in tech, a lot of the big companies lure workers to the office with free food and other perks. Remote workers don’t get these benefits, and so again, what gains made by not having to commute can be offset by having to pay to feed oneself in the absence of free office food (via levels.fyi) … :)
Given the key difference behind the wage premium is occupation, industry and commuting area it would have been interesting to know which occupations, which industries and which commuting areas.
The legal profession is probably in there somewhere, and many courts are virtual now, many lawyers attend court from home. If we control for the legal profession what happens to the premium, I wonder?
And what happens if we also control for finance/banking?
And both of these as industries tend to concentrate in megacities.