“Work from home” is onerous on the poor who struggle to pay for the extra space

Graphic detail

WHEN THE pandemic ends, restrictions on movement will ease, socialising will return and face masks will be retired. For many people, however, working arrangements will be permanently altered. Many firms will undoubtedly allow their employees to work from home more often; others will do away with offices altogether. Coinbase, a crypto-currency exchange planning an initial public offering in the coming weeks, seems especially keen on changing how it operates. The firm recently announced that it would become a “remote-first” company with no headquarters. Executives will “lead by example” by declining to show up to the firm’s San Francisco office, thus preventing remote workers from feeling left out.

This shift will be a welcome change for many employees, especially those who used to have long, arduous commutes. But those who go remote on a full-time basis will incur at least one cost: paying for extra workspace at home. Such expenses are not trivial. A recent working paper by Christopher Stanton and Pratyush Tiwari of Harvard University estimates that, between 2013 and 2017, American renters who worked from home spent roughly 7% more of their incomes on housing than similar workers who commuted to the office. Homeowners who worked remotely spent an extra 9% on their mortgage payments and property taxes.

In this way, remote work allows firms to push real-estate costs onto their employees. This burden is especially onerous for the poor, who spend a larger share of their income on housing than the rich. Mr Stanton and Mr Tiwari estimate that firms would have to pay remote workers in the bottom decile of household earnings an extra 10-15% to compensate them fully for their increased housing costs. Workers in the top decile of household income, meanwhile, require no additional compensation at all, since their homes are already big enough to feature home offices.

One limitation of Mr Stanton’s and Mr Tiwari’s research is that it compares the housing costs of people who work from home with those who travel to work within the same commuting zone. If more companies adopt Coinbase’s strategy, workers will feel free to leave big cities entirely, thus offsetting the costs of having home offices.