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The economics of remote work: What we can do about technology widening wage gaps

The economics of remote work: What we can do about technology widening wage gaps
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While technology and remote work are providing unparalleled opportunities in the United States thanks to a larger and more technological globalized workforce, it’s also widening the wage gap. According to the U.S. Bureau of Labor Statistics, the median annual wage for occupations in technology was $50,000 higher than the median annual wage for all occupations in 2019. Even more staggering, Owl Labs, a Boston-based startup conducted research in 2019 that found that 24 percent of remote workers make more than $100,000 compared to 7 percent of those who work in-person in an office setting.

These gaps are only expected to increase in a post-COVID world, as less than 30 percent of workers can do their jobs from home, and even fewer roles — held primarily by black and hispanic populations — can be done in a virtual setting at all.

We’re in the midst of an upskilling revolution: Millions of people need to learn new skills — or evolve in their careers — to adapt to the ways technology is impacting every industry. The challenge, however, is that we’ve underinvested in what’s needed to support a workforce of the future. Nearly all spending — public and private — on education and training occurs before a person turns 25 in the United States, according to a 2018 White House report. Last year the Wall Street Journal reported that the United States “ranked second-to-last among 29 developed nations in terms of taxpayer-funded training investment” according to the Organization for Economic Cooperation and Development.

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Independent initiatives — from either the public or private sector alone — will not curb this economic crisis. In isolation, they lack the consistency and follow-through to enact real change. The key lies in a public/private sector partnership, with an emphasis on education, apprenticeships, equal access to the internet, and empowering upskilling through unemployment benefits.

Innovative policy around these four key areas will not only shrink that economic wage gap, but will help the United States economy develop the infrastructure to grow faster, and bounce back from labor market downturns at a more consistent rate.

Fiscal policy to deliver free community college to build a higher qualified workforce

Professional success has historically mapped back to two circumstances: the zip code within which someone grows up and the level of education they receive.

In recent research, community college has actually shown to have a higher return on investment when compared to a four-year degree — both because of cost and community colleges’ ability to partner with local businesses to train and hire a workforce much faster. Free community college is estimated to cost roughly $6 billion each year, about half of what students are currently accumulating in student debt.

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While members of government have been skeptical of this type of fiscal support, a study done by Noah Berger and Peter Fisher of the Economic Policy Institute showed that there is a correlation between the amount of education a state’s workforce has, and the median wages of that state. Given the research we’ve seen around how financial outcomes are heavily dictated by the community one grows up in, free access to public education at the community college level will help level the playing field.

Incentivizing continuing education in unemployment benefits

Many countries have created the ability for those who have been laid off or let go to have key unemployment benefits extended if they can show that they’re using that time to improve their skills, ultimately benefiting the economy when they return to full-time employment. When a person is unemployed, it becomes easier for them to invest in the skills they need to get back into the workforce. When governments not only support the basic benefits needed to take care of their families and financial responsibilities, but also incentivize the unemployed through a stipend of sorts for continuing education, the likelihood of re-employment — and a higher wage as a result — increases.

Universal broadband as mobilization increases

Particularly pronounced during the COVID-19 pandemic has been a surge of professionals moving out of cities and into more rural settings. At the same time, it has become clear that these rural areas don’t have the digital infrastructure support — namely internet connectivity — to sustain the trends being driven from remote work. Earlier this year, the Federal Communications Commission voted to disperse more than $20 billion to rural and underserved areas that are at a significant disadvantage without access to fast and reliable internet.

This is just one step, but one in the right direction so that as more professionals look for jobs and move to rural areas to work remotely, their local infrastructure will support future economic growth.

Private sector apprenticeships with public sector support

Private sector-only investments in upskilling tends to lead to even more inequality, as those who work for larger corporations get preferred opportunities to receive apprenticeship training. In other governments, the public sector’s partnership makes initiatives like these more powerful by subsidizing benefits, such as healthcare for the employee, to give a company more of an incentive to hire individuals in an apprenticeship. To make this a success in the United States, policymakers would need to subsidize healthcare costs for workers in apprenticeship programs, removing some of the financial burden on companies to test the waters.

Politically, the United States would also need to take a stance on holding companies accountable for the number of workers they hire compared to the number displaced each year — whether that be through tax incentives or punishment akin to a “diversity, inclusion, and belonging” mandate, such an alignment only works if the goals — and stakes — are the same: to remove the burden on the state for those displaced, and to provide equal opportunities for every member of the workforce.

Less than 40 percent of jobs can be done remotely, and jobs that can be done remotely earn more than those that cannot. The current economic crisis brought about by the COVID-19 public health crisis has only widened that gap. By investing in these areas, our digital infrastructure would fundamentally change, better supporting innovation and future economic growth.

Ryan MacInnis is a product marketer at LinkedIn, building products that unlock economic opportunity for the global workforce. Prior to LinkedIn, Ryan held marketing roles at Twitter, Notarize, and Voysis, which was recently acquired by Apple, and served as a Sports Journalist at The Boston Globe. Follow him on Twitter @rkmac