Eve, here. This is the kind of study I like. We highlight interesting questions and uncover findings that have broader implications. The question is, why do telecommuting staff actually earn more than those in their jobs, given that most telecommuting staff would accept the perceived lower pay as a perk of working from home? Given this conundrum, one might wonder why supposedly highly bottom-line-oriented bosses often insist that everyone come into the office, when they can placate everyone by imposing pay cuts on employees who want to continue working from home.
This brief discussion and the following findings highlight that wages and worker-supervisor relationships do not conform as neatly to organizational stereotypes as one might think. In my opinion, a big reason managers are trying to get everyone back into the office is that walking around and making your presence known or calling impromptu meetings is an exercise in authority that is lost when many people work from home. The other thing is that bosses need to change their habits a bit to make working from home as productive as possible. For example, face-to-face meetings may be infrequent and on a set schedule. A top dog cannot change his life to suit his subordinates.
Here we see further evidence of the arbitrariness of wage relations, at least of a more logical kind, showing that larger producers and better negotiators are able to strike better deals, even in supposedly structured work environments.
By Huiyu Li, research advisor at the Federal Reserve Bank of San Francisco, Julien Sauvagnat, professor of finance at Bocconi University, and Tom Schmitz, reader at Queen Mary University of London. Originally published on VoxEU
Research shows that workers typically value the option of working from home and are willing to accept significant pay cuts in exchange, but there is a growing body of literature showing that workers who work from home earn higher wages on average than those who do not work from home. This column combines French survey data, registration records, and social security records to show that the main driver of this telecommuting wage premium is choice. Workers who are more productive or have better negotiation skills appear to be able to earn both higher hourly wages and the right to work from home more frequently.
Since the COVID-19 pandemic, work from home (WFH) has become entrenched in the labor market in many countries. For example, Aksoy et al. (2024) report that in 2023, one-third of full-time workers in 34 countries will be engaged in hybrid or fully remote working arrangements. This widespread adoption has generated significant interest from policy makers seeking to understand the impact of telecommuting on productivity, inequality, employment dynamics and urban structure (e.g. Eurofound 2024).
The impact of working from home on wages is of particular interest. A growing body of literature shows that workers who work from home earn, on average, higher wages than workers who do not work from home. A significant portion of this premium reflects differences in occupation and education, as workers in higher-wage occupations and with higher education are more likely to work from home. However, recent evidence shows that economically meaningful wage premiums persist 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. Numerous studies have shown that workers typically value working from home as a comfortable environment and are willing to accept significant pay cuts in exchange (Mas and Pallais 2017). One potential explanation is that telecommuting increases worker productivity and encourages companies to pay higher wages (Pabilonia and Vernon 2025). But this raises further questions. If the productivity gains are so great, why don’t all workers in jobs that allow them to work from home do so?
An alternative explanation for the observed telecommuting wage premium is selection. Workers with higher unobserved productivity or greater bargaining power may be more likely to secure both higher wages and more flexible telecommuting arrangements. A recent study (Li et al. 2026) provides evidence that selection is indeed the main driver of the telecommuting wage premium in France.
Data and methodology
Our analysis combines three administrative data sources. First, the French Labor Force Survey provides information on key personal characteristics such as workers’ telecommuting status, self-reported income, working hours, education, occupation, gender, and age. From this, calculate your hourly wage by dividing your income by hours worked. We then link these data to the world of business registration records. This allows us to observe employer characteristics such as turnover, employee size, and firm age. This association is important because a large literature documents substantial and persistent wage disparities across firms (Card et al. 2013, Song et al. 2018). Finally, we match workers to their social security records, providing detailed information about their income and employer background. Combining these data allows us to study wage differentials associated with telecommuting while accounting for both worker and firm heterogeneity.
Telecommuting and wages
First, we document the relationship between telecommuting and worker wages over the period from mid-2022, after the pandemic, to the end of 2024, after all coronavirus-related restrictions are lifted. In this sample, we first document the sizable raw wage gap between workers who telecommute and those who do not telecommute. As shown in the first bar of Figure 1, hourly wages for WFH workers are, on average, 35% higher than hourly wages for field workers.
However, much of this difference reflects differences in occupation and education. In France (as in other developed countries), remote work is much more common in higher paid occupations and among highly educated workers. When we focus on occupation, education, and location, the wage premium associated with WFH narrows significantly to about 12% (second bar in Figure 1). Further controlling for other observable worker characteristics, such as age, gender, and seniority, reduces the wage premium to 6.6% (third bar in Figure 1). Although this is a low number, it is still significant. This result survives a number of robustness checks, including the use of alternative measures of hourly wage and telecommuting status.
Figure 1 WFH hourly wage premium rate (%)
What accounts for this large wage difference? One possible interpretation is that it depends on the employer. In fact, companies with higher salaries may also be more likely to offer more flexible working arrangements. However, we found that this explanation was not supported by the data. The premium remains even after controlling for firm characteristics or comparing workers within the same firm. The fourth bar in Figure 1 shows that adding controls for firm age, size, and earnings productivity only reduces the premium from 6.6% to 6.4%. This suggests that firm-level wage policies alone cannot explain the telecommuting wage premium.
Next, consider whether your premiums are determined by your choice. To do this, we leverage social security data to extract workers’ wages before COVID-19. This reveals notable patterns. Workers who worked from home after the pandemic were already earning higher wages before the COVID-19 pandemic. Even after controlling for abundant worker and firm characteristics, pre-pandemic hourly wages (measured as the average wage in 2018-2019) likely account for nearly all of the remaining wage premium. The last bar in Figure 1 shows that adding pre-COVID-19 wage regulation reduces premiums to 1.1%, which is not statistically significant.
In other words, workers working from home after the pandemic were already being paid higher wages before WFH became widespread. We also found that working from home was not associated with higher wage growth post-pandemic, as would be expected if this type of work led to large increases in productivity. Overall, this evidence points to the selection of WFH as a central driver of the wage premium. Workers who are more productive or have better negotiation skills can earn both higher hourly wages and the right to work from home more often.
Our findings have several important implications. First, the researchers suggest that traditional wage measures may underestimate inequality in a world where telecommuting is widespread, as higher-wage workers are more likely to enjoy the benefits of being able to work from home. Second, it limits the potential productivity gains of working from home (or suggests that employers do not share these productivity gains with employees). Third, by emphasizing the role of selection, we suggest that changes in work-from-home policies, such as mandatory return-to-office requirements, can affect the allocation of talent across a company and, in some cases, total productivity.
