More work headed outside high-priced US cities

spike

According to a new study released Thursday from global freelance platform Upwork, the massive shift to remote work resulting from companies adapting to the changes caused by Covid-19 has great potential to reshape opportunity across the country and bridge the geographic wage gap.

That’s because businesses are most highly concentrated in the top 15 most expensive places to live in the U.S. despite only housing 19% of the U.S. population. But with the recent shift to remote work, the 49% of business spend that is now going to those workers will disperse throughout the U.S., spreading productivity to other talent pools and thus essentially fueling the creation of the largest labor market in the world, claims Upwork’s chief economist Adam Ozimek.

Titled “When Work Goes Remote: How remote work can help bridge the geographic opportunity gap,” the report claims that with major tech companies such as Twitter and Facebook switching over to remote-first policies and hiring managers planning to double their remote plans over the next few years, this will have a significant impact on the wider economy. 

Already, says Adam Ozimek, Upwork’s chief economist and author of the study, the shift to remote work caused by the pandemic is starting to flow business spend way beyond the top 15. This will likely not only help bridge the wage gap for the 72% of independent freelance professionals who live outside these places but provide lower costs for businesses than in their local markets.

A look at the geographical wage gap

Using its own platform data for the study, Upwork analyzed thousands of remote projects between U.S. companies and freelancers, adding up to over $100 million in earnings. What they found was that the businesses are disproportionately located in the most expensive areas, while the independent professionals they hire reside all over the country.

The study specifically looked at 12 occupational categories: accounting; human resources; management consulting; personal/virtual assistant; customer service; tech support; graphics and design; law; network and systems administration; marketing; web, mobile and software development; and engineering.

Using data from the Bureau of Labor Statistics, Upwork ranked over 500 geographies to find the metros with the highest average earnings. They found that, on average, hourly earnings in the top 15 metro areas for these occupational categories were $40.5 per hour compared to $28.36 for the average location, a premium of over 40% for the same occupation.

The study also found that when independent professionals located outside the most expensive areas are hired by businesses located in the top 15, they will earn, on average, 18.6% more than from companies in their local market.

The benefit of relocating

Despite having higher pay in these expensive areas, a high percentage of income goes to housing costs. Median house values in the top 15 were over $500,000, nearly three times that of the average place. Those living in the top 15 have a price-to-income ratio that is more than double the rest of the country: an average of 680% to as high as 1,260%, the study finds.

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