Finance
Many workers would take a pay cut to work from home
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Many workers value remote work to such a degree that they’d take a pay cut to be able to work from home, even on a part-time basis, studies show.
The prevalence of remote work ballooned during the Covid-19 pandemic. Many experienced telework perhaps for the first time in their careers; employees cite work-life balance as by far the biggest perceived benefit, according to Pew Research Center.
Some researchers have quantified the financial value workers assign to telework.
For example, about 40% of workers say they’d accept a pay cut of at least 5% to keep their remote job, according to a recent study by researchers at Harvard University, Johns Hopkins University and the University of Illinois at Urbana-Champaign.
About 9% would trade at least 20% of their salaries to preserve telework, said researchers, who polled more than 2,000 workers.
Put another way, workers see the ability to work from home — even two or three days a week — as equivalent to getting a raise, according to Nick Bloom, an economics professor at Stanford University who studies workplace management practices.
Data that Bloom has collected in recent years suggests the average worker equates remote work to about an 8% raise, he said.
“That figure seems remarkably stable” over time, Bloom said in an e-mail.
“For some subsets of workers you can find higher numbers,” relative to the pay cut they would accept, Bloom said.
For example, a National Bureau of Economic Research working paper published in January that looked at workers predominantly in the technology field found they’d accept an average 25% pay cut for a job that offers fully or partially remote work.
“The reality is: It is a very attractive feature of a job,” said Zoe Cullen, an assistant professor of business administration at Harvard Business School, who co-authored the NBER research.
The paper examined data on almost 1,400 workers from the U.S. tech sector. The average person was 32 years old, and had about seven years of work experience. Researchers gathered data on the job offers individuals receive and the jobs they ultimately choose, with the average gig offering $239,000 a year in total compensation.
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Of course, not all Americans prefer out-of-office work.
About 41% of workers with the ability to telework — but who rarely do — say in-office work helps them feel more connected to co-workers, and 30% think in-person work helps with mentoring opportunities, according to Pew Research Center.
Working from home has also waned from its pandemic-era peak.
Big companies like Amazon, AT&T, Boeing, Dell Technologies, JPMorgan Chase, UPS and The Washington Post have initiated return-to-office mandates for at least some employees.
President Donald Trump also issued an order Jan. 20 to terminate remote work for federal employees and require full-time in-office attendance, with some exceptions.
That said, on a national scale, employers don’t seem to be retrenching en masse, according to labor economists.
The number of paid days worked from home during the workweek has held steady for the past two years, at between 25% and 30% — more than triple the pre-Covid rate, according to WFH Research.
Employees aren’t the only ones who get a benefit: Remote work is also a profitable arrangement for businesses, according to labor economists.
For example, employers may save money on real estate by downsizing office space. They may also hire job candidates from across the country, potentially at a lower relative salary, depending on geography.
Workers with the ability to work from home also tend to quit less frequently, thereby reducing company spending on expensive functions like hiring, recruitment and training, Bloom said.
It appears T. Rowe Price is benefitting from the record growth in actively managed exchange traded funds.
Tim Coyne, the firm’s head of ETFs, reports the firm is seeing significant growth in the area — listing the T. Rowe Price Capital Appreciation Equity ETF (TCAF) and T. Rowe Price U.S. Equity Research ETF (TSPA) as two established strategies that can satisfy investor demand.
“I think having that professionally managed portfolio is really beneficial to clients,” Coyne told CNBC’s “ETF Edge” this week. “We’re seeing just… greater volatility [and] uncertainty across both the equity and fixed income markets.“
According to Coyne, the T. Rowe Price Capital Appreciation Equity ETF suits investors who are looking for long-term growth.
“The objective of the fund is to outperform the S&P 500 with lower volatility and greater tax efficiency,” he said. “It’s also a more concentrated portfolio, typically holding around a hundred names.”
As of April 24, the fund’s top holdings include Microsoft, Amazon, and Apple according to the T. Rowe Price website. But it’s not all Big Tech. The ETF also features smaller positions in companies like Becton Dickinson and Roper Technologies.
The T. Rowe Price Capital Appreciation Equity ETF is down about 5% so far this year while the S&P 500 is off about 7% However, the ETF is up close to 8% over the past year — roughly identical to the S&P 500’s performance.
Coyne notes the T. Rowe Price U.S. Equity Research ETF follows a similar strategy, but with a heavier weighting in top tech stocks.
“This is more of a large-cap growth product [T Rowe Price U.S. Equity Research ETF],” he said. “There are components of characteristics of both passive and active here. This fund is actually managed by our North American directors of research. So again, strong fundamental research is going into the stock selection.”
Both the T. Rowe Price U.S. Equity Research ETF and S&P 500 are down around 7% since the beginning of the year. Meanwhile, the fund is up almost 9% over the past year. That’s less than one percent better than the S&P 500’s performance.
T. Rowe Price U.S. Equity Research ETF vs. S&P 500
‘Some form of bear market’
Strategas Securities’ Todd Sohn thinks investment demand for active managers will continue to be strong.
“This is the type of the environment where it [active management] can actually shine,” the firm’s senior ETF and technical strategist said. “We are in some form of bear market. This is where the active manager really can come into hand and offer their solution they are doing right.”
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