The shift to remote work has permanently weakened the relationship between geography and work, with an undeniable impact on the relationship between employees and employers. In previous research, Gusto has investigated the changes that remote and hybrid work have brought to the workplace, with new challenges as well as new opportunities.
Yet, this shift is having reverberating impacts beyond the workplace. The relocation of people and jobs is changing the look and feel of cities across the country. Exploring this transformation as it unfolds is key to understanding its impacts and shaping its trajectory.
To better understand the impact remote work is having beyond the workplace, Gusto economists examined data for a sample of companies on its platform from March 2019 to March 2022 – companies with primarily in-person work practices before the pandemic – to understand how the pandemic-induced shift to remote work has affected where jobs are and what that means for employment, income, and regional development across the country.
- Overall, our findings show a significant expansion in remote hiring – a 223% increase across the board and a 266% increase for professional services.
- We also see a diffusion of jobs from city centers to suburbs, small and medium cities, and rural areas. The share of hiring in the top five cities by GDP fell 13%, from 38% to 33%, and 1.4 million professional service jobs moved out of dense urban areas across the country.
- We also find that the increase in hiring for remote-able professional services corresponds to increases in hiring for more in-person personal services as well. A 1% increase in the professional services hiring rate corresponded to a 1.3% increase in the personal services hiring rate.
- We also find large differences in earnings between remote and non-remote workers within all professional services industries. The average remote worker makes 17 – 58% more than the average non-remote worker in the same industry and zip code.
New Hires Are Significantly More Likely to Be Remote-Workers
As remote work went mainstream in 2020, it expanded what had once been a fringe perk to a well-established norm for many whose jobs don’t rely on in-person transactions. While many company policies on remote work continue to evolve, hiring patterns have also experienced a sizable shift pre and post pandemic. Our analysis reveals a 247% increase in the chance that a new hire will be a remote worker*.
As the number of remote workers increases, workers’ job options aren’t limited only by the availability of employers in their local area who need their skills. And, employers aren’t limited only to the available workers in their area. This holds true especially for knowledge workers in professional services industries like consulting, finance and technology, who saw the largest increases in cross-state hiring. The number of professional services workers classified as remote post-Covid increased 266%.
Table 1: The professional services sector saw increases in cross-state hiring across the board.
Remote Work Drives Down Hiring in Major Coastal Cities
The increase in hiring of remote workers underscores a shift in geographic hiring patterns. Gusto data shows that prior to March 2020 38% of all hiring was concentrated in the five largest metro areas –– New York City, Los Angeles, Chicago, Dallas and Houston. Since the beginning of the pandemic that share has fallen to 33%. As companies and employees embrace remote work, hiring trends are beginning to shift from densely populated coastal economic hubs towards smaller and medium sized metro areas throughout the country.
The largest decrease in the share of hiring was in San Francisco, which lost 30% of its national share in hiring. New York and Boston both lost 13% of their share, and Los Angeles lost 12% .
Conversely, remote work led to an increase in the share of hiring for several cities including:
- Memphis, TN (52% increase in share)
- Tampa, FL (42%)
- Colorado Springs, CO (22%)
- Houston, TX (16%)
- Dallas, TX (12%), and
- Des Moines, IA (11%).
The map below shows the percentage change in share of hiring before and after March 2020 for all areas where we have available data.
Across the country, small and medium cities gained hiring share. The share of hiring in medium- and small-sized metro areas increased nearly 25% for professional services, and 30% for personal services. In June 2022, 35.3 million workers were employed in the professional services sector according to BLS estimates. If we extend the findings from our sample to all professional service workers in the US, it would equate to 1.4 million professional service jobs moving out of dense urban areas.
Table 2: Small and medium-sized cities, and rural areas saw the largest relative gains in hiring
Increase in Professional Services Workers Drives Up Personal Services Hiring
The availability of remote working for professionals has raised concerns about possible impacts on the costs of living in cities due to potentially large influxes of professionals relocating from large, coastal metro areas like New York, San Francisco, and Seattle. Indeed, a recent paper estimates that the shift to remote work caused by the pandemic raised house prices by 15% nationally. News stories reporting on the influx of remote workers into cities like Austin, Miami, and Denver and the ensuing increase in the cost of living and competition for housing and other amenities.
And, while many observers have linked an influx of remote workers with higher home prices in some areas, Gusto’s analysis demonstrates how more remote workers can create more opportunities for others in the local labor market. Economists have long understood that the inflow of high paying professional service jobs into a local economy leads to more spending on goods and services and ultimately more job creation for the local residents.
When looking at the areas that saw an increase in remote workers in the professional services industry, the majority of those areas also showed an increase in hiring for personal services. For example, a 4% increase in the professional services hire rate in Sacramento, CA correlated with a 6% increase in the personal services hiring rate. In Orlando, FL a 3% increase in the professional services hire rate correlated with a 5% increase in the personal services hiring rate.
It’s important to also note that the extent to which remote hiring drives up the cost of living in a local area depends on the level of migration into the area from remote-capable workers. Gusto’s analysis does not differentiate between workers who moved during the pandemic from another major city and were then hired by a Gusto company and workers who are longer-term residents of the metro area. Some of the hires in our dataset are undoubtedly workers who are part of the pandemic migration. Many are not.
Salary for Remote Workers Higher Than Local Median Pay for Non-Remote Workers
Our analysis also shows large differences within industries between remote and non-remote workers’ earnings. When looking at the professional services industry, remote workers were two times more likely to earn above the median pay for an employee’s home zip code relative to non-remote workers in the same industry. Across all professional services industries, the typical remote worker makes between 17% – 58% more than the typical non-remote worker in the same industry and area. The table below shows typical wages and compares them to area-level incomes for remote and non-remote workers across industries.
Table 3: Remote workers in all professional services sub-industries make more than non-remote workers in the same industry and area
There are a few potential explanations for this finding. One possibility is that highly-paid workers from high-income areas took their jobs remotely to lower-income areas, and non-remote lower-paid workers in the same industry haven’t seen their wages catch-up. Another possibility is that remote workers are able to connect with companies that can make more productive uses of their skills, which merits higher wages. A third possibility is that differences in the types of jobs that can be done remotely within an industry is driving this difference. For example, in the Consulting industry, an environmental consultant may be non-remote, and a management consultant may be remote, and the difference in income may be driven by the fact that environmental consultants tend to make less than management consultants.
What is clear, however, is that remote work brings more money into these areas immediately, and can open a pathway to higher incomes over time within industries at the metro level. Over time, non-remote workers may be able to switch to remote-capable companies that can make the best use of their talents, or upskill to new occupations within their industries without relocating to another area to find a job.
The opportunity to increase diversity and equity in hiring exists, but requires purposeful action
Some have noted the opportunity to increase the diversity of company workforces through increased remote hiring. Geographically unrestrained hiring is thought to expand the pool of talent available to companies to include more people of color, people with alternative educational pathways, and people who are from economically disadvantaged backgrounds. Some companies have recently announced that remote hiring has helped them make important progress in their diversity and equity goals for hiring, and others are embracing a way of work that workers of color predominantly say they prefer.
The research team does not have demographic data on those who are specifically hired, but the research team did pull U.S. census data to observe the income, racial makeup, and education levels of the neighborhoods where they live. We specifically looked at more highly paid professional services industries to assess the likelihood that higher-income, remote-capable jobs are moving to more diverse areas.
We found a small decline in the median home zip code income of new hires before and after Covid, as well as a moderate decrease in the share of the population that has a college or graduate degree in the zip codes of these post-Covid hires.
Though the share of hires in zip codes with a sizeable Hispanic population (defined in this analysis as 25% or more Hispanic residents) barely budged, the share of hires in zip codes with a sizeable Black population (similarly defined at 25%), increased nearly 8%.
Table 4: Remote work potential impact varies across demographics and locations
Overall, these results indicate a moderate improvement in the availability of jobs and highly-paid work for workers in areas with large Black populations. The absence of similar improvements for workers in Hispanic areas suggests that while the opportunity exists to use remote hiring as a tool to diversify company workforces and create more equitable work arrangements, challenges remain to making this a reality. Remote hiring can be a conduit for companies to meet their diversity and inclusion goals in combination with directed effort to attract and recruit diverse workers, but this requires purposeful effort as part of company’s diversity, equity, and inclusion (DEI) strategies.
Although we are still in the early stages of remote work adoption and acceptance, remote work promotes economic activity in regional economies outside of “superstar cities” – such as Nashville, Minneapolis, Atlanta, and Detroit, all areas with positive increases in hiring share within professional services – by bringing more jobs and more dollars to these areas. It also represents a new tool in the toolbox of economic development agencies, in addition to or as an alternative to traditional place-based policies that focus on incentives for companies to locate in an area. Many cities and some states are embracing opportunities to attract professional workers who can work remotely in the hopes that they will bring talent and tax revenue to their cities by offering incentives for people who relocate and plan to stay.
What remains true is that remote hiring and remote work opportunities are shifting the economic landscape, with many potential implications for wages, hiring, and economic mobility as remote work changes the geographic landscape of opportunity. We are still at the beginning of this transformation. The Gusto research team will continue to analyze how remote work is impacting the labor market as this evolution unfolds.
To isolate the effect of remote work adoption on hiring trends we use a sample of companies on the Gusto Platform. Our Sample consists of 35,858 companies that existed on the Gusto platform for the 3 year time frame starting March 2019 and ending March 2022. Additionally, companies must have had at least 3 employees as of March 1, 2019.
A Micropolitan Area as defined by the Office of Management and Budget (OMB) are urban areas with a population of at least 10,000 but fewer than 50,000 people.
We classify the counties in which employees are located according to the National Center for Health Statistics Urban-Rural Classification Scheme for Counties (NCHS). This scheme is one of six groups: