Episode 26
Episode summary
A recent analysis of Gusto data by researchers from Stanford University, ITAM, the Hoover Institution and the Gustonomics team found that Americans are living farther away from their employers. Caleb and Liz discuss the findings, what they indicate, and the current state of the remote/hybrid work evolution in America.
Shownotes
Americans Now Live Farther From Their Employers [Gusto Blog]
Americans Now Live Farther from Their Employers [Gusto, Stanford, ITAM, Hoover Institution]
Transcript
Liz Wilke (00:00:31) – Hi, I’m Liz Wilke.
Caleb Newquist (00:00:35) – I’m Caleb Newquist.
Liz Wilke (00:00:36) – And this is the Gustonomics Podcast. In each episode, we bring you a little bit of economics knowledge so you can be more informed, use the information in your business or work, or distract you from the person in front of you who’s struggling at the self- checkout.
Caleb Newquist (00:00:52) – Please remember to rate, review, and subscribe to the show, or share it with an economics curious friend. Anything you can do to spread the word about the podcast is greatly appreciated. Great to be back with you, Liz.
Liz Wilke (00:01:07) – You too, Caleb.
Caleb Newquist (00:01:09) – Over on the Gustonomics team where you sit, it’s been pretty busy lately, huh?
Liz Wilke (00:01:14) – Yes, we have been busy, Caleb.
Liz Wilke (00:01:15) – We’ve just finished the first part of a collaboration with the great folks over at Stanford on how far Americans now live from their employers using data from our platform.
Caleb Newquist (00:01:26) – Oh, all right. So that’s very interesting. So why this topic? Why the distance from work? Why is that of interest?
Liz Wilke (00:01:39) – This topic, because even though we’ve been talking about remote and hybrid work and the reorganization of work since the pandemic, which really accelerated this trend, we are still in the middle of the conversation about remote and hybrid work. Is it worth it? Is it not worth it? Is it permanent? Is it going away? Are employers, you know, why do employers dislike it? Why do workers love it so much? We’re just still learning so much about how remote work caused by the pandemic is really sort of changing not only our work lives, but the other part of our lives also.
Caleb Newquist (00:02:17) – Okay. Yeah, absolutely. Was it a survey? Was it a study? What do I want to call it?
Liz Wilke (00:02:21) – So it’s an analysis of our platform data, right? So Gusto processes payroll, so it needs to know where workers live and it needs to know where employers are in order to get all the taxes and filings and withholdings. We have that information. So we just looked at the sheer distance between where employees are and where their employers are. So if remote and hybrid work are helping people live farther away from their employers, maybe a short distance farther or a lot farther, you know, we should be able to see that in the data. And actually we definitely did. So the average distance of a worker in our dataset to their employer nearly tripled from about 10 miles to about 27 miles.
Caleb Newquist (00:03:02) – Oh, wow.
Liz Wilke (00:03:02) – And I’ll caveat because we’re going to have a couple of naysayers to say, well, that could just be driven by people who live all the way across the country, right? And there just don’t need to be that many of them to really drive the average up. So I’ll say as a methodological point, we actually capped the distance at 500. So you actually can’t get values that are, you know, like 3000 miles all the way across the country.
Liz Wilke (00:03:25) – So we really know that that distance is being driven by smaller increases in the distance to work.
Caleb Newquist (00:03:31) – Right. The New York to LA commute would be excluded if there were any in our dataset is essentially what you’re saying.
Liz Wilke (00:03:39) – Only that it would only count as 500 miles, not as the full distance from New York to LA.
Caleb Newquist (00:03:44) – Oh, I see. Got it. So you would include it, but it would be capped at the 500 miles. Okay. So the big headline is people are living farther away from work, right?
Liz Wilke (00:03:53) – That’s right. And what I think is one of the most interesting things about that is we think about people working remotely as people who had a job before the pandemic, they became remote and then they moved, but they’re still in the same job. And that’s actually not what is driving this trend. This is all driven by new hires. So that’s sort of two cases. One is that you moved and you got a new job, but with a different employer much farther away. And that’s sort of independent of your moving because your labor market just got bigger, right?
Liz Wilke (00:04:22) – If you can work remotely for one employer, you can work remotely for an employer anywhere.
Liz Wilke (00:04:27) – And the other is that, you know, you never moved.
Liz Wilke (00:04:30) – Say you were in Chicago and you always worked for a Chicago based employer, but again, because of remote work, your talent market got a lot bigger.
Liz Wilke (00:04:38) – So you never moved, but you know, you could now work for somebody in Miami.
Caleb Newquist (00:04:43) – Do we know anything about the motives of people living farther away from work? Was that part of the study?
Liz Wilke (00:04:51) – We don’t capture people’s feelings on our platform because we don’t need it to run payroll. But what we know are the demographics of people who actually moved the farthest, right? They tend to be remote able industries like finance, like tech, like communications, etc. They also tend to overwhelmingly to be in their thirties.
Liz Wilke (00:05:04) – They tend to be remote able industries like finance, like tech, like communications, etc. They also tend to overwhelmingly to be in their thirties. So, the 30 to 39 group had the largest increases on average, and even just sort of anecdotally, we think that that’s because, one, they’re professionally pretty well- established, so they don’t lose as much by going farther away or not coming into the office as much, if at all. But also, the 30s tend to be a time of major life milestones for a lot of folks, right? First house purchase, first kids, maybe second kids, maybe they start to care- give or really care about being closer to family for other reasons. Maybe their life has lots of sort of pursuits outside of work or responsibilities. And so, we think of 30s as being full of non- work- life milestones that really take a lot of time and attention, and they seem to be the group that really is taking advantage of a lot of this distance to work, either for affordability or to be closer to family. Okay.
Caleb Newquist (00:06:10) – Very interesting.
Liz Wilke (00:06:11) – I will correct that every age group saw an increase in their distance to work. It’s just most intense for the folks in their 30s. It’s not just driven by folks in their 30s. It’s just the changes most is highest for folks in their 30s.
Caleb Newquist (00:06:27) – Like say, I don’t know how you broke down the ages, I don’t recall. So, even people in their 60s, for example, are living farther away from work.
Liz Wilke (00:06:37) – Yeah. They actually have the smallest changes. They still went from about 16 to about 21- ish miles, right? So, even they gained about five miles on average.
Caleb Newquist (00:06:48) – Okay. Are there some big, clear impacts from this shift in the distance that people live away from work?
Speaker 4 (00:06:59) – Yeah. I think the real impacts are, especially for workers and for businesses, are sort of multiple, but I’ll see if I can list them and we’ll maybe get through them. One is that the talent market for both employers and for workers has gotten way bigger for jobs that can be done, right, in a remote or hybrid way. So, we’re not really constrained by a 30- minute commute anymore for these jobs, which means that the talent pool has become regional or even national in some cases.
Liz Wilke (00:07:29) – And that’s true for companies looking for workers, and it’s also true for workers looking for businesses.
Speaker 4 (00:07:34) – Yep.
Liz Wilke (00:07:34) – So, it’s redefining what a, quote unquote, local labor market looks like for any business that’s looking for a worker.
Caleb Newquist (00:07:42) – Right.
Liz Wilke (00:07:43) – So, what I think is really common is actually not that employers are hiring people all the way across the country, but you might think of an employer in Austin being willing to hire somebody in Killeen, which, for those of you not familiar with the region, is about an hour, hour and 15 minutes drive. Close enough to come in for an onsite or for an important meeting, but not so close that you would expect them to commute in. Or they might go as far as Dallas or Houston, right, to find the right person at the right price for their job.
Caleb Newquist (00:08:13) – Yeah, yeah. I mean, here in Denver, like the front range is kind of a, it’s not a, there’s not a strong like commuter corridor up and down the front range, although they’ve tried to build one, it’s never happened. But it is easy to imagine someone who maybe lived in the Denver area, but for whatever reason decided to move to Colorado Springs, which is much farther away, but then could still drive up once or twice a month if their employer asked them to do so, but then spent the rest of the time working at their home in Colorado Springs.
Liz Wilke (00:08:46) – Yeah, that’s right. One of the other implications that I think is very interesting is that, you know, Gusto serves small and medium businesses. There’s lots of headlines about, you know, fully remote jobs sort of disappearing and large enterprise being less amenable to remote and hybrid work. Certainly remote work, if not hybrid work. What we’re finding in our data is that small businesses on the whole are really not experiencing this retrenchment of remote and hybrid work, right? It’s a talent advantage for them.
Liz Wilke (00:09:20) – It can be difficult to find the right person, right, with the right skills at the right price for small businesses. And so this is a talent tool that they are clearly using, right, to find the right people and to gain maybe a little bit of an edge, right, especially in an environment that’s been very difficult for them over the last few years.
Caleb Newquist (00:09:36) – Yep. I think small businesses will take whatever advantage they can over their larger competitors wherever they can get it. And so this seems to be one potential area.
Liz Wilke (00:09:48) – Well, and I think what’s also really interesting is, you know, I’m going to use this sort of jargony term here, but hopefully it’ll translate, is that small businesses, startups, and small companies have different technologies, you might say, right? And I mean that very broadly. I’ll give you an example.
Liz Wilke (00:10:05) – I was talking to someone who owns a really, a small company, maybe 20 people, and I was asking them about their remote and hybrid work experience, and the CEO of the company said, look, we’re a 20- person company, and if somebody is not doing the job, we’re going to know very quickly if they’re not doing the job.
Caleb Newquist (00:10:23) – Yeah, sure.
Liz Wilke (00:10:24) – I think that really illustrates they have ways of, you know, monitoring and engaging people that very large companies do not, right? They’re very different ways of encouraging and coordinating work. Small businesses may very well be able to manage the work, right, that’s done in a remote and hybrid way in ways that large enterprise just don’t have the ability to do.
Caleb Newquist (00:10:47) – Where would you say we are in this kind of remote work evolutionary era, whatever you would call it? It’s not an era. It’s a very short period of time. In this kind of environment, where would you say we are right now? Do you have a name for it, or how would you generally describe it? Where are we in this kind of evolutionary journey?
Liz Wilke (00:11:10) – I would say we’re probably in the middle of the beginning. There’s still much that we don’t know.
Liz Wilke (00:11:15) – about remote work and hybrid work and how it works or not. There are many papers already published about whether or not remote and hybrid workers are more productive by any measure, right? One, productivity is sort of difficult to measure for a lot of occupations. But once you even think about those metrics, there are studies that show that remote and hybrid workers are 25% more productive almost. There are studies that show that they are 25% less productive, right? And you have studies that show everything in between. So to have such a wide range of estimates means two things. One, measurement of these things is very hard. And two, it probably depends a lot, a lot, a lot, a lot on the specific management structures, technologies, supportive environment that the company has, right? And that the culture that they’ve created around remote and hybrid work. And on top of that, everybody is still learning about how to do that well, right? So what I think this moment is, is we’re still trying to figure out what it is and how to do it well. And we still don’t know if it’s better or worse, right? Than what we had before.
Caleb Newquist (00:12:33) – The issue of productivity seems to be like a pretty thorny one. Like there’s no uniform way to measure this, right?
Liz Wilke (00:12:40) – There are ways to measure productivity. It’s easy to measure company level productivity. You have revenues and you have costs and you can think about the ratio there. So you can think of as company as being very productive. In some cases, you can think of a worker as being very productive. So if you are a customer service representative, right? It’s cases resolved or calls taken per hour, right? There are other jobs or tasks that you think you can measure productivity for, but you might not actually be able to. And I’ll give you an example, coders. One measure of productivity is the number of commits or the amount of code that they’ve written. But the amount of code isn’t what you really care about. It’s the quality of the code.
Caleb Newquist (00:13:22) – Right, what if it’s bad code?
Liz Wilke (00:13:23) – Exactly. So you can measure part of the productivity bit, but you can’t measure all of it very readily, right? Without some more effort involved. So that’s just sort of an example. And then there are other tasks that it feels basically impossible. So you might think of a brand or creative studio team whose job it is to come up with a color scheme and a brand logo and all of those things. It seems very difficult to measure productivity there, but all of these jobs could potentially be done remotely.
Liz Wilke (00:13:52) – And so if you cared about the productivity impact of remote or hybrid work, you’d probably run into some real problems trying to measure that. So bringing this back to a business or a worker perspective, one, workers and employers both should get very specific about what productivity means and write how they’re going to measure it and monitor it.
Caleb Newquist (00:14:13) – I couldn’t help but thinking about how long it takes me to write a newsletter and then how long it takes someone to read that newsletter. And it kind of is exhausting, but the point is I very much appreciate the idea that sometimes your value can be created in about five minutes as opposed to one hour creating, like you say, coding so many lines of code or preparing so many tax returns or whatever, because if the code is bad or the tax returns are wrong, then you’re just gonna redo that work anyway, and that’s not very productive.
Speaker 4 (00:14:48) – Yeah.
Caleb Newquist (00:14:49) – So to kind of wrap this up, how can small and medium- sized businesses, how can they think about remote and hybrid work at this moment in 2024?
Liz Wilke (00:15:00) – I think there are a few principles for businesses or the workers that might work for a small and medium business. When they’re thinking about remote and hybrid, one, we are in a long- term tight talent market as most small businesses already understand. The fact that large enterprise seem to be less amenable to at least fully remote, if not also extended hybrid work, suggests that there is an opportunity to attract talent from sort of anywhere. With a caveat, as long as they have the right processes and culture and management in place to really make good use of those workers. So if you’re thinking about remote as a talent acquisition strategy, that might very well work, but also think about whether or not you have the tools and systems and the orientations in place, right? So that once you attract somebody who maybe works 300 miles away, you can actually get the most out of them. And it’s a very different kind of environment that needs to be created versus more in- person work.
Liz Wilke (00:16:09) – So it’s not a better strategy to hire somebody remote if you cannot support their performance from a remote environment. There’s two sides of this coin. Who can you get in the door, but how can you make the best out of them? And it takes a different sort of structure.
Caleb Newquist (00:16:24) – That’s it for this episode. We hope you learned something new and useful for yourself or your business. Please let us know what you think of the podcast by leaving a review or share with a friend or colleague who might enjoy it. I’m Caleb Newquist.
Liz Wilke (00:16:34) – I’m Liz Wilke. Thanks for listening.
