How Remote Work Has Become the Great Wage Equalizer

Remote work has significantly contributed to wage equalization across the globe by diminishing regional pay differences.
As remote work has become more prevalent, individuals in areas with lower living costs are able to secure higher-paying roles that were once limited to major cities. This change has enabled workers from various locations to compete for the same jobs, resulting in a more equitable wage distribution. Additionally, businesses have gained access to a wider range of talent, enhancing overall productivity and innovation. Consequently, remote work has not only narrowed wage gaps but also promoted economic inclusivity and development globally.

For this analysis, we pulled data from government surveys and AGS’ Acumen® Intelligent Workforce Platform to leverage real-time contingent worker data.

United States

Some US markets have experienced considerable change in wages through the pandemic. The highest cost markets (e.g., New York, San Francisco, Boston) have seen remarkable wage growth, with wages growing 44% since 2019.

With this growth, these markets have become untethered from medium- to low-cost markets. The high-cost market still mimics the overall wage cycle, same as medium- to low-cost markets, but has gone from being 56% higher on average from medium-cost markets in 2019, to 67% higher in 2024. This is driven primarily by the inflation experienced in these markets. High-cost markets are home to leading technology and business services companies. These labor categories grew 20% and 18% from 2019 to 2024, putting upward pressure on wages in high-cost markets.

High-cost markets have also experienced higher than national average inflation that has put pressure on wages. As competition over labor remains elevated, companies operating in these labor markets will continue to pay higher wages to attract and retain talent.

In contrast to the high-cost markets, cities like Chicago, Denver and Cleveland have stayed relatively aligned. These markets have not seen the same growth in wages, with medium-cost markets growing 32% and low-cost growing 28%. Wages have grown more in cities like Boston and Los Angeles, as these cities have experienced higher than national average inflation.

Conversely, wages have grown less in medium-cost markets (e.g., Minneapolis, Houston) and low-cost markets (e.g., Tampa, Oklahoma City) because these areas have experienced less inflation than the national average. Remote work has also helped to drive these increases, as people moved from larger cites to smaller cities during the pandemic, but as more employers move towards location-based pay, this exerts less upward pressure on wages in these areas. Employers in high-cost markets will likely see labor costs continue to increase at a higher rate compared to medium- and low-cost markets. Companies looking to save on labor costs may want to look at hiring more in the medium- to low-cost cities, both on site and remotely.

Canada

Much like the US, Canadian wages rose during the pandemic, but at more modest rates. Wages in high-cost markets (e.g., Toronto, Vancouver) grew at 15%, medium-cost (e.g., Windsor, Quebec City) at 14.5% and low-cost (e.g., Cape Breton, Victoriaville) at 17%. These wage increases were driven by inflation and labor shortages as Canadian labor markets fluctuated. Because of the similar growth across each market, Canadian labor markets have a similar spread in 2022 compared to 2019. Interestingly, medium-cost markets on average are higher than the high-cost markets in Canada. This is due to many oil hubs (Edmonton, Grand Prairie, Red Deer) being in medium-cost markets. Oil wages are typically higher than other sectors due to occupational hazards and working in remote areas. This raises downstream sectors' wages in oil hubs as well, as there is more money in the regional economy to be spent than other areas. Canadian wages will continue to rise, but at much more gradual numbers than the US has seen. Employers that can avoid the high-cost markets will see the biggest savings over time.

United Kingdom

London is a major economic hub in the UK, attracting multinational corporations due to the specialized talent pool and access to top resources. A competitive market combined with a higher cost of living drives a premium on pay for workers compared to the rest of the UK. However, in recent years, data suggests that this gap is gradually closing.

The pandemic accelerated a shift towards new working patterns, with remote and hybrid models a common theme among global companies. This continues to be driven by the growing demand for flexibility, enabling employees to better balance their personal and professional lives, while businesses benefit from access to a larger talent pool in a competitive market.

An increase in hybrid working models has accelerated the ability for workers to commute from more rural locations to a city-based role to benefit from the salary premium. In turn, companies are increasingly offering more competitive pay to attract workers from the commuter belt, reducing the pay disparity.

This trend has led to more competitive rates for roles outside of London, with median pay increasing at a higher rate than in London across many expanding talent hubs between 2020 and 2023. During this period, London’s median pay increased by 14.6%, compared to 22.4% in Reading and 19.2% in Milton Keynes. Both locations have also seen a significant reduction in the pay premium compared to London over the four-year period, with the difference to London down by 5.8% and 3.6%, respectively.

With the rise of remote work, companies are no longer confined to hiring within specific locations, driving demand for talent in alternative, potentially more cost-effective areas. Median pay has increased at a higher rate in Glasgow (+27.2%), Edinburgh (+20.3%) and Cardiff (+19.1%), all of which are growing talent hubs. Companies are now able to access a larger talent pool, which is particularly beneficial for hard-to-fill roles in the competitive labor market. As a result, the pay premium for London has decreased as other cities close the gap due to growing demand for skilled professionals.

By embracing flexibility and investing in talent outside of London, businesses not only gain access to high-quality candidates but also contribute to the economic growth and development of other regions, fostering a more diverse workforce.

While the pay disparity is shrinking, London remains the highest-paying location in the UK. However, regional pay rates will continue to reflect local market conditions, the cost of living and demand for talent in specific areas.

How Offshoring and Remote Work Have Changed Wages in APAC

The common consensus among economists is that offshoring tends to create larger gaps between wages for skilled and unskilled workers in the countries where jobs are being offshored from. The OECD recently stated, “Low-skilled workers performing tasks with a high degree of routine content experienced much stronger wage penalties from offshoring than low-skilled workers performing tasks with a high degree of non-routine content.” This difference was attributed to several factors that make highly skilled roles more difficult to offshore, such as the need for strong soft skills, and concerns around data security or regulatory issues. In short, offshoring reduces wage pressures for lower-skilled jobs but the increase to global productivity raises the demand for high-skilled labor, resulting in higher wages. We are now beginning to see this trend reverse.

Since the pandemic, the OECD also found that offshoring has led to a sharp increases in wages in many offshoring hotspots. In India, WTW expects wages to rise more than 9% in 2025, which will be the fourth consecutive year of 9% or greater wage increases. Wages in China have doubled from 2013 to 2023, with manufacturing wages rising nearly 30% from 2020 to 2023 alone. Disruption from geopolitical instability has also complicated offshoring, as trade barriers between the west and China and Russia have expanded rapidly in the last several years.

While the offshoring effect on suppressing wages in developed countries is often talked about, many don’t stop to consider the opposite effect it has on raising wages in developing nations. Now that the gap between low skill wages across different countries has begun closing, companies are beginning to re-examine where they are leveraging offshoring and for what skillsets. The IT offshoring industry has grown by nearly 60% since 2020 and the market is expected to reach $1.18 trillion in revenue by 2030.

Global Labor Unions and the Impact on Wages

The 2023 labor strikes in the US represented a pivotal change in worker-employer dynamics, resulting in significant wage hikes across multiple sectors. With a 280% surge in major strike activities compared to previous years, workers utilized collective bargaining to push for higher wages amidst rising inflation and corporate profits. Strikes led by unions like the United Auto Workers and SAG-AFTRA achieved considerable wage increases, with some contracts securing up to 43% raises over four years. This surge in labor activism highlighted the increasing influence of organized labor in securing better pay and working conditions for American workers.

Last year, more than 16.2 million workers were represented by unions. Bloomberg Law reported 347 worker stoppages that were called by either unions or management. This did not only affect North America; globally there was an increase in collective bargaining rounds. France, for example, saw an increase of individual days not worked due to strikes by 71% in comparison to the previous year. For some cases, there were no resolutions in 2023 and conflicts continued into 2024. Europe’s most affected sectors include transportation; education, health and social care; and manufacturing, while strikes within North America predominantly affect the transportation and manufacturing spaces.

A significant reason for industrial unrest across the globe has been a result of wages not keeping pace with inflation coupled with the ongoing increase in cost of living. Global inflation peaked in 2022 at 8.6% and has been slowing down since; however, households continue to feel the pain of high prices. In the US, though, wages have increased by 27% since 2019. When inflation is factored in, real earnings have only risen by 1%, dampening individuals’ purchasing power and shifting how consumers spend their money.

Ongoing Strikes

Boeing remains front and center in the news, as the machinist union has been on strike since September 2024. Like many other unions on strike, their biggest push is for wage increases and reinstating defined pension benefits. The US also saw port strikes in early October along the East and Gulf coasts, which could have seriously damaged the US economy and global supply chains. Thankfully, the strike only lasted three days after all parties agreed to 62% wage increase over six years. Following suit, the Port of Montreal’s longshoreman within Canada began a strike affecting two terminals that account for 40% of container traffic within the Montreal port. Yet again, wages are the main cause for the strike as the longshore union employees work with the Maritime Employers Association to come to an agreement.

Though wages are the most common subject of labor disputes, we see other unions and employees fight for non-traditional benefits as well. The Times Tech Guild, the biggest union of tech workers in the US, which represents employees like software developers and data analysts at the New York Times, is an example of union workers fighting for benefits. The guild workers are striving towards getting a “just cause” provision in their contracts, which means employees can be terminated only for misconduct or another such reason. Another common subject for labor disputes includes working conditions as seen in countries like Lithuania and Hungary that are fighting for reduced class sizes in the education system. There have also been protests in Belgium against rising work pressures due to low staffing in the aviation industry.

Unfortunately, within the Asia-Pacific region not much reformation for workers occurs, as this remains the second worst region in the world for working individuals. According to the 2024 ITUC Global Rights Index, the Asia-Pacific region has continued to be marked with systematic violations of workers’ basic rights to organize a trade union and to strike. Unions, however, generally have a positive impact on productivity. They enable employees to express their opinions, which, in turn, allows for more equitable operations and results in lower turnover. This results in reduced associated costs for the business and helps firms retain tenured workers.

It's important to note that despite the risk of business disruption, unions and strikes offer a space for employees to voice their concerns and provide an opportunity for bargaining power and income equality, which helps boost economic activity. Historic inflation and increased living costs continue to burden most households globally, which means negotiations and strikes could continue into 2025.