- The primary causes of fluctuations in the cost of living are twofold: (1) inflation and (2) exchange rates.
- With more of the workforce population working remotely, this will have implications in conjunction with fluctuations in cost-of-living.
- Demographically speaking, in the coming years, the effects of cost-of-living fluctuations will primarily depend on one’s economic/social class.
Fluctuations in the cost of living have historically affected the world of work. If you were to ace a job interview in a different state, for instance, one of the first questions you’d ask yourself is, “what is the cost of living?”
Moving is difficult enough – moving somewhere you can’t afford is even worse.
Potential business owners likewise must consider the cost of living when determining where their business should be.
If you live in New York City and want to open up a surfboard shop in San Diego where it would be most likely to be lucrative, the cost of living is an important factor to consider when finalizing your commitment to start a business.
In each case, the cost of living consists of the purchasing power your money has. A salary of $20,000 a year will not support a family in New York City, but it might in Arkansas.
What about the cost of living’s effect on the future of work? The primary causes of fluctuations in the cost of living are twofold: (1) inflation and (2) exchange rates.
“Exchange rate changes and inflation differentials can push the cost-of-living indexes in the same direction or they can counter-balance each other. However, in recent years exchange rate fluctuations have had more effect on cost-of-living indexes than inflation, except in some countries with hyper-inflation,” according to Mercer.
Inflation is on the rise in the United States and exchange rates change constantly from currency to currency. Thus, fluctuations are to be expected in the cost of living. As one’s job requires you to relocate, the abovementioned considerations will largely remain the same.
The relationship between cost of living and remote work
The COVID-19 pandemic brought about work conditions that are likely to remain permanent.
Many of these changes were profoundly disruptive to the very infrastructure of doing work. The most salient in respect to cost-of-living concerns is remote work.
According to the World Economic Forum, there are good reasons to believe the disruption of remote work on the economy will only amplify in the coming years.
When companies began to bring in-person work back after the seemingly worst of the pandemic, there was great pushback among workers, resulting in many companies’ revising their policies on remote work.
Major companies such as Apple, Google, Microsoft, and JP Morgan & Chase now readily offer remote options to their workers. The World Economic Forum also believes that companies will increase their reliance on freelancers and contractors in the coming years.
With more of the workforce population working remotely, what sort of implications will this have in conjunction with fluctuations in cost-of-living?
“40% [of workers] said they would move four hours or more by car from where they work, so those aren’t the short-distance moves we’re seeing so far. There is unmet demand out there: people want to move to lower-cost places, they want to move to less dense places, they want to move farther away. They’re not doing it in vast numbers yet, but I do think that we will see that,” according to WeForum.
As a result, the increased availability of remote work seems to have sparked a greater interest among workers in moving away.
Traditionally, the primary negative relationship between cost of living, and work was obtaining work in a place where you cannot afford to live. However, in most cases, remote workers are free to work from where they choose to.
Inflation is not expected to continue indefinitely. In fact, when the pandemic recedes – that is, when COVID cases are low enough to no longer regard it as a pandemic – inflation is expected to decrease down to pre-pandemic levels, if not lower.
In addition, millennials report high rates of excitement regarding the idea of traveling and working simultaneously and to have the freedom to move wherever, and whenever they want.
Therefore, the future of work will entail more people gaining the freedom to live where they want, not where their job wants. In other words, there will be more geographic flexibility for a growing percentage of the workforce population.
According to the Harvard Business Review, many companies are already opting to make the majority of their work options remote. Consequently, it’s plausible to suspect a greater number of digital nomad workers to emerge not just in the distant future, but in the coming few years.
However, it is likely that a substantial percentage of the population will get left behind in these improvements. In America, a large percentage of workers are low-wage workers whose wages haven’t increased in decades.
Low wage workers are less materially prepared for fluctuations in cost of living, making inevitable fluctuations more likely to worsen their financial and occupational status.
Upward mobility in social/economic class in America has been declining for several decades, and nothing indicates that this is going to change anytime soon. Demographically speaking, in the coming years, the effects of cost-of-living fluctuations will primarily depend on one’s economic/social class.
The majority of the population of American workers will benefit greatly from remote work, and will be largely unscathed by the inevitable fluctuations in costs of living.
The hope is that, with the requisite social changes and public policy, the 53 million Americans making low wages can be given the resources they need to also reap the benefits of remote work.