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The distance between employees and their supervisors has grown steadily since 2020, literally.
ADP payroll data shows that since the onset of the COVID-19 pandemic, the share of “cross-metro” remote workers employed at large firms in the U.S. increased from 23% in February 2020 to over 31% by mid-2023, and that trend shows little signs of slowing down.
Long-distance employees who report to a supervisor located in a different metropolitan area than their own are classified by ADP as being a cross-metro worker.
“This acceleration shows up in almost every industry, from ones that seem remote-friendly, such as information, to others that don’t, such as manufacturing,” according to ADP’s recent Today at Work report.
While there is major overlap between remote work and cross-metro work, the concepts are “inherently different,” and help ADP analyze employment trends. The arrangement differs from hybrid work and other forms of remote employment where the employer is located within the same city.
“Someone working remotely, for example, from home but in the same metro area as their manager, is performing remote work that is not cross-metro. In that sense, cross-metro work captures less than the full extent of remote work,” according to a report published by ADP. “On the other hand, someone working from an office — or any other work establishment — while reporting to a manager located in a different metro area is performing cross-metro work that is not remote. Workers at a satellite office reporting to a manager at headquarters could fall in this category, for example, as could a local store or factory manager reporting into the regional center. So, in this sense, cross-metro is broader than remote work.”
The data also reflects how remote work opportunities have become highly sought after and adopted by younger employees aged 25 to 35 over the past three years. It’s revealed that more than half of cross-metro workers are aged 45 or younger.
Notably, ADP found that cross metro workers who kept their jobs but moved to a cheaper city in 2022 and 2023 experienced a 2.8% decline in wage growth relative to their teammates who decided not to relocate. Payroll data shows that from 2016 to 2019 that average decline was only 0.3%.
At the same time, people who were hired into long-distance work in 2022 and 2023 experienced a “16% pay growth relative to new hires taking on local jobs. That compares to an 8.1% figure from 2016 to 2019.”
Many U.S. companies are using the high demand for remote work as an advantage to improve recruitment efforts. Some of the benefits include having access to a broader talent pool and reduced labor costs. Meanwhile, retention among workers increases and it allows workers to experience greater work-life balance and freedom to live in more affordable areas.
This hiring trend has its economic downsides, too. ADP found that jobs with salaries insufficient to cover high housing costs in expensive cities are being relocated to more affordable areas.
“[L]ong-distance work gives distant, deep-pocketed employers an opportunity to skim the best and brightest from local labor pools to the detriment of small and regional employers,” according to the report.
Despite these challenges, the overall impact on the labor market seems positive. Long-distance work is found to improve worker job placement by better matching employees to potential employers.
ADP found that economic power remains concentrated in a few key cities, referred to as “command-and-control cities,” which are centers for business, ideas, and influence. As these cities become increasingly expensive, they are left with a workforce of highly paid decision-makers, while other workers face economic challenges. It’s reported that this sorting of workers and jobs threatens to increase regional inequality and limit opportunities for many people.
Technology, like generative AI (gen AI) is also expected to expand the scope of what long-distance work encompasses. Census Bureau data shows that between September 2023 and February 2024, the percentage of U.S. businesses using AI increased by 46%, with expectations of further growth this year.
ADP’s data reflects a widespread acceptance of long-distance labor, which has also improved the odds that workers find jobs that are good matches. Employers also benefit from improved recruiting, reduced turnover, more productive workers, and the potential to cut labor costs even in expensive areas. The full extent of the negative economic impact remains to be seen as Moody’s Analytics expects office vacancies will reach 24% by 2026 due to persistent work-from-home trends.
