According to recent analysis, the expansion of remote work might help the Federal Reserve manage inflation a little better while saving companies more than $200 billion.
For the convenience of working from home, employees are ready to accept lesser salary increases. This thus aids in containing corporate costs and slowing what economists refer to as the wage-price spiral, which occurs when businesses increase prices for customers in order to cover rising costs.
According to a working paper from the University of Chicago, 4 in 10 businesses reported expanding chances for remote work over the last year to relieve strain on their labor budget, and a comparable amount anticipate to do so over the following 12 months.
During congressional hearings on June 22, Fed Chair Jerome Powell stated that authorities “anticipate that ongoing rate increases will be appropriate” to calm the strongest pricing pressures in 40 years. According to him, abrupt increases in interest rates might push the US economy into a recession, and orchestrating a “soft landing” would be “extremely difficult.”
The authors made it clear that their study does not provide “grounds for complacency” with regard to inflation pressures in the near future. “Our evidence says only that the challenge is somewhat less daunting than suggested” by some economists, they wrote.
Jobs are anticipated to suffer from the combined effects of increasing borrowing rates and so-called quantitative tightening. At 3.6 percent last month, unemployment was close to a 50-year low, but pay growth has lagged behind inflation.
There is a rising perception that employees may need to return to the workplace more frequently in order to maintain the good graces of their bosses as recessionary anxieties develop and firms begin to implement hiring freezes or even layoffs. However, there is still a high need for remote work.
The study also discovered that, in addition to its moderating effect on wage increases, remote work may lower labor costs in other ways, including by encouraging employers to hire more independent contractors and part-time workers.
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