The ability to work remotely enables individuals to secure jobs that are a better match, even if those jobs are located further away
Working from home has lessened the need for commuting, effectively reducing the costs associated with the distance between residence and workplace. The advent of the Covid-19 pandemic has significantly increased the viability of remote work, potentially severing the traditional ties between where people live and work to an unprecedented degree. This shift has the potential to broaden the scope of local labor markets for both employers and employees, facilitating more efficient and suitable job matches.
How does working from home change locality choices? Has the restriction of living near to the workplace become less binding? Are jobs further away now more relevant? In addressing these pivotal questions, our recent IZA Discussion Paper in Germany integrates extensive administrative data on employment histories with a newly developed indicator for the potential of working from home, based on detailed data regarding occupational working conditions. This approach allows us to use the variation in how suitable different occupations are for remote work as a means to identify the effects of working from home on commuting distances through lens of a quasi-natural experiment setup.
Our findings indicate a significant transformation in the dynamics of work and residence locations attributable to remote work. After the pandemic hit, there has been a notable increase in the distance between individuals’ workplaces and their homes, especially among those in occupations conducive to remote work. While the year 2020 showed no notable changes, from 2021 onwards, a significant rise in the association between the potential for working from home and the distance between work and home emerged, diverging from previous trends.
Moreover, we observe that some individuals have opted to relocate to areas farther from their workplaces. This trend is more pronounced for new employment relationships, suggesting a tendency for people to seek new jobs with greater remote work potential, which are located further away than what was common before the pandemic. This phenomenon is largely observed in jobs located in big cities, indicating that remote work is alleviating the constraints imposed by tight housing markets.
Additionally, the difference in real estate prices between workplaces and residential areas has widened. While new jobs and their incumbents are more likely to be found in areas with higher housing costs, this tendency has started to diminish since 2021. Lower-cost, more peripheral regions are becoming more attractive for residence, enabling individuals to live there while taking up or maintaining jobs in metropolitan areas.
Despite the potential of remote work to narrow the gender commuting gap, our analysis has not found significant evidence of a differential impact on commuting patterns between women and men.
In sum, the ability to work remotely potentially enables individuals to secure jobs that are a better match for them, even if those jobs are located further away, and is allowing firms to extend their recruitment reach, thus tapping into a larger pool of potential employees. This is advantageous for employers in metropolitan areas and also opens up opportunities for firms outside urban centers to attract suitable employees. Beyond improving individual working conditions, remote work has the potential to enhance labor market matching, which could induce increases in employment, productivity, and incomes. We anticipate that future research will continue to explore these issues from diverse perspectives, and we intend to actively contribute to this burgeoning field of study.
© Sena Coskun, Wolfgang Dauth, Hermann Gartner, Michael Stops, and Enzo Weber
Sena Coskun is Assistant Professor of Economics at FAU Erlangen-Nuremberg
Wolfgang Dauth is head of the Research Department "Regional Labour Markets" and Professor of Regional Labor Economics at the Otto Friedrich University in Bamberg, and IZA Research Fellow
Hermann Gartner is Economist at IAB
Michael Stops is Economist at IAB
Enzo Weber is Head of the Area Forecasts and Macroeconomic Analysis at IAB and Professor at University of Regensburg
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