It’s time to pay attention to pay

The pandemic has changed everything about work.

Far more people now work remotely. Hybrid and flex work arrangements are all the rage. Employees are quitting in droves in the Great Resignation. There’s the labor shortage, the skills gap, and remote hiring. The list goes on.

So, how do we decide how much to pay people? And if you’re interviewing for a new job, how do you decide how much to demand?

Two opposing incentives are creating uncertainty about pay. On one hand, most employees prefer remote work so much that they’re willing to take a cut in pay. And they need less pay if they move outside expensive areas.

On the other hand, the skills shortage, labor shortage, and Great Resignation movement are driving up salaries and bonuses, as companies work to incentivize employees.

Adding to the unpredictability: Many companies are still in lockdown mode, so it’s unknown how many jobs currently remote will remain so. And inflation is changing the cost of living.

Tech giants like Alphabet, Amazon, Apple, Meta, and Microsoft announced pay cuts for remote employees who left Silicon Valley—which is notorious for its high cost of living (the median home price in Palo Alto in Silicon Valley is roughly $3.5 million). But many other companies, including real estate website Zillow, have said that pay shouldn’t vary based on the cost of living.

When the dust settles, it’s likely that pay at most companies will generally reflect the cost of living of the employee as it always has. Companies will tend to pay whatever the market will bear in the labor market, and it will prove easier to hire good employees at lower salaries in areas with lower costs of living.

But there's much more to it than that. Here's what we should all be thinking and talking about when it comes to paying people in the future of work

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