The Hidden Costs of Remote Work, Home Seller Worries, and Pizza With a Side of Stock
Beyond the Headlines: Personal finance news and research you may have missed
No doubt you’ve heard the IRS delayed the filing deadline for 2020 tax returns, which gives some breathing room to taxpayers as well as an agency that’s been busy issuing the first 90 million stimulus checks.
You probably also know just how much brighter everyone is feeling about the economy, what with that flush of cash from the government, more vaccinations by the day, parents feeling good about plans for kids to return to school, and consumers’ appetite to borrow returning. Even parts of the stock market have been feeling jaunty, with the Dow Jones Industrial Average topping 33,000 for the first time in its history after the Federal Reserve signaled it is in no hurry to curtail its easy-money policies.
But while you were monitoring your bank account for that check, here’s what you may not have heard. Did you know there are hidden costs to working from home? Or that companies have been experimenting with giving away their own stock to customers to encourage loyalty, much like credit cards give cash back or airline miles? And how about all you homeowners. Just because it’s a seller’s real estate market doesn’t mean you don’t have your own specific worries about the economy, right?
To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news you may have missed.
What We Found
The Hidden Cost of Working From Home
For many office workers, a silver lining of the pandemic has been kissing the commute goodbye, saving not only time each day, but the costs of hitting the road and sucking down fumes on the freeway. But a newly released study of housing costs prior to the pandemic reveals remote work isn’t free.
Harvard University researchers studied Census data collected between 2013 and 2017 to compare the housing costs of remote and non-remote workers and found that households with at least one remote worker paid between 6.5% and 9.8% more per year, on average, than those with only non-remote workers. (The range depended on whether the home was rented or mortgaged.) For example, remote workers in New York paid $2,549.84 more a year for housing than non-remote workers, while in Phoenix, the extra cost was $1,379.95.
Why? Remote workers had bigger and more costly homes than their in-person worker counterparts who lived in the same areas, probably at least in part due to the need for home offices. This means that workers are effectively footing the bill for office space instead of the companies they work for.
“For firms, managers often speak colloquially of cost savings from remote work due to reductions in office space,” the researchers wrote in a working paper published in February by the National Bureau of Economic Research that has yet to be peer-reviewed. “But this neglects the fact that remote households need more space to accommodate working from home. As a result, remote work entails a transition from firms’ financing of office space to household financing of home workspaces.”
Customers Binged on Pizza When Rewarded With Slices of Stock
While many people say they are going to invest the money from those stimulus payments, there’s a strong temptation to spend on things like eating out, once it’s safe to do so without contracting COVID-19.
But maybe you won’t have to choose. An up-and-coming kind of customer rewards program may provide a way to get a piece of the action by splurging and investing at the same time.
In a two-year pilot program run by the fintech company Bumped, some 13,000 U.S. consumers were given Bumped brokerage accounts, asked to choose their favorite brands from a list, and then awarded fractional shares of those favorite companies when they spent money with them. (The Bumped accounts were linked to their credit card and checking accounts, and when they spent money at those brands, they received a fraction of their spending in that brand’s stock.)
What did they find? According to a Columbia Business School study of the program, released last month, becoming a shareholder was remarkably effective at encouraging business, with people spending 40% more at their selected brands after they were enrolled in the stock reward program.
Take the success experienced by the Domino’s pizza chain. The stockholding customers ended up going to Domino’s 44% more often and spending $33.19 more every month, figures that translate to about 24 more pizzas per year, Bumped said.
“Our study is the first to show a very clean, causal link between stock ownership and consumption,” said Michaela Pagel, a business professor at Columbia, in a press release. “It’s not only that loyalty matters in people’s investment decisions, but we show one step further that loyalty actually affects consumption of the very brands people are investing in.”
And with those solid results, it wouldn’t be too surprising to see stock offerings join cash-back and merchandise rewards as a standard way for companies to tempt you to spend.
Home Sellers Aren’t Just Sitting Pretty
But selling isn’t without its stresses, and the most frequent concerns among sellers have to do with the same pandemic economy that’s put them in the driver’s seat, according to survey findings released March 16 by Coldwell Banker.
Of the more than 1,300 U.S. homeowners the Harris Poll surveyed on behalf of the real estate brokerage in late February, 20% plan to sell their homes over the next 12 months. Among those, many said if they were to list their home now, they’d have concerns: 38% worried about the U.S. economy declining and leaving them unable to buy or sell as planned, 29% worried about buying a home before selling theirs, and 34% were afraid of coming into contact with COVID-19.
And of course, it remains to be seen how much buyers will be deterred by a recent uptick in what have up to now been ultra-low mortgage rates.
The Double Indignity of Low Wages
While pay is just one factor to consider when comparing job opportunities, a new study suggests that pay impacts more than you might realize. Namely, the higher the wage, the less likely you are to be exposed to labor rights violations.
An analysis of data from government workplace safety regulators including the Occupational Safety and Health Administration and the National Labor Relations Board shows increasing wages is correlated with a better quality job less likely to entail unsafe or unhealthy conditions, not being paid fully, harassment, or other violations of labor laws, according to a group of academic researchers whose findings were published in a National Bureau of Economic Research working paper last month.
In fact, within some industries, a 10% increase in the average wage over time was linked to a 5.5% decline in the prevalence of labor violations and a 10% decline in the severity of them, the researchers found.
Hey Canada, How Is That Child Tax Credit Working Out?
The recent expansion of the federal government’s child tax credit (part of the American Rescue Plan) is a big deal for parents: not only does it boost the maximum benefit from $2,000 to $3,000 or $3,600 per child, depending on age, but it transforms the credit from an annual lump sum to a monthly check of either $250 or $300 per child.
But some worry that such a benefit could discourage people from working not only because it’s more money, but because it allows people to claim the full benefit whether or not they earned any income. (The old tax credit was only partially refundable, meaning parents could only get the full amount if they made enough to pay income taxes).
“By increasing cash benefits while eliminating work requirements, the Biden plan would increase dependence and reduce work,” wrote Robert Rector, a senior research fellow at the conservative Heritage Foundation, in a commentary in February. “This would be harmful to the poor, to taxpayers, and to society in general.”
The experience of our neighbor to the north might shed some light on this debate, since child tax credits are old news to Canadians. Since 2016, Canadians have been receiving child tax credits that are for some people much larger than the ones provided by the American Rescue Plan.
So, how did this affect their appetite to work? Researchers in Canada and France studied whether these benefits reduced both child poverty and labor force participation by comparing data for single mothers and single women without children in Canada.
Looking at rates of employment, data on labor supply, and multiple government surveys on income and taxes, they found that the changes had no appreciable impact on the labor supply but did reduce poverty rates, according to a working paper published recently by the U.S. National Bureau of Economic Research. So at least in the case of Canada’s reforms, Rector’s fears—that these child benefits will reduce work—haven’t been realized, this study found.