This workplace policy move is destined to create conflict, animosity and even a departure of talented staff. Business leaders need to understand the danger before it’s too late to change course.
Roughly one in 10 Americans moved during the COVID-19 pandemic—Silicon Valley in particular experienced a mass exodus. The introduction of widespread remote work allowed many workers to de-camp from large urban centers. Some moved back into their childhood bedrooms, while others fled to the suburbs, seeking a picket fence and backyard for their kids. Enough so-called digital nomads migrated to Canggu, Indonesia, to earn the island the nickname “Silicon Bali.”
A year and a half later, tech companies are eager to lure hesitant employees back to their expansive and expensive campuses—so eager, in fact, that they are willing to use sticks and not just carrots. Google, for example, unveiled a work-from-home pay calculator. According to internal documents reviewed by Reuters, the tool would determine pay reductions for any worker who permanently moved to remote work. Pay cuts will be based, in part, on distance from the home office. A Google employee working from home in Stamford, Connecticut, would experience a 15 percent reduction, whereas a colleague working from home in New York City would not experience any loss of pay.
It’s equal work, but not for equal pay. If that sounds like a ridiculously bad idea, that’s because—according to research on organizational behavior and social psychology—it is.
Embedded in human nature is a drive for fairness. In the case of salary, this drive translates into the simple but profound idea that people deserve equal pay for equal-quality work. Of course, negotiations have always played a part in salary differentials, as have demographic biases. Office zip codes have partly determined salaries, as they can account for local costs of living. In many instances, companies support commuting employees, even providing perks like free shuttle buses. But they certainly haven’t penalized workers who report to the same home office based on where they live.
Determining salaries based on an employee’s home zip code is likely to be seen as unfair. Unfairness breeds resentment, and resentment generates spite. And research shows it’s not just humans who think this way—monkeys get furious if they see another monkey get a better reward for the same work effort. A monkey who happily ate a piece of cucumber just moments earlier will, upon seeing another monkey get a better-tasting fruit, throw that cucumber back at their human “boss.”
Unfair systems that generate resentment lead to three corrosive outcomes. The first is conflict. As I have detailed elsewhere, the distinction between remote and in-office workers is now replete with status differences and the potential for grievance-driven conflicts.
The second is attempts by workers to game or even sabotage the system. When people consider a system unfair, they will act against it, even unethically, without guilt. It is easy to envision a situation wherein people offer false addresses to thwart the system and keep their pay, not unlike a parent using a relative’s address to get kids into a more desirable public school. A simple zip code calculator would likely require a complex surveillance system, which would inevitably breed more resentment.
Another inherent feature of human nature is loss aversion. For human beings, losses are more painful than gains are pleasurable. The proposed zip code pay calculator will mean dramatic reductions in pay for many—some remote workers may face up to a 25 percent pay cut. Salary cuts are a gut punch, and could motivate high-performing employees to leave for good.
The seething resentment driven by an employee’s sense of unfairness and loss aversion will only cause Silicon Valley firms to lose even more staff. Formerly high-status tech companies have lost their sheen in the public mind. Amid concerns about data privacy and social media’s effect on democracy, employees of Facebook and Google no longer puff out their chests with the pride of working at a coveted firm. Instead, many feel the sting of shame by association. Work-from-home pay calculators will only increase the attraction of small start-ups teeming with potential and opportunity, free from any suffocating stigma.
Here is a simple principle for Silicon Valley to pursue: equal pay for equal-quality work. At the very least, tech firms should determine a fair salary proposal that is uniformly applied for all remote work. But if the goal is to put butts back in Silicon Valley seats, penalizing remote employees will only drive them away, supercharging the mass exodus away from tech epicenters.
Adam Galinsky is the Paul Calello Professor of Leadership and Ethics at Columbia Business School. He is the co-author of the best-selling book Friend & Foe.
The views expressed in this article are the writer’s own.
