The COVID-19 crisis is worsening inequality around the world as people fortunate enough to work remotely continue to earn a pay cheque while millions of others lose their livelihoods or risk their health in jobs that are deemed “essential” but pay low wages.
Now, one of the world’s biggest banks has proposed a fix to level the playing field and create a more inclusive economy as nations rebuild from the pandemic:
Tax remote workers.
In a report called “What we must do to rebuild” (PDF), Deutsche Bank suggests slapping a 5 percent daily tax on people who work from home and using the funds raised to subsidise the lowest-paid workers who are unable to work remotely.
“For years, we have needed a tax on remote workers – COVID has just made it obvious,” the report’s authors argue.
Deutsche Bank says that the 5 percent tax is justified because people who work from home “are contributing less to the infrastructure of the economy while still receiving its benefits”.
To understand what the bank is getting at, take the example of someone who used to commute from a suburb to work in a New York City office.
That person’s contribution to the economy starts before they even leave home when they choose an outfit purchased from a store that relies on people wanting to look smart on the job. Take away the demand for office wear, and that store and its employees are looking at some lean times.
If the office worker takes the train into the city, they need to buy a ticket, which helps keep public transport running and transit workers in jobs. If they crave a morning latte, they will swing by a coffee shop, which helps keep baristas gainfully employed, not to mention all the vendors who supply that coffee shop.
There are the security guards at the office building’s entrance whose jobs depend on people making use of that facility; custodial workers who earn their living cleaning it; people who make sure the office supply cupboard is stocked – and the list goes on.
The point is – office workers are an integral part of an economic ecosystem that has been built up over decades, so when they stop going to the office, it negatively affects a lot of businesses and jobs.
Considering the number of remote workers in the United States has increased ten-fold since the pandemic, and seven-fold in the United Kingdom, we are talking about a significant disruption.
Meanwhile, remote workers are gaining tangible benefits in the form of higher savings, and intangible ones, like greater flexibility or an extra 30 minutes of sleep because they don’t have to put themselves through the tortuous grind of a morning commute.
“People who can WFH [work from home] and disconnect themselves from face-to-face society have gained many benefits during the pandemic,” the report found. “A 5 per cent tax for each WFH day would leave the average person no worse off than if they worked in the office.”
How is that possible? Deutsche Bank is assuming the average salary of a remote worker in the US is $55,000 a year. At that rate, a 5 percent tax works out to just over $10 per working day. That is the equivalent of lunch money for many workers in the US and Europe – cash they are now saving if they do not have to go into the office.
Deutsche Bank reckons in the US alone, the remote worker tax could raise $48bn a year – enough to give a $1,500 grant to each of the estimated 29 million workers who cannot work from home and earn less than $30,000 a year – a pool that includes essential workers.
The report also says the tax would only apply when governments are not advising people to work from home and would exclude self-employed people and low-income remote workers (insert a collective cheer from struggling freelancers). The tax itself would be paid by employers if they do not provide a worker with a permanent desk (see ya’ later, hot desking).
Deutsche Bank further argues that the tax has the added advantage of not propping up businesses that may never recover from the pandemic, but does help “the mass of people who have been suddenly displaced by forces outside their control”.
“Those who are lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe it to them” to help”, says the report