Who Should Work from Home During a Pandemic? The Wage-Infection Trade-Off

25 Pages Posted: 3 Nov 2020

See all articles by Sangmin Aum

Sangmin Aum

Myongji University

Sang Yoon (Tim) Lee

Queen Mary University of London

Yongseok Shin

Washington University in St. Louis

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

Shutting down the workplace is an effective means of reducing contagion, but can incur large economic losses. We construct an exposure index, which measures infection risks across occupations, and a work-from-home index, which gauges the ease with which a job can be performed remotely across both industries and occupations. Because the two indices are negatively correlated but distinct, the economic costs of containing a pandemic can be minimized by only sending home those jobs that are highly exposed but easy to perform from home. Compared to a lockdown of all non-essential jobs, the optimal policy attains the same reduction in aggregate exposure (32 percent) with one-third fewer workers sent home (24 vs. 36 percent) and with only half the loss in aggregate wages (15 vs. 30 percent). A move from the lockdown to the optimal policy reduces the exposure of low-wage workers the most and the wage loss of the high-wage workers the most, although everyone's wage losses become smaller. A constrained optimal policy under which health workers cannot be sent home still achieves the same exposure reduction with a one-third smaller loss in aggregate wages (19 vs. 30 percent).

Keywords: exposure, lockdown, Pandemic, work from home

JEL Classification: E24, I14, J21

Suggested Citation

Aum, Sangmin and Lee, Sang Yoon (Tim) and Shin, Yongseok, Who Should Work from Home During a Pandemic? The Wage-Infection Trade-Off (October 2020). Available at SSRN: https://ssrn.com/abstract=3723521

Sangmin Aum (Contact Author)

Myongji University ( email )

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Seoul, 120-728

Sang Yoon (Tim) Lee

Queen Mary University of London ( email )

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London, London E1 4NS
United Kingdom

Yongseok Shin

Washington University in St. Louis

One Brookings Drive
Campus Box 1208
Saint Louis, MO 63130-4899
United States

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