New research from Wharton shows that technology firms pull a more diverse pool of job applicants when they offer remote work, a finding that could help shape how jobs are designed in the future.

In their paper accepted for publication in Management Science, Wharton professors David Hsu and Prasanna (Sonny) Tambe analyzed thousands of technical and managerial jobs that were posted before, during, and after the peak of the COVID-19 pandemic. When the same jobs shifted from in-person to remote, that single change yielded a 15% increase in female applicants, a 33% increase in underrepresented minority applicants, and a 17% increase in total applicant experience.

Although the study focused on tech startups, the professors said the results are relevant for business leaders across industries as they tackle the dual challenge of increasing workforce diversity and figuring out remote, hybrid, and in-person work.

“We think that there’s going to be a lot of real-world importance [to this research] as companies think through what their policy is going to be. Is it going to be equitable? How do we encourage the right behavior and balance it against the needs and wants of the employees?” Hsu told Wharton Business Daily on SiriusXM during an interview about the paper, which is titled “Remote Work and Job Applicant Diversity: Evidence from Technology Startups.”

The Flexibility of Remote Work for Diversity Applicants

Hsu and Tambe said they wanted to study the effects of remote work on women and minorities because they are often overlooked in emerging research on remote work. They are also statistically underrepresented in careers in science, technology, engineering, and math (STEM), despite well-established research showing that diversity boosts innovation.

“We wanted to investigate the extent to which this more flexible work arrangement might help attract these individuals to the workforce,” Hsu said.

“We do think that this is fairly applicable for a pretty wide swath of skilled jobs.”— David Hsu

The professors partnered with AngelList Talent (now Wellfound), a platform catering to the growth-oriented, early-stage startup labor market. They analyzed data from about a half-million STEM job listings from 2018 to 2022 — two years before and after the March 2020 COVID shutdowns. The time period is key because it enabled the scholars to examine jobs in which the only factor that changed was remote-eligibility status.

Three Reasons Why Remote Jobs Boost Diversity Recruitment

Drawing on previous studies about women and minorities in the workforce, the professors outlined three reasons why they believe remote jobs draw significantly more numbers of diverse candidates:

1. Time Flexibility

This dimension is especially valuable for women who bear a greater share of child and family care. The professors cited one study that found female scientists with young children experienced a substantial decline in time devoted to research, for example. Remote work also erases commutes, giving women back more family time.

2. Location Flexibility

Remote work loosens geographic constraints for women who may be confined to a location because of their husband’s job. It also provides broader job opportunities for underrepresented minorities who may not have the same access to living in an expensive city. According to one study, just five cities — Boston, San Diego, San Francisco, Seattle, and San Jose — accounted for 90% of the growth in tech jobs from 2005 to 2017.

“If you’re not coming into the workplace every day, your boss doesn’t see you, and that may limit you.”— David Hsu

3. Limiting Face-to-face Interaction

Remote work allows women and minorities to remove themselves from hostile work environments or offices where they may encounter microaggressions or overt discrimination. However, the professors caution that this benefit also comes with a downside. Long-term remote employees may not develop the interpersonal skills required for managerial jobs, may get less useful feedback, and they may be overlooked for plum assignments and promotions.

“If you’re not coming into the workplace every day, your boss doesn’t see you, and that may limit you. You may be passed over more easily even if you’re quite capable,” Hsu said, adding that organizations need to establish policies that equalize the treatment of remote, in-person, and hybrid workers. Those features or interventions should be “baked into” their policies so there’s no ambiguity, he said.

Another interesting finding from the study is about money. The professors estimated that applicants are willing to give up an average of 7% in wages in exchange for remote work.

“You can think about that as another perk, just like your health insurance or vacation days,” Hsu explained. “Having remote work turns out to be thought of as an amenity or a job benefit for which we could calculate using our data.”

The Future of Diversity Recruitment

Hsu said the study is not meant to be exhaustive, nor does it address all the challenges of diversity and remote work. After all, he said, there are many jobs that cannot be done remotely and likely never will. But the study offers insight for companies committed to increasing their number of minority and female employees. Managers don’t often think about offering remote-eligible jobs as a way to boost diversity, yet the research shows it’s an option.

“If we pay attention to the reasons why women and underrepresented minorities are drawn to remote work, we do think that this is fairly applicable for a pretty wide swath of skilled jobs,” Hsu said, noting that the average salary of the jobs in the study was $120,000. “These are also the areas that are growing in our economy. We are projected to have a shortfall of STEM workers, and the competition for talent is strong.”