Where's the sweet spot? Canadian-led study of Labour Force Survey data reveals excessive remote work may erode wages and productivity
For many employers across Canada, remote work has become a reliable lever for recruitment and retention, a handy tool for flexibility in scheduling and even a productivity increaser.
However, a new study of Canadian Labour Force data from Ottawa reveals a U-shaped effect: regular remote work can raise the overall wages (and profit) of an entire industry, but after a certain threshold is reached, that effect reverses and wages will fall again.
Tony Fang, professor or economics at Memorial University of Newfoundland, led the team that looked at more than 730,000 data points from the survey.
“WFH (working from home) can affect productivity and, consequently, firms’ profits and wages,” the researchers state.
The sweet spot for remote work
The research used Labour Force Survey data covering the first quarter of 2023 to the first quarter of 2024, combined with industry-level data on remote work intensity (based on the share of companies in an industry where all employees have access to at least some remote work options).
It found a 52 – 64 per cent “sweet spot” of peak remote work participation economy wide, associated with higher profit in an industry and by extension wages, because “remote work contributes to virtual production externalities and reduces monetary outlays for office space, as well as turnover costs.”
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For every one percent of remote work intensity, average wages increase by almost one percent – but the increase is not endless: when remote work intensity exceeds 64 percent, the positive wage effect diminishes.
Why remote work benefits have limits
The research identifies three forces that drive wages lower when remote work becomes too prevalent in an industry: increased employee shirking, higher management complexity, and reduced in-person collaboration.
Fang says the management complexity finding is well supported by research, and is a key driver of corporate opposition to remote work – either for systemic or structural reasons or purely due to perception.
"Out of sight, out of mind – it's hard to monitor people working from home,” he says.
“That's the reason why some companies actually install electronic monitoring software. And the other is very subtle, from a psychological point of view: managers are losing … control over the workforce."
Fang's earlier research, published in the Asia Pacific Journal of Human Resources in 2026, reinforced this finding. That research focused on remote work at the organizational level, and found broadly positive effects around organizational performance, productivity, innovation and talent retention — with one exception: management complexity.
Industry-specific approaches to remote work
Fang is careful to tell employers that the findings aren’t homogenous. The 52 – 64 percent optimal remote work threshold is for the overall economy, but each industry has its own sweet spot depending on varying factors.
That means doing the research to find out where employers stand in their industry and what level they should be shooting for. Some employers may find themselves paring back on remote work structures they’ve become over-dependent on, he says.
However, employers above the optimal level don’t need a blanket return-to-office mandate, says Fang.
“Read our paper,” he says. “Look at how [you] stand in that industry: 'Are we overdoing it, or are we under utilizing remote work..?' They could say, ‘Okay, I cannot give you four days out of five days remote... I [can] give you two days.'”
To the question of why employers should care about employee wages, Fang says the goal should ultimately be happier employees, which has a direct effect on long-term bottom lines.
"There's no doubt that employees on remote work are happier," he says.
"You get flexibility, reduced commuting costs. Happy workers are more likely to stay and more likely to be productive.
