Sometimes remote workers working from home can be perceived as outsiders by company leaders. The purpose of this article is to present the risks associated with being perceived as an outsider. The parallels of insider advantages in the stock market and insider advantages within the job market are explored. Skip to the last paragraph if you are uninterested in the background research of labor economists.
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The risk of outsider status for remote workers
While remote workers, telecommuters and digital nomads have fought hard for the benefits of working from our home office, telecommuting or working from anywhere, one can’t be too careful. Each and every day we need to fight to remain inside while we work in distributed teams external to the in person office.
The costly risk of outsider status of Gen Zs
Then too, think about the Gen Z’s who have yet to secure their first professional job for which they have been trained. They may succumb to depression or experience high levels of anxiety at the thought of receiving another rejection level. Or to face yet another belittling interviewer. The unemployed make negative generalizations of their future potential because they’re on the outside, trying to get inside of a gated community of gainfully employed workers.
Why do we talk about inside versus outside on this blog catering to people working virtually or aspire to?
Insider advantages and outsider disadvantages in the financial sector
“If you’re not inside you are outside, ok?” Gordon Gekko advised his young protégé in his speech, “Greed is Good.” This movie, set in Wall Street financial district, New York during the mid 80s when inside deals between brokers, investment bankers and venture capitalists were the norm. A scientific analysis of trading data spanning decades and cited in Nature shows investment brokers using insider information have a definite financial advantage. Not only that, their clients of whom they advise and subscribers to their financial newsletters are privy to more accurate earnings forecasts and can make better financial decisions. For our readers who who like to track insider trades for their own benefit, seek out the widely used Refinitiv product.
Sure, making inside trades based upon non-public information is unethical and unfair. And can be illegal. But auditors and investigators at the Security Exchange Commission are toothless tigers and lack the resources or will to stop it from happening. Funny thing is, not all trades benefiting for insider information is illegal.
Fortune explains, “insider trading isn’t illegal as long as the person reports the trade to the Securities and Exchange Commission (SEC)and the information is already in the public domain.”
How lucrative is insider trading? The Wharton School of Business: The Rodney L. White Center for Financial Research conducted a 20 year study spanning 1975 to 1996. Traders who disclosed insider trades revealed “abnormal returns of more than 50 basis points per month. About one-quarter of these abnormal returns accrue within the first five days after the initial transaction, and one-half accrue within the first month (Estimating the Returns to Insider Trading, L.A. Jeng, A. Metrick & R. Zeckhauser, page 4, para 2.)
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But getting back to most recent data. Fortune analyzed more than 2.5 million stock market transactions that were reported to the SEC during 1987 to 2019 from insiders employed at 10,000 companies. Yes, insiders generally beat the regular day traders, retail traders and the like. Also, particularly for our digital nomads working from anywhere:
- high ranking officers and employees employed by global conglomerates experienced 2.8% financial returns in the month after purchasing a stock,
- high ranking officers and personnel working for domestic-based operating companies earned 2.4% in the month after buying a stock.
Fortune concluded with this, “that may not sound like a lot [of money or financial gains], but assuming consistent returns, it could amount to earning $170,000 more if an insider traded $1 million over several months. ” This amount of earning is three times the amount of a typical monthly gain (0.9%) when trading. Not to mention the lowered potential of experiencing a loss to wipe out your principal investment!
Insider advantages and outsider disadvantages in the job market
Understanding and benefiting from the insider / outsider concept isn’t confined to the movers and shakers of Wall Street. Economists have applied an “insider – outsider” model to the labor market to explain the persistence of unemployment (Blanchard and Summers, 1986). The Gordon Gekko philosophy applied to the job market implies that while the ranks of unemployed are plentiful in supply, they can’t underbid current workers to entice employers to fire insiders and replace them with unemployed outsiders.
Why? Labor economists give these 3 reasons:
- minimum wage levels and/or range levels already established and accepted in the market for groups of jobs, job categories, job functions, and job requirements
- companies can assume that lower wages offered by outsiders may lead to reduced productivity or increase in current / future employee turnover
- insiders use their insider position to their advantage (insider- outsider theory).
Assar Linbeck, Professor of International Economics, Institute for International Economic Studies, University of Stockholm, and Dennis J. Snower, Professor of Economics, Birkbeck College, University of London write in Insiders versus Outsiders, published in the Journal of Economics, the occurrence of currently employed workers holding numerous employment advantages than their unemployed counterparts. These corporate insiders also reap benefits over employed job applicants working elsewhere (outside of the company posting a job vacancy).
Here’s a few more posts to consider:
- How to keep your team connected in a remote working world
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- How to keep remote workers motivated and engaged
- How to manage toxic employees in a remote work environment
More specifically, the direct insider – outsider model of labor markets in its application show where employed insiders knowledgeable of the costs associated with hiring and replacing them usurp newcomers by:
- making professional life difficult by slow rolling the individual job task and project success of newcomers,
- hesitating to share job specific information to help them become more proficient,
- refusing to cooperate with new job market entrant during group work,
- harassing and/or failing to invite newbies to informal social events, and
- forgetting to involve them during strategic planning and team meetings.
These under the radar tactics, hardly perceptible by management but felt with great intensity by the newly employed, enhance the “market power” of insiders to push their wages to greater heights, “above the market clearing level.” Although the average wages of their personnel pool is above market rates, the economists theorize that firms are hesitant to replace these insiders with outsiders because “it would be costly to do so.”
Insider advantages of in person staff returning to the office (RTO)
Corporate insiders trade nonpublic company information for exorbitant personal gain and financial profit. A stable of insiders working for an employer cooperatively shut out the potential of entrant outsiders to succeed at the company. Do employees returning to work hold insider benefits inaccessible to remote workers? How might telecommuters, those working from home take maintain insider status? Is it possible? Sure it is. But it may be a fight against the odds. For instance,
- BBC cited a Stanford Graduate School of Business study showing that even though remote workers were 13% more productive, they weren’t rewarded with promotions at nearly the same rate as their peers who reported to the office daily.
- The University of California, Santa Barbara, conducted research demonstrating the importance of face time. The findings indicated that being observed by others while working in an in office setting yielded positive benefits for employees. This facetime communicated to employers their commitment to the company, their team; and most importantly, their job.
The costly risk of outsider status for remote workers
Telecommuters are not immune to the dangers of being perceived as outsiders. Back in 2017, a majority of remote workers (52%) according to Harvard Business Review:
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- felt their colleagues did not give them equal treatment
- felt mistreated
- felt left out
- worried their co-workers spoke ill of them
- made changes to projects without telling them beforehand
- lobbied against them
- failed to help them fight for their priorities
While 2017 was long ago, the current return to work movement is in full force. It is likely that covert threats to the employment stability of telecommuters may rear its ugly head again. Therefore it is imperative that staff working virtually take the necessary steps to solidify and maintain their insider status. To not do so would be at one’s own peril.
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