The Economics of Working from Home (WFH)

Being privileged enough to still be employed, yet not essential enough to be physically at work, I will burden you all with my two cents on what I have learnt about productivity. I write this in context of us non-essentials, mostly office workers, who work from the comfort of our homes. We are in the golden age of technology so working from home is technically feasible for some professions and also quite a privilege. Unlike workers in healthcare, retail, delivery services etc, for most of us, productivity is not always strongly and positively correlated to the number of hours worked. Whether we work from home or not.

The opportunity cost of going to work

We may consider ourselves to be more productive when working from home because we don’t waste time commuting in traffic, being distracted by co-workers, or generally because we are just more motivated to finish a task since we’re working in comfort. Or are we actually more distracted when we’re at home? Or equally distracted by co-workers as we are by children or Tik Tok. Or is that balanced out by the removal of time spent commuting to work?

There are endless ways of calculating the opportunity cost of going to work. Workers can now claim 80 cents per hour in tax deductions if you are WFH. That, as well as the money spent on petrol that you save, the depreciation of your car, time spent in traffic, time spent socialising, office distractions, etc. In terms of productivity, more time means there is the opportunity to take up new roles. For instance, being one of the only people under the age of 30 at my workplace, I have been granted the honorary position of becoming the unofficial IT Help desk.

In which case, what is the argument for then going to work at all if it’s so costly and now we’ve proven that we technically can work from home? Maybe it’s that home can still be a distraction, especially if you have children present. And if you’re connecting through a VPN, you are familiar with the pain of completing a task that would normally take substantially less time. Traditionally, physically going to work was a necessity and we’ve always had to separate work from life, but in today’s age the line is blurred. But what is clear is that more than half of workers, 69.6 percent in Australia, believed their productivity at home was the same or higher than in the office.[1]

But how many hours are actually spent working or producing value?

Productivity ≠ hours worked

In a recent survey on working from home, 80.8 percent of the Australians surveyed said they work the same or more hours at home as they do at their place of work.1 However, how much of this time translates into productivity is difficult to measure. Surely completing tasks is an indicator but tasks vary in complexity.

In an era of ‘fake jobs’, it is easy to see how many of us are actually not paid based on the value we produce or contribute but rather often on the number of hours worked. This is in contrast to retail or healthcare where more hours worked literally means more work done, more shelves stacked, more patients looked after or more surgeries completed. How much time do we waste procrastinating or watching the clock or refreshing our emails for the sake of the status quo of a 9 to 5? In economics, we talk about utilisation in terms of labour and capital. Not enough emphasis is placed on the utilisation of time. Will a worker be more motivated if they can leave work as soon as they have no tasks to do? In fact, will they be more efficient, and communicate with their co-workers more effectively to complete a project that would have otherwise dragged on with unproductive meetings and postponements. Just because you have 7 hours to do a task doesn’t mean you need all seven hours.

Recently, there has been a lot of discussion surrounding a four-day work week. Microsoft experimented by implementing a four-day work week and found that productivity jumped by 40%.[2] Staff was given special leave on Friday that was paid. But of course, less hours could mean more pressure placed on workers in some cases.

The future of work is flexibility

The underlying idea is flexibility. Whether working from home or working four days or fewer hours, workers are more productive when they can balance their lives with their work.

Where do we go from here? This has been the only time in history where people have had to work from home. It now shows that most people, we non-essentials, can do this work from home, so why waste petrol and time commuting to work? For the sake of having a routine? Technology has granted most of us the ability to communicate and collaborate as we would at an office from the comfort of our homes.

In conclusion, what this will show is that we can work remotely when we want, we can also work from an office when we want to. What is likely to give the most productivity and extract the most value from a worker is flexibility. And that is subjective, everyone has different needs and is motivated in different ways. Eventually, if we are ever allowed to leave our houses again, it might be worth rethinking how we work. Until then, we are doomed to watch true crime documentaries about the messy underworld of big cat breeding. A profession I hope is not (but probably is) working from home.

Image by Mudassar Iqbal from Pixabay

[1] Citrix. (2020). Remote work: The new normal. Retrieved from https://www.citrix.com/en-au/news/announcements/apr-2020/remote-work-the-new-normal.html

[2] Klienman, Z. (2019, November 4). Microsoft four-day work week ‘boosts productivity’. BBC News. Retrieved from https://www.bbc.com/news/technology-50287391