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2 million Aussies save $397 by remote work. Is it worth a pay cut?

·4-min read
Blurred image of pedestrians on Australian footbridge, Australian $100 notes
The Productivity Commission has found how much Australians are saving on their commute. (Images: Getty).

Around 2.4 million Australians currently employed have the ability to work from home and save money and time on commutes, with the Productivity Commission now questioning what that means for rates of pay.

A new report released on Thursday found that the average full-time city worker spent 67 minutes each day getting to and from work prior to COVID-19. That equates to an average $49 in foregone earnings.

It’s even higher for people who take public transport, with the average time value and transport cost estimated to reach $57 a day, the Productivity Commission found.

It means that if a worker were to commute one day less each week over the course of the year, they would save seven total days in travel time and $394 in public transport expenses.

The mean value of the commute is calculated as the costs of a daily public transport fare plus forgone earnings of the time spent commuting. Forgone earnings are based on mean commuting time in capital cities (except for Tas, NT and ACT, where whole of state commuting times are used) and mean earnings per hour of full time employees. Mean earnings per hour are calculated as the average weekly ordinary time earnings of full time workers divided by 37.5 hours (assumed hours worked per week).
Source: ABS; Australian Automobile Association and SGS Economics & Planning (2020); Housing, Income and Labour Dynamics of Australia.
The mean value of the commute is calculated as the costs of a daily public transport fare plus forgone earnings of the time spent commuting. Forgone earnings are based on mean commuting time in capital cities (except for Tas, NT and ACT, where whole of state commuting times are used) and mean earnings per hour of full time employees. Mean earnings per hour are calculated as the average weekly ordinary time earnings of full time workers divided by 37.5 hours (assumed hours worked per week). Source: ABS; Australian Automobile Association and SGS Economics & Planning (2020); Housing, Income and Labour Dynamics of Australia.

“Avoiding the commute can therefore substantially benefit workers — survey evidence suggests that many workers consider it to be the most beneficial aspect of working from home,” the Productivity Commission stated.

“Saving on the commute enables workers to undertake other activities — such as extra work, time with family, and caring and domestic tasks,” the researchers added.

Will Aussies swap pay rises for remote work? It's already happening in the USA

The percentage of people working from home climbed from 8 per cent pre-COVID to 40 per cent, and It’s a shift in how Australians spend their money and time that could have ramifications for their rates of pay.

Over the long term, it means workers will ultimately have more power to select jobs that meet their lifestyle needs, although there could be salary trade-offs.

“Anecdotal evidence suggests that many people are already leaving their jobs to pursue the flexibility offered by remote work. Workers may also be willing to accept lower wages to work from home,” the Productivity Commission said.

It quoted US research that found the ability to work remotely for two or three days a week would be equivalent to a 7 per cent pay rise for workers.

Additionally, 40 per cent of workers would quit their job if their boss forced them to return to the office full-time.

WATCH: How leaders can promote healthier habits at work.

And among Silicon Valley businesses, the practice of offering wages depending on where staff work is becoming normal.

Google is reportedly considering cutting workers’ pay by up to 25 per cent if they choose to work remotely, depending on the distance they live from the office.

Facebook has also flagged plans to base salaries on where workers live, while Twitter CEO Jack Dorsey is also mulling pay localisation.

However, the Productivity Commission doesn’t predict wage reductions at a broader level for remote Australian workers, describing this outcome as “unlikely”.

This is for a few reasons: the first is that what people say in hypothetical surveys doesn’t always translate into reality.

The second is that as remote work becomes increasingly normalised, workers and employers will inevitably find ways to reduce distractions and increase productivity, putting upward pressure on wages, the report found.

What will remote work look like post-pandemic?

This is already occurring. A 2021 US study published by the National Bureau of Economic Research found that workers who were forced to work remotely during the pandemic saw productivity increase 46 per cent.

The Productivity Commission expects remote work levels will end up somewhere between pre-pandemic levels and the levels seen in Australia’s toughest lockdowns.

For businesses, it means a period of testing is on its way. Workers can expect businesses to test different hybrid, fully-remote and office approaches attached to varying salaries to see what sticks, and what brings out the best candidates.

“Working from home won’t suit everyone or every business but for many employees working from home arrangements will be a factor in deciding which job to take,” said Productivity Commission chair Michael Brennan.

“There is a long history of technology enabling different ways of working. The forced experiment of COVID-19 has greatly accelerated take-up of technology including that which assists working from home opportunities.”

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