Benefits of WFH now too big to ignore

The Coalition’s decision to change its policy on working from home (WFH) for public servants shows the benefits of this kind of workplace flexibility are now too big to ignore.

Thirty-six per cent of Australians worked from home on a regular basis in 2024, ABS figures show. That’s almost the same as the 37 per cent who did so in 2023. But it’s a dramatic rise from the five per cent rate before COVID seen in the 2016 Census.

A larger proportion of the population has benefited from this shift to WFH. Credit: iStock

While that means the majority of Australians don’t WFH regularly, the benefits experienced by the one-third of Australians who WFH are enjoyed more broadly.

In households where one person works from home and another goes to the office, the whole household benefits from the time and money saved on commuting and buying lunch, as well as other less quantifiable benefits such as the flexibility to do chores at home.

That means a larger proportion of households overall are benefiting from this shift.

But the gains don’t only go to workers and their households. Employers are also saving money on their wage bill.

We recently found that since 2020, Australians who have hybrid or fully-remote working arrangements earn 5.8 per cent less than otherwise similar people who cannot or do not work from home.

That means someone on the average annual pay who works from home would earn around $4400 less than someone who does not.

This suggests that those who value WFH are making a trade-off between their wage and the benefits they see from the arrangement.

That allows employers also to make a trade-off – they can enjoy these cost savings or pay a premium to mandate office attendance.

Employers are also enjoying greater worker retention. A recent randomised control trial of 1600 workers – the gold-standard of good study design – by Stanford University Economics Professor Nicholas Bloom, found employee quit rates were reduced by a third if they could WFH. This has very real and very large financial and non-financial benefits for employers.

WFH is also helping to increase workforce participation at a time of ongoing skills shortages.

Australia’s overall participation rate has climbed to historic highs since the pandemic lockdowns and is now just under 67 per cent.

The Productivity Commission says in the two years coming out of lockdowns the increase in the share of Australian women aged 15 or older working full-time was bigger than any increase in the previous 40 years.

And we’ve previously found participation in jobs where people could work from home jumped by nine percentage points for women with young children and 4.4 percentage points for people with a disability or health condition from 2019 to 2023.

The growth in WFH has helped overcome barriers that previously made it harder for these groups to get a job, keep their job or increase their work hours.

This is very good news for the economy. It means more income taxes are flowing into government coffers to shore up the budget, and employers – including the public service – can now access a bigger pool of talent.

With these gains in mind, why would we encourage anyone to cut their work hours and job share instead of working from home sometimes?

Leaving aside the fact that many people simply don’t have the choice to work fewer hours as they need to pay their bills, why would we want to unwind so many gains for workers, employers and the broader economy?

A recent study showed that employee quit rates were reduced by a third if they could work from home. Credit: Getty Images/iStockphoto

The reason given by the Coalition was that “these arrangements led to a reduction in productivity”.

This would be a good reason if it were true. But the study quoted was conducted during the pandemic in India.

This was a bad time to study WFH due to other pandemic effects on productivity, the novelty of these ways of working and the fact that India has very different work environments, less childcare and dwellings that are less suited to WFH than Australia.

In fact, the evidence suggests hybrid workers are just as productive as full-time office workers.

The study by Bloom found no differences in productivity, performance-review outcomes, promotion, learning or innovation between hybrid and office-only workers.

Yet again, this episode shows the importance of evidence-based policy formulation for all sides of politics.

Had the Coalition consulted widely and looked at all the evidence, it might not have had to reverse its policy.

The Coalition should be congratulated for listening to feedback, considering the evidence and admitting its mistake. This is a good thing and something politicians should do more often.

As for the rest of us, the best way to make WFH work is to remember that one-size-fits-all solutions don’t help.

Employers and workers should instead find solutions that work best for their circumstances, acknowledging this may change over time.

And we can all make both remote and in-office work better by: clarifying expectations, assessing performance based on outputs rather than inputs, formalising mentoring and developing communication and management skills.

Cassandra Winzar is chief economist at CEDA, the Committee for Economic Development of Australia.

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