Research note: Potential economic impacts of Victoria's proposed WFH laws
(with Arianna Gatta and Lizi Yu)
Main findings
The policy targets a sizeable group of workers in Australia’s highest-WFH state. In our survey, 32% of full-time Victorian office workers are allowed fewer than two WFH days. Among these affected workers, three-quarters want to WFH at least two days. More broadly, Victorian employers show relatively strong adaptation to WFH, allowing the most WFH in Australia and placing less emphasis on office presence in promotion decisions.
Affected workers would take up and value a two-day WFH option. If the right effectively moved such workers onto a two-day firm WFH policy, their WFH would increase from 0.2 to 1.7 days. This would be worth 5.6% of salary to an affected worker if coworkers remain mostly office-based, and 10.5% if coworkers also work from home two days. WFH is much more valuable when hybrid work is embedded within teams rather than exercised individually.
Affected workers hold jobs less suited to WFH and value it less. They are not a random slice of office workers: their jobs involve stronger teamwork, more in-person tasks and promotion systems where office presence matters. Moreover, their willingness to pay for a two-day WFH option is about 50% lower than other office workers.
The policy may slow wage growth and have other unintended consequences. Absent any disemployment effects, the short-term benefits to workers will be sizeable, as firms are unlikely to cut existing workers’ wages. In the longer term, firms may capture some of the benefits by offering lower wage growth or starting wages. The legislation may also have broader implications for younger workers’ careers, productivity, team coordination, housing affordability, CBD activity and public transport use.
Our findings suggest caution. We show that the policy binds in the state and jobs where additional WFH is least likely to be efficient. For these marginal jobs, worker valuations are lower than average and firms’ costs of allowing WFH are likely to be larger than average.