The economics of office presence
By Frederick Pilot
October 14, 2025
The virtualization and decentralization of knowledge work has greatly reduced the need for office attendance. But it nevertheless holds value for many knowledge organizations as shown by return to office policies mandating attendance for all or some of the work week.
That value is being assigned and weighed by both knowledge organizations and workers in terms of compensation and talent attraction and turnover.
The math of the office attendance value equation works roughly inversely. Some organizations offer premium pay for office attendance. It’s also being valued insofar as spiffing up offices to make them “worth the commute.”
Conversely, some knowledge workers are willing to accept lower compensation for roles that don’t require much if any office attendance. A paper issued earlier this year by the National Bureau of Economic Research found on average, tech workers are willing to accept a 25 percent pay reduction for roles that don’t require full time office attendance.
This explicitly recognizes the personal cost in terms of time and money incurred by the commute whereas traditionally it was externalized onto staff and seen as part of the job. Now it’s being factored into the employment relationship. Higher compensation for roles requiring regular office presence can offset employees’ cost of commuting.
On the other hand, companies that do not demand office attendance and thus remove the cost of commuting from the employment bargain are being flooded with job applications per this recent Business Insider article, reflecting their high desirability among knowledge workers.
“It’s not about where we work, but how,” Melanie Rosenwasser, chief people officer at Dropbox, told Business Insider. “Flexibility and agency are the new currencies of work.”
The length of the commute and housing costs also factor in. The math there is well established and similarly inverse. Housing tends to cost more nearer to downtown business districts or office parks and campuses or with reliable and fast public transit. Conversely, housing costs tend to be lower in outlying edges of metro areas but come with longer and more time-consuming commutes that take away from employees’ personal time.
As for talent attraction and retention, the most skilled and knowledgeable staff know they are marketable and factor that into their calculations. Knowledge organizations that require office attendance run the risk of losing talent not inclined to work in a mandated organizational office setting.
The primary motivation of the company that participated in the first formal test of telecommuting in 1973 was to reduce the salary premium it had to pay in order to get employees, who lived at least 10 miles away, to work there. We arranged to have them work near their residences. Salary demands dropped and productivity increased as well.
Jack: You literally wrote the book on the transportation demand tradeoff back in the 1970s when it was becoming clear there was only so much capacity on LA Basin freeways and how telecommuting as you termed it then offered potential relief.