The Economics of Working from an Office are Insane

Jeff Graham

Exactly two years ago Marissa Mayer made headlines with Yahoo's policy that required its employees to come to the office instead of working from home. A raging debate ensued, and was largely focused on collaboration vs. productivity, and flexibility vs. innovation.

The surprising omission from the group was economics. Working in an office building costs workers and employers an incredible amount of money. Here's how it breaks down as I see it:

Employer Costs:

Two years ago, the average cost of office space in the United States was just over $23 a square foot per quarter. A fairly modest office space for an employee is about 125 square feet, which means that companies typically pay about $2,875 a quarter for the space a worker sits at.

Offices also require security guards, receptionists, cleaners, furniture, insurance and maintenance people (to name a few). In total, the whole endeavor is a very expensive one, with an estimated per employee cost of over $10,000 a year.

Employee Costs

The American Automobile Association says that a vehicle costs about $10,000 to operate annually. If a worker owns a primary or secondary car for the reason of getting to their job, they're spending about $900 a month to get to work. Workers also spend an average of $1,000 annually on lunch, to say nothing of coffee, clothing and other activities.

There's also the cost of lost time to consider. According to the US Census Bureau, The average travel time to work is 25.4 minutes, which amounts to about 210 hours a year (or five weeks of full-time work).

The Combined Cost is a Whopping $20,000 Annually

Office space, vehicle costs and lunch bring the combined employer, employee cost to around $20,000 annually... which is an unbelievable price to pay for innovation and collaboration.

Yahoo has over 12,000 employees, bringing the combined cost of working from the office to an estimated $240,000,000 (12,000 employees x $20,000).

Based on the above figures, commuting costs Yahoo employees about 2,520,000 hours a year, which is 63,000 work weeks, and is 1,260 full-time-equivalent working years.

Working from Home Should be the Default

Because there is so much money to be saved working from home, I think it should be viewed as the default option. In every situation the employee and employer should collectively ask: "are we going to get a good return on our $20,000 annual investment in this?"