Costs and Benefits of Home-Based Telecommuting: A Monte Carlo Simulation Model Incorporating Telecommuter, Employer, and Public Sector Perspectives

Abstract

This paper reviews and utilizes the current body of telecommuting related research to study the costs and benefits of home-based telecommuting. Monte Carlo simulation methods were utilized to help account for costs or benefits that remain highly variable or have not been well documented by past research. This study illustrates the conditions under which the business case for telecommuting is supported or weakened. Conditions for the employee (the telecommuter) are generally most favorable when: (1) the employer bears the equipment cost; (2) commute distances are above average; (3) the commute vehicle has below-average fuel economy; (4) travel time is highly valued; and (5) telecommuting is frequent, while conditions for the employer are most favorable when: (1) the telecommuter bears the equipment cost; (2) there is low telecommuter attrition; (3) the employee is highly productive on telecommuting days; (4) the employee’s time is highly valued; and (5) telecommuting is frequent. For the employer, telecommuting is also favorable if parking and office space savings are realized. While public sector benefits are conceivable, they remain insignificant in most situations because the impacts on the transportation network are probably not concentrated enough over a specific transportation corridor to realize infrastructure benefits and not quantified or valued enough within a regional air district to realize significant air quality benefits. Further, the public sector loses fuel tax revenue. Altogether, this paper provides insight into the potential public sector impacts of telecommuting, as well as the federal, state, regional, and local public policy implications that arise when telecommuting is considered among other transportation demand management alternatives.