That "incentive" already exists in the form of cheaper housing the further away you go.
I agree that commuting should be considered as part of "work", but I always took into account commute time when considering job opportunities. The pay obviously never had an explicit "commute" line, but my math was "this job + this commute for this pay". Figure if it's worth it or not.
Salaried employees are already paid for their labour, I'm not paid hour by hour.
If I work one extra hour, was that unpaid and my employer stealing from me? If I work one hour less, is that me stealing from my employer? No on both counts in my opinion.
When picking a job I consider a commute a cost already and would need to be compensated for it in the form of higher pay.
But I don't think we should artificially stack the deck in favour of people who live close to work, that just adds a totally fake and unneeded item to the long list of advantages e.g. non parents have over parents who need a bigger house or access to schools.
Everyone already does. If a job involves picking up toxic sludge, commuting long distances, or any other badness factors, you're going to get paid more because the labor market will clear at a higher price. This is how all markets function, the labor market is no exception. I believe governments should fix market failures, but this isn't an example of a market failure.
You could maybe make an argument only for minimum wage jobs as a special case, because the price for labor can't freely adjust downwards if you force companies to also pay for commute.
The Efficient Market Hypothesis is an approximation at best, and fails hard at labor issues.
Employee salaries don't fluctuate continuously. In most cases, labor loading - the number of warm bodies paid to be there 9-5 - can't fluctuate much, quickly (with the exception of catastrophic business failure). Salaries and wages almost never go downwards for employees already hired. Etc.
Companies would change their tune on WFH real quick if that were the case.