This is how every salaried person's pay already works and it should apply to hourly workers too.
But in reality, in just doesn't work.
If I don't value my time, and my employer has to pay for my commute, then why wouldn't I choose to move an hour away from work, or take a job an hour away, to make more money without actually working?
How would you solve employers discriminating against people that live an hour away or paying a lower hourly wage to someone that lives farther away?
Also, right now plenty of companies put out voluntary overtime that people don't end up taking, despite higher pay and literally the same work. Plenty of people would rather not be under someone else's command for an extra hour just to make a few bucks, and in fact, when you pay people adequately they largely don't want to do that. You always have weird outliers that think life is an idle game and try to make the bank account go as high as possible, but building systems around dumb outliers is not good systems engineering.
On average, people don't want to spend extra hours in their car, even if you pay them full wage. This is why when Uber started out they basically had to push subsidized high pay, so people would be willing to drive around all day.
Right now you can, with little experience, go make like $80k or more a year driving around all day, by being a trucker, and yet the industry is constantly struggling to keep people working, because the job is awful. If you have an employee that decides to move five hours away and waste ten hours of their day to make an extra hundred bucks, there are probably other things that make them a mediocre employee that you can fire them for.