How should we measure the value of time?


This cartoon from xkcd made me think about how we measure the value of time.

I have never totally bought the argument that we should assign to time the same hourly rate that we get for working. Suppose someone gets paid $50,000 per year. That works out roughly to $25 per hour of work, allowing for a 40-hour workweek and two weeks off for vacation. Does that mean that each minute of our time is worth about 42 cents?

The only time that argument made sense to me was a brief period when I was working as a consultant and actually charging by the hour. During that period, I felt really guilty when I was just goofing off and not doing anything because I could have been working and earning money instead. That ever-present feeling of guilt for not working became oppressive after some time. I could never quite find the right balance. It was a big relief to stop doing consulting as my primary source of income.

Some people use the ‘time equals money’ argument to say that it is not worth spending too much time to make small savings here and there. But the catch is that the time we save by not doing something (like going to a more distant store to buy something on sale) is not used to actually earn money. That time is just spent on other non-earning activities. So the real contrast is how we compare the relative value of two competing non-earning activities.

Most of us work on a more intuitive sense of how much our time and effort is worth. When we were poor graduate students, we spent a lot of time cutting coupons for groceries and everyday items and carefully shopping to get the most for our limited money. I don’t do so anymore because at my stage in life, I think that my time is better spent on other things. But I am willing to spend quite a lot of time researching a major purchase like a computer or TV or car or house to try and save money. I know people who agonize over small items and yet will impulsively make big purchases.

So clearly in my mind there is some internal measuring device that tells me how much my time is worth but I am not able to quantify it in any way. This internal device may be also quite unreliable and overwhelmed by other emotional factors.

Comments

  1. unbound says

    When I saw the cartoon, my first thought was “penny wise, pound foolish”.

    Even today, I don’t see 10 cent cheaper within 5 minutes (maybe 20 minutes out, but that is enough gas to make the trip questionable in savings)…but even if it was 10 cents cheaper, for a typical, not-so-fuel-efficient car, you are talking $2 cheaper on a bill that is likely about $70. Maybe 3% cheaper overall. In my hybrid, I would only save $1 for the tank…with a more realistic 3 cents / gallon, I’m only saving $0.30.

    Yet how many things do we blast money on for far more than a realistic less than $1 savings once a week or so?

  2. The Lorax says

    I guess the answer would be in what we, as individuals, value. Sure, you could narrow the view to particular details (ie, money) and do a lot of fancy mathematics, but there are other things we value that aren’t so black and white.

    For example, we at my job are swamped with work. There’s so much to go around that we’re being offered a lot of overtime work. I haven’t taken any, and I steadfastly refuse to. Why? Because my free time is worth more to me than a few extra dollars. Plus, I hate my job. It’s decidedly more difficult to do the math there, so I sort of have to just go with what I feel.

    And as per the comic, I completely agree with that guy. I am not going to go out of my way for minor conveniences; life is too short.

  3. mastmaker says

    Well….each situation is unique. There is a name brand gas station near my home that is always 30-35 cents higher (for regular) than a bigger (but lower name brand) gas station that is less than 3 blocks further, ON THE SAME SIDE of the road. How does it survive? Brand recognition I suppose. Just yesterday the prices were $4.19 and $3.85 respectively.

  4. says

    I’m sure you’re correct that our intuitive judgment of our time’s worth is, like almost any such judgment, unreliable overwhelmed by emotional factors. That’s why I still think of my hourly rate of pay for work as a good measure of how valuable my time is–because it’s objective. I might not plan to use some specific period of time to earn money by working, but I know how much I could get if I did.

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