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The Money Value of Time

Matt Yglesias points to a recent IBM study trying to map much people hate commuting to work and points to this interesting chart:

commuter-pain-chartFrom this, Matt concludes that all manner of government policies could be framed as a way of reducing the pain of commuting: higher gas taxes, congestion pricing, and so forth.

I simply don’t believe the numbers.   Matt’s commenter Paulie Carbone encapsulates my objection nicely:

I think people are radically overstating how much they dislike traffic. 18% are willing to pay over $30 to save 15 minutes? If you commute to and from work, and work 5 days a week, 50 weeks per year, that’s at least an extra $7,500 per year.

And who really values their time that highly? If you think 15 minutes is worth $30, that’s $120/hour. Would these same people not work for anything less than $120 an hour?

I make a decent living and insisted on the ability to work from home at least one day a week before taking my present job.  I find driving 45 minutes average each way a ridiculous waste of time.  But I wouldn’t pay $120 a day  ($20 x 3 x 2) to avoid it.

The problem with these surveys is that most people are innumerate.  (Which explains, for example, why a significant number of people spend more on child care, commuting costs, lunches, dry cleaning, and the like than they actually net from an unsatisfying job because the family “needs the money.”)

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He has a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. This is actually a subject I’ve thought some about in my own circumstances. Since I currently work at home (commute time: approximately 30 seconds from the bedroom to my office), but given where I live, taking another job would probably require a one-way commute time of 45 minutes to as high as 2 hours.

    How much extra would a job have to pay me to make it worth the extra commute? As an added bonus, the way my current job operates makes the math easier: I really could choose to just work the extra hours rather than commute them, so (monetarily at least) it’s a flat 1 for 1 trade: rather than taking, say, an extra 2 hour round-trip commute, I realistically *could* choose to just work 2 hours extra per day, for a roughly 25% annual salary raise.

    For me, that makes the comparison rather easy. If I were offered a new job that required a commute, I would expect the pay raise to be *at least* equivalent to what I’d get if I just worked that extra time. Or, on the other hand, I’d expect non-financial job benefits that I personally valued at approximately that level.

    I’ll tack on top of that, though, that since I would probably be expected to work at least a typical 40 hour work week at the new job, that new commute would be pushing into my non-work time, which I personally value at a higher dollar rate than my work time (if I didn’t, I’d be working more hours now for the extra money).

    Commute time cutting into personal time may be better or worse than work time doing the same, depending on how you look at it. It doesn’t require the mental effort and fatigue of an information economy job, but it brings with it the stress of traffic and the cost of travel.

    The direct result of this is that it makes it very difficult for me to accept a new job, even if I wanted to. On top of all other considerations (benefits comparison, etc), a job with a one hour one-way commute (which is probably about typical of what I’d get here) would have to offer me a 20% raise just for me to “break even” (8 hours of travel on top of 40 hours a week). That’s pretty huge.

    [Note: for various reasons, moving is simply not an option for me right now.]

    *EVEN WITH ALL OF THAT*, I still find myself right at the border of the first two categories on that list, and my salary would have to go up a *LOT* for me to bump out of that – and I’m pretty decently paid.

    Long story short, yes, people are innumerate. This isn’t exactly hard math to do.

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  2. DC Loser says:

    It’s not as easy as simple economics for me. I traded a 15 minute commute for a 60 mile one, but for a higher grade (federal civilian). The higher cost of commuting basically zeroed out any gains in pay I got, plus my commute went from 30 minutes to 2.5-3 hours a day. Why did I do it? It was in many ways a “dream” job in my line of work and the rewards greatly outweighed the inconvenience. Why didn’t I move closer to my new job? Because I’ll probably move again in another few years, back close to home. So I’ll stay put and suck it up for now.

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  3. PD Shaw says:

    I don’t know James; I agree with the innumeracy issue, but I would not be surprised that people do pay $7,500 extra a year to live in a house that is closer than a comparable house in a comparable neighborhood. I’m not familiar with the D.C. area, but could you find a similar house on a similar lot that was considerably cheaper because it inovled an extra half-hour commute?

    I take it as a given that some people live farther from their work than they desire because they can’t afford the type of house they desired that was any closer.

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  4. Furhead says:

    I make a decent living and insisted on the ability to work from home at least one day a week before taking my present job. I find driving 45 minutes average each way a ridiculous waste of time. But I wouldn’t pay $120 a day ($20 x 3 x 2) to avoid it.

    For one day a week, that’s $6000 a year. I’m just curious – you negotiated (“insisted”, in your words) that you work one day a week at home. If they had said, “no, but we’ll give you an extra $6000/year”, would you have agreed?

    If your answer is no, then in fact you are paying MORE than $120 a day for that convenience.

    By the way, when I used to live in apartments, I moved TWICE with the primary benefit of being 5-10 minutes closer to work.

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  5. James Joyner says:

    Actually, the salary was as high as they could go and I asked for two work-from-home days and they agreed to one. Would I have taken an additional $6000 to drive to the office another 50 times? Probably.

    Paying more and receiving more tend not to be weighed the same, anyway. Most people value the former more. That is, they’ll drive an extra couple of miles to avoid paying an extra 5 cents a gallon for gas but wouldn’t drive those miles to be given 50 cents.

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  6. odograph says:

    In SoCal it is very common for people to commute from far out to save money on houses. There have been a number of studies which calculate commute tolerance on that basis.

    Those studies were probably somewhat suspect though, as the communities were not equivalent in other regards.

    The double tragedy for people who made the trade was that those tenuous boom towns suffered this crash the hardest.

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  7. Steve Verdon says:

    Actually, the salary was as high as they could go and I asked for two work-from-home days and they agreed to one. Would I have taken an additional $6000 to drive to the office another 50 times? Probably.

    So you would pay $20/15 minutes, either that or your not working enough. :p

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  8. Move.

    Hey, look at that, no government intervention required.

    Did I mention that Young Matt Yglesias is a real butthead sometimes?

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  9. [...] James Joyner: I simply don’t believe the numbers.   Matt’s commenter Paulie Carbone encapsulates my objection nicely: [...]

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  10. teqjack says:

    From this, Matt concludes that all manner of government policies could be framed as a way of reducing the pain of commuting: higher gas taxes, congestion pricing, and so forth.

    Could indeed. Or not. Just how is increasing the cost of a commute supposed to lessen the dislike/pain of same?

    “When a greater contribution to transportation is pitched as a way to shorten commutes and give workers more free time, the prospect becomes more desirable.”

    Does he mean Public transport? Because it takes me as long to walk to the bus stop as it does to drive to work: about twenty minutes. Still, well, keep reading this comment…

    As to “congestion pricing,” it is called “parking lot/garage charges/fees.” In my area, an eight-hour stretch next to downtown offices runs more than ten dollars a day. So unless the weather is really bad I bus.

    Bring back the Company Town. And the Company Store. Work at a company, live in company-supplied housing and shop at company-owned store[s].

    Or perhaps aim at what I think has been called “arcology” – everybody lives in several-miles-high buldings, and only agricultural workers “need” to go out.

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  11. Michael says:

    The problem with these surveys is that most people are innumerate.

    I don’t think that’s the issue here.

    Consider your hourly pay rate, divide it by two, that’s what a 30-minute (15 both ways) chunk of your time is worth to you.

    Suppose someone feels that 15 minutes of their time is worth $30. That’s $120 an hour, or roughly $250k a year for full-time pay, not unreasonable for someone commuting into a large metropolitan area.

    Let’s take the larger $10-$20 range, that’s $80k to $160k, which is probably fairly common for anyone making a long commute in a city.

    Now figure that those 30 minutes are time you are _not_ paid for, and which you can _not_ spend with family, friends or whatever, and it becomes even more costly than the time you spend at work.

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  12. Greg says:

    Actually, the salary was as high as they could go and I asked for two work-from-home days and they agreed to one. Would I have taken an additional $6000 to drive to the office another 50 times? Probably.

    Don’t forget that after taxes (fed, state, possibly SS), you may need to be paid an extra $10,000 to receive $6,000 after-tax.

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  13. [...] consider these numbers about as valid as those in the recent commuting pain survey claiming most people would pay $20 per 15 minutes saved on their commute. In reality, few of the [...]

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