Can we put a monetary value on leisure time?

The London School of Economics (LSE) publication ‘CentrePiece’ (Spring 2024) had an article on how we can find out the value people place on time spent doing non-work activities.

Putting a value on labour is reasonably straight forward in that you have minimum wage legislation and hourly rates of which the latter is determined by the competitive labour market. As well as work people spend their time doing other activities whether it be volunteering, family care, exercise or going to sport / cultural events. How do we value these activities?

Economists have tried to estimate the value of time by asking people how much they would be prepared to pay for walking the dog, doing housework etc. But there are flaws in this method as people value activities differently depending on the context e.g. waiting in a queue with a friend can be interpreted very differently form waiting in a queue by yourself. A paper entitled ‘Back to Edgeworth?’ by Christian Krekel and George MacKerron (2023) proposed an alternative method to estimating the value of time by measuring people’s feelings – which they call ‘hedonic experiences’ – in real time. So it is not what a person thinks but how they feel in real times once they have made their choices. The basic idea behind the authors approach goes back to the early economist Francis Edgeworth (1845-1926), who argued that, at some point in the future, a psychophysical machine – a so-called hedonimeter – would make it possible to measure utility directly on a physiological basis.

The authors estimated the value of time for 42 daily activities which provided data that could then be used policymakers in social cost-benefit analyses and national accounting. They used a smartphone app, Mappiness, that asked more than 30,000 UK residents about their momentary feelings and activities at random points in time throughout the day over the period 2010 to 2017.

From this they were able to estimate the value of time for daily activities controlled for other activities like who they are with, region and time etc. Therefore they knew how happy people are feeling when doing certain activities and the how much money makes them feel happy. From that they could calculate the marginal rate of substitution between each activity and income to find the monetary value of each activity. The table below shows the value of time for certain activities with sport, running or exercise is worth £11.70; going to the theatre, dancing or a concert £11.20; and visiting an exhibition, museum, or library £8.10. On the negative side commuting (being stuck in traffic etc) is valued at -£17.20 which indicates that people would be better off doing something else – opportunity cost. This is relevant to governments in their designing of infrastructure projects aimed at reducing waiting time during commuting or travelling – e.g. commuting time into Auckland City. Other data is useful in that it captures non-market activities which are not included in the national accounts and therefore could shape public policy which has long been interested in putting a price tag onto time use. People’s wellbeing is mainly valued by how they spend their time.

Source: How much is your time worth? CentrePiece Spring 2024

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