Monday, March 14, 2011

Daylight Saving Time Costs $2 Billion Per Year

Here's a slightly updated post from last year at this time:

In 2008, economist William F. Shughart did a back-of-the envelope calculation and estimated that the opportunity cost of daylight savings time was $1.7 billion per year: 

"Although it is unclear what benefit Americans derive from adjusting their timepieces twice a year, the costs they bear are clear. As the Benjamin Franklin adage goes: Time is money, and time spent resetting clocks and watches is time that cannot be devoted to other, more valuable uses. Switching between daylight saving and standard time has what economists call an ‘‘opportunity cost.’’

Economists typically value the opportunity cost of a person’s time at his or her wage rate. The U.S. Department of Labor’s Bureau of Labor Statistics reports that the average American’s hourly wage was $17.57 in September 2007. Assuming that it takes everyone 10 minutes to move all of their clocks and watches forward or backward by an hour, the opportunity cost of doing so works out to $2.93 per person. Multiplying that number by the total U.S. population (excluding Arizona) yields a one-time opportunity cost for the nation of just under $860 million—or, to be more precise, $858,274,802. Since clocks must be changed twice every year, this back-of-the-envelope calculation must be doubled, to approximately $1.7 billion annually."

MP: Since 2008, the average hourly wage has increased about 10%, and the U.S. population has increased about 3%, so that would put the annual cost today of changing clocks twice a year at almost $2 billion ($1.92 billion).

Note: If we adjust the time cost of ten minutes per each housing unit (130 million)  instead of for each person, the cost would obviously be less - about $836 million.

Update: Tim Worstall points out by email that another cost to the U.S. DST is that we are not synchronized with Europe, partly as a result of the "Energy Policy Act of 2005."  We used to switch on the first Sunday in April and the last Sunday in October, which was  only one week different than Europe - last Sunday in March and last Sunday in October.  Following the 2005 legislation, we now switch on the second Sunday of March and the first Sunday in November.  So for the next two weeks, and for the first week of November, the U.S. will be on DST, but Europe will remain on regular time.  This lack of coordination for three weeks every year likely imposes additional costs on both the U.S. and European economies.  

Here's a detailed discussion of Daylight Savings Time at Wikipedia, which includes the world map above (click to enlarge).

28 Comments:

At 3/14/2011 11:42 AM, Blogger Michael Hoff said...

That's interesting, but isn't it kinda silly to put a cost on the ten minutes before people go to bed? They're not taking 10 minutes out of their job to do it. It's 10 minutes they weren't earning money or creating value.

Caveat: I'm no economist. Just sayin' it doesn't make sense to a layman.

 
At 3/14/2011 11:50 AM, Blogger Mark J. Perry said...

Michael: If the value of those ten minutes to you is insignifcant (zero), and you happen to have ten extra minutes of your time available every day before you go to bed, or about an hour of your time per week, I could find some work you could do for me, if you'd be willing to work for $0.00 per hour.

And in case you have more than ten minutes of free time per day, let's say one hour per day, I'd also like to "hire" you for those hours as well, at $0.00 per hour!

Deal?

 
At 3/14/2011 11:57 AM, Blogger Highgamma said...

I always feel the same about curbside recycling.

 
At 3/14/2011 11:57 AM, Blogger Alex Rodriguez said...

As the owner of a self-adjusting clock, I did not spend any time at all adjusting it for daylight savings this year or the year before that. To be more accurate, shouldn't I be removed from this calculation? My guess is that I am not alone and that a large portion of the US population also owns self-adjusting clocks by now.

 
At 3/14/2011 11:59 AM, Blogger Cabodog said...

Mark, how much is the opportunity cost of discussing the opportunity cost of daylight savings time?

 
At 3/14/2011 12:04 PM, Blogger Marko said...

Cabodog - I had the same thought - how much did it cost to read this article?

I am not saying this is not a good article, I am saying the cost of reading the article or setting back one's clocks needs to be weighed against the (claimed) benefits of the activity.

People claim DST saves all kinds of energy and stuff. I don't know, doing the calculation has too high an opportunity cost.

Plus, I live in Arizona now and we don't play that game here. Time is what it is.

 
At 3/14/2011 12:25 PM, Blogger Ron H. said...

The time spent adjusting clocks for DST may seem trivial, but the total cost of complying with government regulations at all levels is huge.

I have to question some of Shughart's math: Every person in the US isn;t a wage earner, yet he multiplies the average wage by total population. It's also not clear that every person spends 10 min adjusting clocks. Don't some households designate a "family clock setter"? For more accurate accounting, this should be someone who is also a wage earner, so the value of their time can be more accurately measured.

 
At 3/14/2011 1:01 PM, Blogger Benjamin said...

I would pay money to stay on daylight savings time year-round. I never met anyone who ikes the non-daylight savings time.

What is the libertarian answer? We can all set our own clocks to whatever time we like? Then, we can do away with those frigging traffic signals all over town. They get in the effing way, no?

 
At 3/14/2011 1:27 PM, Blogger Buddy R Pacifico said...

Blame all this on Ben Franklin's daylight saving letter to the editor in 1784. Ben's reason was to save millions on candles for the people of Paris, "by the economy of using sunshine"!

 
At 3/14/2011 2:29 PM, Blogger AIG said...

10 minutes to change clocks? Thats probably an order of magnitude to high, given that most clocks in today's house or person change automatically, especially the ones we rely on the most (cell phones, computers etc).

And as someone pointed out, not everyone is employed. Plus, usually one person will change the clocks in a household, not everyone in the household.

The number than comes out to a "measly" 150 million, far less than the government spends in a day.

But, may we be overlooking any potential benefits? (I'm not saying there are, but we may be overlooking them)

 
At 3/14/2011 3:20 PM, Blogger Steamboat Lion said...

Not to mention spring skiing sucks big time when you've got to wait another hour for the snow to soften...

on a more serious note, plenty of my clocks self adjust but plenty don't and I still haven't fixed all of them. Currently searching for the instruction book for one device to figure out how to change the time.

 
At 3/14/2011 4:41 PM, Blogger Nathan Benefield said...

Ten minutes for everyone is a extremely high estimate of the labor costs, even in the days of the Grandfather Clock.

But a more important critique is the energy costs - DST made sense at one point, but in the age of the air conditioner, studies show it actually increases energy consumption and use.

 
At 3/14/2011 4:57 PM, Blogger Dr. T said...

AIG said: "10 minutes to change clocks? Thats probably an order of magnitude to high..."

No, it isn't. In my household of two adults and one teen, the following clocks need manual adjusting:

two clock radios
the oven clock
the microwave clock
the intercom clock
the coffee maker clock
two battery-powered wall clocks
the VCR clock
the TV clock
the digital camera
the video camera
two iPods (need to switch DST on and off)
two analog wrist watches
one digital wrist watch
two car clocks

Resetting them all takes at least twenty minutes.

 
At 3/14/2011 6:49 PM, Blogger AIG said...

"No, it isn't. In my household of two adults and one teen, the following clocks need manual adjusting:"

Well, the problem here is that you have too many clocks! Whats the utility curve of having 19 clocks in one's house? :)

 
At 3/14/2011 7:58 PM, Blogger Alan said...

My self-adjusting clocks now self-adjust on the wrong day. Thanks, turkeys!

I live in the part of Indiana that used to stay on standard time all year round. It would have been a good system except that most of the country, including some parts if Indiana, used DST, so we'd be on the same time as the next counties west and north for part of the year and different times the other part. This was confusing, not so much for us as for out-of-staters who dealt with us (or in some cases didn't bother to, which is why we changed). The only thing worse that changing clocks twice a year is a system in which some people do and others don't. Sort of like qwerty and other keyboards, I suppose.

 
At 3/15/2011 6:12 AM, Blogger geoih said...

Quote from Benjamin: "I never met anyone who ikes the non-daylight savings time."

DST is just one more great illusion to make the masses feel better while they're being robbed, like tax refunds, public schools and social security.

 
At 3/15/2011 7:50 AM, Blogger Christopher said...

I agree with the previous comments that associating average wage and total population is a big extensive compared to the gap between the low end earners, or unemployed, in the US.

Also, majority of clocks are auto adjusting, and if they aren't they could be left for the weekend when there is no paid work to be done, bringing the costs down.

Also, with increased sunlight (especially in Michigan) there is the chance that overall productivity would be higher due to the extra sunlight boosting overall moral. As well as being out of sync gives the East coast of the US one more hour of interaction with the European economy.

 
At 3/15/2011 10:50 AM, Blogger Matthew said...

These calculations are always so silly. Aside from the self-changing clocks issue, and household issue, you just can't value time at the average wage. If everyone worked additional hours the wage rate would fall, furthermore pensioners or children can change clocks.

In addition I can change a clock whilst doing something else, such as listening to the radio, watching TV, cooking. Often I can't do paid productive work whilst doing those things. Survey always show that people simply don't think like this, and of course only people can value their own time.

 
At 3/15/2011 11:30 AM, Blogger William said...

There's a substantial cost that isn't accounted for in here too, and that's actual costs for corporations and businesses, beyond switching clocks.

Any software or hardware that requires a DST shift or records data in a time format requires a code to do so. There's no magic formula that solves this. For every piece of software written (whether apple, microsoft, or simply a business recording hourly data) requires some shift for DST.

There's costs to this

 
At 3/15/2011 12:59 PM, Blogger misterjosh said...

Don't forget about the deaths!

http://news.softpedia.com/news/Watch-Out-DST-can-Kill-You-69923.shtml

 
At 3/15/2011 1:01 PM, Blogger Ron H. said...

"Also, majority of clocks are auto adjusting, and if they aren't they could be left for the weekend when there is no paid work to be done, bringing the costs down."

LOL! I don't believe it's been suggested that anyone take time off work to adjust their clocks.

Actually, it can't be "left for the weekend", as the official time change occurs at 02:00 on Sunday morning. This is supposedly a time when the fewest people are inconvenienced. I suspect that many people ignore this rule - I don't believe there's a penalty - and adjust their clocks either before retiring Saturday evening, or when they are awake during the day on Sunday.

I must confess that's what I do, but I don't often admit it, as I don't want to come under any additional government scrutiny. Just the idea that someone in government might know what library books I have been reading is all the exposure I want.

You shouldn't assume, however, that the opportunity cost for adjusting clocks is ever zero.

 
At 3/15/2011 1:07 PM, Blogger Ron H. said...

misterjosh

From your reference:

"The research conducted by professors Paul Fischbeck and David Gerard, both of Carnegie Mellon University in Pittsburgh, on a seven year study of federal traffic fatalities, shows that the calculated risk for a pedestrian walking a mile is increased to 186 percent from the months of October to November, but it then drops suddenly in December, to only 21 percent.

And we wonder where our tax money is going!

 
At 3/15/2011 3:59 PM, Blogger Christopher said...

@Ron H.
There are times the cost is near zero. I myself have auto adjusting clocks, and have left clocks such as my car's to another day, possibly weeks later. During a time when the only opportunity cost would be paperwork that is not work related due to the business being closed, and as I am not paid through the night so my payscale is irrelevant.

Beyond that, it is set to 2AM to not inconvenience the bars that are open, or they would lose a full hour of business if it was set to 2AM.

Not all things are set in such a literal sense as needing to adjust clocks at the moment it chimes 2AM.

 
At 3/15/2011 4:50 PM, Blogger juandos said...

From Tips to avoid a Daylight Saving Death:

Over nine hundred Americans, from the years 1987-1991, are estimated to have died purely because of Daylight Saving Time (DST).

Another study, using 1997-8 data, estimated that abolishing Daylight Saving Time would save 171 American pedestrians per year (13% of all pedestrian fatalities in the 5:00-10.00 a.m. and in the 4:00-9:00 p.m. time periods) as well as 195 Americans killed in car collisions per year (3%, during the same time periods). To make matters even more stark, moving DST to an earlier, darker date (March instead of April), as we are this year, is likely to make those numbers go up. Daylight Saving deaths are predominantly due to pedestrians getting killed by cars. People are driving after a smaller chunk of sleep, probably stressed and running late, and, importantly, drivers are not yet accustomed to watching for pedestrians in the dark.

 
At 3/15/2011 4:50 PM, Blogger juandos said...

This comment has been removed by the author.

 
At 3/15/2011 6:28 PM, Blogger David Gallion said...

Daylight savings is costly, wasteful, counterproductive, harmful to health, annoying and painfully stupid. In America that translates to sound government policy.

 
At 3/17/2011 10:16 PM, Blogger M.L. said...

Two people live in my house, I changed one annoying clock on my microwave, taking me about two minutes. I would have spent the two minutes doing nothing of value, and as I'm a student, have no current means of making money anyway.

 
At 4/13/2011 3:40 AM, Blogger Vichy said...

He underestimates. What about coordination problems, missed work of people who didn't switch over, etc.
Daylight savings time is pointless and stupid.

 

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