Carpe Diem

Daylight saving time costs about $2 billion each year

This is a slightly revised post from exactly a year ago…..

In 2008, economist William F. Shughart did a back-of-the envelope calculation and estimated that the opportunity cost of daylight saving time (DST) 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 2007, the average hourly wage has increased about 14%, and the U.S. population has increased about 4.5%, so that would put the annual cost today of changing clocks twice a year at about $2 billion. Note: If we adjust the time cost of ten minutes per each housing unit (130 million) instead of ten minutes for each person, the cost would be less than $1 billion.

Tim Worstall pointed out last year that another cost to the US of daylight saving time 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 from 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 Saving Time at Wikipedia, which includes the world map above (click to enlarge) of daylight saving time around the world (blue countries observed daylight savings time).

25 thoughts on “Daylight saving time costs about $2 billion each year

  1. gawd.. talk about minutia… most cable boxes and most phone automatically update.. these days..

    those who want to screw around with clocks apparently have time to waste anyhow.. otherwise.. who cares?

    and the time zones themselves don’t really matter anymore… as business that need to operate 24/7 – just does so.

    we’re down into the noise level here.. we probably could find more “costs” in how long people have to wait to use the john or dropped cell phone calls, or highway congestion..or foods that take too long to microwave, or the traffic signal that won’t turn when you want it to, etc…. etc…

    lord!

    • Agreed in many respects its a legacy issue, but in the case of cars it depends on the model my 2011 chevy cruze does not know about daylight savings time, and I got an email from the dealer saying they would help for a fee fix the time issue. (Not that it is hard if you read the owners manual). But legacy includes mechanical grandfather clocks, as well as the old electic time indicator (electric clock based upon the line frequency), as well as older clock radios microwaves and the like that don’t know the date. (and don’t really care about the date). I have about 10 such devices around the house. But I agree its looking pretty far in the weeds, and there is a question hiding which time do you stay on daylight time or standard time? In other words do you want it dark in the am or pm?

      • yes.. “opportunity cost” sort of assumes that you are productive 24/7 and that you never have a moment to….screw around … there might be some folks like that around but I don’t know any…

        ;-)

        besides.. we got all these folks that can do 2 things at one… drive and text… so surely they can drive and adjust clocks… eh?

        • No, opportunity cost is the value you place on the next most important alternative use of your time, when two activities are mutually exclusive.

          If you choose the steak dinner instead of the chicken dinner, the opportunity cost of the steak dinner is the chicken dinner.

          Leisure is an important part of most people’s lives, and when you go to work or change all your clocks your opportunity cost is most likely the leisure activity you are giving up to do it.

      • I realize this is tongue-in-cheek but it really does have a instructive aspect to it with regard to productivity and opportunity cost.

        the programming did take initial time but once done – it’s automatic… and requires no more effort…

        opportunity cost – simple premise.. sitting on toilet changing your wrist watch…

        I think this might be instructive in general in the workplace these days… (not the toilet) but the idea that an employee can often figure out how to get twice as much work done by double or triple tasking.. like talking to customer on phone while updating on computer or coordinating on cell phone while en-route to a different physical location…

        Papa Johns has web ordering app… it cost money to develop it but it saves phone calls to their store; the web order appears on their screen without any phone call or order taking by employee…

        • opportunity cost – simple premise.. sitting on toilet changing your wrist watch…

          Or sitting on toilet while reading a book, balancing checkbook, trimming fingernails, reading and responding to email, ordering lunch, making a appointment – all might be forgone in order to change your watch.

          • i get that shugart is largely being a bit cute here and trying to illustrate the concept of opportunity cost, but if we were really tryign to teach an economics lesson, he’s need to include benefits as well, no?

            if it stays light later, people use electric lights for less time in the evening. of course, for guys like me, it’s now dark when i get up in the AM again, so we use more.

            you could work through all manner of issues around this and make it a vast, multidimensional discussion as opposed to the silly oversimplification of shugart.

            you could even pose it as a question and say: if the average person spends $2.93 of opportunity cost adjusting clocks (itself a bad assumption unless the workforce and the population are equal, which they never are) and electricity costs 13c/hwh and the average home uses 1kw to light it (likely much too low) and saves and hour a day, does this makes sense?

            such would seem likely, as it only takes 22 days of electricity savings to pay for the purported opportunity cost.

          • morganovich,

            But if clocks were never changed, it would seem that people would match their schedules to their personal needs and preferences just as they do now, and keep them there.

            Any supposed savings in electricity is based on the belief that people will change their schedule to match the changed clock setting and get up earlier.

            In your case, you only get up earlier because your clock tells you to.

            My own preference would be to stay on DST all year round.

  2. The major fallacy of the calculation lies in the fact that usually only one member of a household will change the clocks while the others do more productive things like laying around watching television!

    • actually, no, that is precisely wrong.

      leisure time has value as well and forgoing it is a cost. if you valued your leisure time at less that your work wage, you’d be at work.

  3. This argument assumes, of course, that those taking the time to change their clocks would otherwise have been engaged in profitable economic activities—on Saturday night and Sunday morning. Not to mention that his allowance—ten minutes per adult worker—sounds more than a bit excessive.

    I get a clear idea regarding why the author doesn’t get the “savings” notion from Daylight Savings Time: he seems to have too much time on his hands already!

    • andrew-

      no, it doesn’t.

      free time also has value. you do not give it away for free or for no reason.

      if you valued your free time at less than what you could earn working, you’d go to work.

      one need not be engaged in productive economic activities to experience opportunity cost.

  4. A UC-Santa Barbara study shows that when 77 of 92 counties in Indiana switched to DST for the first time in 2006, electric costs rose by a total of $8.6 million over the prior year, likely because air conditioners ran longer. Indiana’s population is but 2% of the U.S population, so electricity costs for all of America would go up about $430 million.

    As for resetting clocks, veteran accountants like myself will tell you that the task falls into the general concept of “anyhow accounting” – if asked we would do it anyhow, so there is no cost.

    • that is an interesting piece of data, but also quite possibly meaningless.

      did population rise?

      was the summer hotter?

      did the price of electricity change?

      did more people buy air conditioners?

      absent knowing all that (just for a start) simply pointing to such an increase demonstrates absolutely nothing.

  5. Lack of synchronization around the world is a much bigger issue than the minutiae listed in the post. Missed phone calls, delayed meetings, lost airplanes cost much more.

  6. I also wonder what percentage of those who object to DST are naturally early risers/early to bed people. Studies have shown that roughly 55 – 60% of the population are naturally early risers and 40 – 45% are naturally late risers. I suspect that those who are late to bed/late to rise people benefit more from DST. The problem is that there has been demonstrated a mutual lack of empathy between the two groups, and especially contempt toward late-night types from some early risers, due to various social values and stereotypes relating it to laziness, reinforced by America’s rural heritage. ([i]E.g., those in the office by 7 a.m. often manifested a superior attitude to the rest of us who staggered in at 8:30 or 9. By contrast, these same people often had no qualms about dropping everything in the middle of an assignment in order to leave promptly at 4:30 or 5 p.m. while the late risers might stay ’til 7 or 8 p.m. to finish their work for the day.[/i]) This might explain some of the continuing antagonism shown in posts such as this towards an idea which has been generally popular in temperate zones of the world since first being tried in World War I.

    • Andrew: “I also wonder what percentage of those who object to DST are naturally early risers/early to bed people. Studies have shown that roughly 55 – 60% of the population are naturally early risers and 40 – 45% are naturally late risers.

      I think the objections are mostly to the time spent changing clocks back and forth twice a year for no particular reason. Anyone, whether an early or late riser, can adjust their schedules to the time their clock displays and the position of the Sun, but setting your clocks forward and backward seems like a waste of time.

      Arizona doesn’t observe DST, and for the most part civilization has continued to exist there.

      In addition you mentioned studies. Hopefully those are privately funded. As a taxpayer I’m not interested in paying for such nonsense.

      • i hate DST, especially this time of year as means i am getting up in the dark again. last week, it was light out at 6.30 when i got up. today, it’s dark. that sudden shift is really jarring and getting up in the dark is rotten. it seems to go against the basic programming of my body. up with the sun works great, but up before the sun does not.

        • In that case, your opportunity cost is quite high, eh? :)

          I suspect there are a lot of hidden costs like you describe. It’s similar to the effects of jet lag.

  7. The whole exercise is illustrative of the state’s contempt for reality. We live in a world where the state thinks wealth can be created from nothing, where there is no time preference, in fact time is simply something to be costlessly moved around with no consequences or effects.

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