Our time is a limited resource, and so we implicitly place a value on it. Often we pay to save time: for example, on toll roads, on flying instead of driving, and on paying for yard maintenance. But do we have any idea about what value people put on their time? N.C. State University economist Mike Walden responds.
“This has been a long-time question, and it’s really important not just for an individual to know this but for public policy, particularly … in the transportation area. A lot of our investments in transportation have to do with saving time and moving people from one place to the other. So … transportation planners need to have some notion of what is the value of time — what would people be willing to pay in order to save a minute or 10 minutes in their daily commute?
“So, this is a … key economic value. And in estimating you just can’t go up and ask a person. People really don’t know. So you have to actually look at how people behave. So over the years there have been a number of estimates. I have a new study that just came out from the University of Washington that, again, used decisions that people make in transportation, and the conclusion of that study is encouraging because it really falls in line with conclusions we’ve seen from previous studies — and that is that a person will value their time in areas like driving or yard maintenance as you said at about half their wage rate.
“So in other words, if someone is earning $20 dollars an hour, then they will value saving time in their daily commute at the rate of, say, $10 dollars an hour. And this again is important because this is information that can then go into the decisions made by policy makers on things … like toll roads or mass transit.”