The Economics of Sleep
The typical person spends a third of their life asleep – that’s 29,961 hours over the course of an average lifetime. Yet studies carried out within the social sciences, particularly in economics, do not usually consider sleep to be an individual component of leisure time – rather including it as part of ‘personal care’. When creating economic models, time spent asleep is assigned a fixed value due to the assumptions that it is determined only by biological factors and not external shocks.
For a long time, economists have worked based on the theory that consumers, when deciding the distribution of their time, only have the choice between work and leisure. However, the level of sleep is the result of rational consumer choice, based on economic incentives which in turn depend on varying levels of utility gained from sleep itself; leisure activities and the financial benefits of working. According to recent evidence, the impact on economic performance of this time spent asleep is significant, not just on an individual but on an economy as a whole.
But how large an effect can the time spent asleep actually have? Well, evidence for the economic cost of sleep deprivation can be seen all over the world. It has been estimated that if all members of the UK labour force had a minimum of six hours sleep each night, the UK economy would benefit from an extra £24 billion due to the increase in productivity – a value equivalent to more than half the Defence budget. At the moment, workers in the UK suffering from a lack of sleep have an annual cost to the economy of £40 billion, (equivalent to a loss in economic growth of 1.86%), due to the loss of 200,000 working days each year. A similar situation can be seen throughout the rest of the developed world, most significantly in the USA where 1.2 million working days are lost, resulting in a cost of $411 billion and a 2.28% reduction in GDP. In fact, a report carried out by the American Academy of Sleep Medicine back in 2011 concluded that due to sleep deprivation, 11.3 working days and hence $2,280 of productivity is lost by each US worker.
Getting enough shut-eye can also be financially beneficially to individual members of the labour force. Across the US, where differing time zones impact the exact time of sunset, in areas with a one hour later sunset time average wages are 4.5% lower than the national average. Interestingly, a consistent increase in the average level of sleep of just an hour over a week increases wage levels by, on average, 4.9% - reflecting higher levels of productivity. Perhaps most significantly, an increase in the average time spent asleep for a given region increases wages by 50% that of a one-year increase in education for all workers for said region. Conversely, higher wages mean that time asleep carries a greater opportunity cost and may result in individuals spending less time in bed – illustrating that there may be a causal links between sleep and wages running in both directions.
One company who have capitalized on the benefits of sleep is the Aetna insurance group who have set up scheme where their employees are ‘paid to sleep’. For every 20 nights in which they sleep more than seven hours, members of staff are given $25 up to an overall maximum of $300 over the course of the year. Aetna have been criticized for their scheme – claims have been made that employees can undermine the system and lie about the time spent asleep in order to earn the financial reward. However, in an increasingly competitive world, organisations who can boost the productivity of their workers to their optimum performance levels are going to be the ones that not only thrive but survive.
Picture source: http://etinspires.com/sleep-deprivation/