How Much Is Free Time Worth?
I’ve spent a good amount of time in contemplation of man’s balancing of work and so called free time – that in which he is wholly his own master. It is my considered opinion that I am truly lousy at striking this balance naturally and so I have begun to apply logic and economics to the problem, as best I can without actually knowing anything about logic or economics.
First, let’s start with some assumptions and concepts of value. I will assume that I get enjoyment and happiness from my free time and that is the value I’m seeking. To keep things simple at first, I’ll assume that there is no value to be gained from working other than monetary compensation. It might seem that the choice is easy, then: maximize free time and to hell with work!
But it’s more complex than that because money made from working can the value of each free hour. Money increases the diversity of experience through travel, eating out, decorating, etc. Going to the extreme of work makes no sense either: lots of wonderful toys but no time to play. Some balance between work and play is necessary to, in economics terms, maximize the total value of free time.
Staying with economics for just a minute, I’d like to introduce some concepts and make them relevant to the discussion.
- The total number of hours to devote to working and free time is zero-sum or fixed-sum. So the more time I spend working, the less I have free.
- The more scarce a resource, the greater its value. So the less free time, the more valuable each hour becomes intrinsically.
- Opportunity cost is the relative cost of making one choice over another – in other words the loss of total value of free time by moving the equilibrium in either direction.
Now let’s reach out into the real world and see how we can apply them. For example, most people I know are on a fixed-income salary. Each extra hour they work produces no extra money. So effectively you get what we typically observe – people work the minimum hours to satisfy requirements.
Now let’s address a hidden assumption here: that you control the number of hours you work. If, instead, you assume that hours worked are not controlled, we get something different. When the equilibrium is shifted in either direction, we get less total value of our free time. If that shift happens in the direction of free time, we can always find work to do to fill idle time so we can still maximize the value of our free time. But when the shift reduces our free time the problems begin.
What happens exactly? The total value of our free time decreases but the hourly rate increases. Whereas the hourly rate of our monetary compensation goes down. We’ll want to try to restore the previous equilibrium, though doing so is tricky and may be out of our direct control. This may mean renegotiating salary, looking for a new job or simply refusing to work the extra hours.
The salary renegotiation option is interesting – basically this is an attempt to reinstate a new equilibrium with a higher total monetary compensation. What I’m currently interested in is what this does to the ratio of the hourly values. If the value per hour of free time rises, is there an equivalent rise in the money per hour worked? Is the rise of one larger than the rise of the other?
If I go from working 40 hours per week to working 50 hours per week, how much more should I be making? If I was making $10 per hour before, should I make the same now (ie. $400 to $500 per week)? If my hourly rate is to go up or down, by how much?