Sleep and Economic Performance

How lack of sleep affects productivity, earnings and wellbeing, and what research has found about the economic costs of sleep loss.

Sleep is something everyone needs, but it is often sacrificed for work, study or screens. Economists have begun to study how sleep affects productivity, earnings and wellbeing.

Sleep and productivity

Lack of sleep reduces attention, memory and decision-making. A 2016 study by the research organisation RAND estimated that insufficient sleep cost the United States economy hundreds of billions of dollars a year in lost productivity, with large costs in other countries such as Japan, the United Kingdom and Germany.

Evidence from India

A study in Chennai by Pedro Bessone, Gautam Rao, Frank Schilbach and co-authors, published in 2021, examined low-income workers who slept poorly, often in noisy and crowded conditions. Interventions that increased night-time sleep did not improve their work output or wellbeing measures much, because the extra sleep was of low quality. However, short afternoon naps improved productivity, savings and wellbeing. The study highlighted how difficult it is to improve sleep in poor living conditions.

Sleep and earnings

Research by economist Matthew Gibson and Jeffrey Shrader used variation in sunset times across U.S. locations, where later sunsets lead people to sleep less. They found that more sleep was associated with higher wages, suggesting sleep affects productivity.

Sleep and wellbeing

Poor sleep is linked to lower life satisfaction, poorer mental health and higher risk of accidents. Shift workers and people with long commutes often get less sleep.

The drowsy driver

A truck driver works long shifts and sleeps only a few hours. His reaction times slow, raising the risk of a crash that could harm others. Regulations in many countries limit driving hours for this reason. The economic cost of fatigue includes accidents, not just lower output.

What helps

Reasonable working hours and limits on shifts.
Quieter, cooler living conditions.
Awareness of sleep’s importance.
Allowing short breaks or naps, which some workplaces have adopted.

Thinking less sleep means more productive time

Cutting sleep may add waking hours, but tired people work less effectively and make more mistakes. Adequate sleep can raise productivity rather than reduce it.

Key takeaways

Lack of sleep reduces attention and productivity, with large economic costs.
A Chennai study found naps improved workers' productivity and wellbeing, while extra poor-quality night sleep did not.
Research using sunset times links more sleep to higher wages.
Reasonable hours and better living conditions help people sleep well.