Economics of Happiness and Wellbeing
Time Versus Money
How the trade-off between earning more and having more free time affects wellbeing, and why buying time can sometimes be a better use of money than buying things.
Economics has always recognised that people trade time for money: every hour spent working is an hour not spent on leisure, the time left over for rest, relationships and activities we choose freely. Wellbeing research adds a new question to this old trade-off. Which choices actually leave people happier - more money, or more time?
The time-money trade-off
The time-money trade-off shows up constantly. Should you take extra shifts or keep your weekend free? Cook at home to save money or buy a ready meal to save an hour? Take a higher-paying job with longer hours or a lower-paying one with more flexibility?
Standard economic theory says people will choose whatever combination they value most. But research suggests people do not always choose well, partly because money is easy to count while the value of time is harder to see. Hours feel flexible and endless in advance - “I’ll have time next week” - while money feels concrete and urgent.
Time poverty
Many people today experience time poverty, the persistent feeling of having too many things to do and not enough time to do them. Surveys in several countries find that large shares of working adults report feeling rushed or short of time. Time poverty is linked with higher stress, less exercise, poorer sleep, and lower life satisfaction. It is not only a problem for high earners; people juggling multiple low-paid jobs, long commutes and caring duties are often among the most time-poor of all.
Research led by the psychologist Ashley Whillans found that people who say they value time more than money tend to report greater happiness, even after accounting for how much time and money they actually have.
Buying time
One striking finding is that spending money to free up time can raise wellbeing. In a 2017 study, Whillans and colleagues surveyed thousands of people across several countries and found that those who spent money to avoid disliked tasks, such as paying someone to clean or do repairs, reported higher life satisfaction. In a small experiment, working adults felt better on a weekend when they spent 40 dollars on something that saved them time than when they spent the same 40 dollars on a material item for themselves.
Buying time does not have to mean hiring help. It can mean paying slightly more to live closer to work, choosing a direct route over a cheaper indirect one, or turning down overtime when finances allow.
Rahul is offered a Sunday shift paying 1,200 rupees. He calculates that he would lose his only full day with family and friends, as well as the rest he needs before the week begins. If he already covers his essential bills, the wellbeing research suggests the free day may be worth more to him than the extra money. If he is struggling to pay rent, the money may matter more. The right choice depends on whether money or time is scarcer for him right now.
Money still matters for time
It is important to see that buying time requires having some money to spare. For people living in poverty, the priority is usually meeting basic needs, and choices about time are often severely limited. This is why policies such as fair working hours, paid leave, affordable childcare and good public transport can be seen as policies that give people back their time.
A common mistake is to value your time at zero when making decisions - spending two hours travelling across town to save a small amount on a purchase, for example. Every hour has an opportunity cost. Asking "what else could I do with this time, and how much would it be worth to me?" leads to choices that better protect your wellbeing.
- Every choice between work and leisure involves a time-money trade-off.
- Time poverty, feeling chronically short of time, is linked with stress and lower wellbeing.
- People who value time over money tend to report greater happiness.
- Once basic needs are met, spending money to buy time can raise wellbeing more than buying things.
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