I try to assign a number to Krugman’s estimate of the value of not commuting and come up short

  • May 23, 2023
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Krugman (Working From Home and Realizing What Matters):

First things first: The reduction in commuting time is a seriously big deal. Before the pandemic, the average American adult spent about 0.28 hours per day, or more than 100 hours a year, on work-related travel. (Since not all adults are employed, the number for workers was considerably higher.) By 2021, that number had fallen by about a quarter.

Putting a dollar value on the benefits from reduced commuting is tricky. You can’t simply multiply the time saved by average wages, because people probably don’t view time spent on the road (yes, most people drive to work) as fully lost. On the other hand, there are many other expenses, from fuel to wear and tear to psychological strain, associated with commuting. On the third hand, the option of remote or hybrid work tends to be available mainly to highly educated workers with above-average wages and hence a high value associated with their time.

But it’s not hard to make the case that the overall benefits from not commuting every day are equivalent to a gain in national income of at least one and maybe several percentage points.

If median household income is $70,000 and 1 earner in each household works full-time then the household wage is $35. If time is valued at 1/3 of the wage (the number typically used in travel cost demanad models) then the average household enjoys $1200 in additional time at home (100 hours at $12). If there are 125 million households in the U.S. then the number aggregates to $150 billion.

That is lower, 0.65%, Krugman’s 1-3% of US GDP ($23 trillion) estimate. There is some slippage between households and individual adults here, but you get the idea. Krugman is making assumptions less conservative than mine. 

 

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