Opportunity Cost of Leisure Time

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Opportunity Cost of Leisure Time

The opportunity cost of leisure time entails the amount of income that a laborer sacrifices while using their leisure time. Leisure time involves any activity that a laborer chooses to do while no working in order to receive more income. Leisure time can involve any activity, such as reading, watching television, or exercising. It is common sense to assume that if wages go up, then most people would be willing to sacrifice leisure time in order to get more an income. In fact, in wealthier countries it is apparent that the income effect dominates, in that they initially rich people place less importance on the opportunity cost of their time and they are willing to sacrifice the chance to make a higher income in order to do what they would like.

Example of leisure time: If the opportunity costs of leisure increase, then women will be less likely to give birth to a baby. The time that is spent on raising a child is valuable time that women could be using in order to receive more of an income. In this case if wages are high, than the opportunity cost of leisure time outweighs the actual time spent on leisure and the birthrate will decrease.

Sleep is another example of leisure time. Many people think that sleep is a necessity and can be looked at as a valuable commodity that workers are unwilling to sacrifice. In fact, studies done by Jeff Biddle and Daniel Hamermesh, economists at Michigan State University, show that sleep may not be as much of a necessity as we think it is. A diary was kept for 706 different people between the ages of 23 and 65 to monitor their sleeping habits. 78% of the people slept on average, just under 8 hours. However, 12 % slept over 9 hours and and 10% slept under 6 ½ hours. When there was an increase in wages to 25% there was a decrease in sleep by 1% and when wages were doubled, sleep time decreased by 20 minutes. This shows that sleep is sacrificed and the substitution effect takes hold. The assumption can also be made from these studies that women require their sleep more than men because on average, they sleep about two minutes more than men. However, Hamermesh explains that this is not the case, when in fact women with jobs work about 5 minutes less than men, which proves that substitution effect is stronger in women, although women apparently work closer to their biological limit than men do.

Varying from this prior Austrian theory of opportunity cost William Stanley Jevon's puts forth the theory of "Pain Cost" and it's effect on the marginal productivity of labor. The "pain cost" has to do with working long hours or at high levels of intensity, which prevents the worker/consumer from leisure time for consumption. This theory differs from the theory of opportunity cost of leisure time in that Jevons states that a worker will sacrafice higher wages for leisure time because of the work hours causing too much exhaustion and therefore, less leisure time for consumption. The concept is known as the marginal disutility of labor. The marginal disutility of labor is only positive when the job is exhausting and causes "painful exertion." Jevons, for the most part, feels that the marginal disutility of labor is negative because of the pleasure taken out of work. When the marginal disutility of labor is possible, this is when it is very likely for a worker to cease working in order to provide more leisure time for consumption. Although Jevon's theory makes sense the economic world found more sense in the theory of opportunity cost. "for the now universal recognition that even when disutilities are taken into account they are ultimately to be regarded as being the pull of foregone leisure or foregone present income—opportunity costs rather than disutilities in the sense of the old hedonistic calculus."

On the other hand, studies (such as Szalontai's study of African population, for example) show that not getting enough sleep decreases the marginal productivity of labor of the worker, consequently to the New Keynesian Theory when efficiency decreases, the real wage decreases, too, and eventually labor supplied decreases, too. So, sleeping less will lead you to working less in the long run. If insomnia does not kill you in the short run. Much like William Stanley Jevon's theory of "Pain Cost" and it's effect on the marginal productivity of labor. The "pain cost" has to do with working long hours or at high levels of intensity, which prevents the worker/consumer from leisure time for consumption. This theory differs from the theory of opportunity cost of leisure time in that Jevons states that a worker will sacrafice higher wages for leisure time based on the concept that the work is causing too much exhaustion and therefore, less leisure time for consumption.

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