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October 2004, Vol. 127, No.10

Précis

Earning less, rationally
Time stress and its causes

Précis from past issues 

Earning less, rationally

Workers sometimes change employers to get higher wages. True enough, but there are also cases where workers earn less in new jobs. Some of these cases involve workers who involuntarily left their old job and only take a lower-paying job after being unable to find anything at their old wage level. But what about those cases involving workers who voluntarily leave higher-paying jobs for lower-paying ones?

One idea is that workers accept lower wages in a new job if it is an entry-level position in a career that will eventually allow them to earn more than they would ever earn in their previous occupation. For example, a teacher might leave teaching and work as an accountant, even if that meant earning less in the new occupation for the first few years.

In Economic Commentary (published by the Federal Reserve Bank of Cleveland), Peter Rupert puts forth another hypothesis to explain why workers trade higher-paying jobs for lower-paying ones. "It’s not always about the money," is his conclusion.

Wages are only part of a job’s "value" for a worker. Besides wages, a worker also obtains "amenities" from a job: intangible benefits such as the enjoyment of a good workplace environment, pleasant working conditions, a certain cachet, or some other je ne sais quoi.

Employers offer various combinations of wages and amenities. In doing so, they find that it’s possible to trade off one for the other. In other words, it’s not necessary to offer both high wages and all the amenities. This trading off between wages and amenities is called "compensating differentials."

Workers, continually learning about the wages and amenities of various jobs, move from one job to another. Their goal is to maximize both the wages and the amenities they accrue over their working lives. A worker’s ideal job would be one with high wages and the worker’s preferred amenities. But such a job is hard to find. Thus, at one point in their lives workers might give up amenities in order to earn higher wages. At some other time, they might do the opposite; the accountant becomes a teacher.

Thinking about a job’s value in terms of both wages and amenities leads to the observation that income alone can be a misleading measure of things such as the quality of life or well-being on the job. Whether comparing individuals who live across town or across oceans, job characteristics other than wages should also be considered.

Time stress and its causes

In "Stressed out on four continents: Time crunch or yuppie kvetch?" (National Bureau of Economic Research, Working Paper Series) Daniel S. Hamermesh and Jungin Lee take an economic approach to explain time stress and its causes.

The authors propose an economic function depicting households maximizing their utility in the face of some time con-straint. The results show that the binds of the time constraint, that is, time stress, increases along with increases in income.

The authors test their hypothesis by looking at measures of time stress from surveys of working couples in Australia, Canada, Germany, Korea, and the United States. Reports of time stress were more common in high-income, two-income families. Analysis shows that additional hours of work do generate additional time stress, but also, when hours of work are held constant, increases in time stress are also associated with increases in income. The same result was seen in all five countries, but was strongest in North America.

Why should this be? After all, no matter what a person’s income may be, the number of hours in a week remains constant—168.

Part of increased time stress might be the stress that comes with high-paying occupations. But not all of the increase can be attributed to these factors. The authors ask if this is time crunch or kvetch (complaining). And their answer isn’t too far from saying that oftentimes cases of time stress are basically cases of too much money and not enough time to spend it. The more money one has, the more demands there are on one’s time. As the authors say, "Time stress is analogous to poverty. . . One is a lack of time, the other, a lack of money."

The authors observe that busy life-styles of the economically comfortable should be seen as more of a blessing, evidence of the myriad of options and opportunities that are available to those who can afford them.

The paper goes on to show that time stress will probably increase over time. Future higher standards of living will mean more opportunities for people to buy and do more, and this will cause increased feelings of missing something when there isn’t time enough to try everything.

They close with the observation that while answering "crunch or kvetch?" is a matter of values, it may be more ethical to direct public sympathy (itself a scarce commodity) to those who suffer from the "goods constraint" than those for whom the "time constraint" is the problem—that’s the economist’s way of saying the poor instead of the financially well-off.