Guest Post by Meir Statman, Ph.D.

Meir Statman is the Glenn Klimek Professor of Finance at Santa Clara University and a consultant to Avantis Investors. His research focuses on behavioral finance. He attempts to understand how investors and managers make financial decisions and how these decisions are reflected in financial markets. His most recent book is Behavioral Finance: The Second Generation, published by the CFA Institute Research Foundation.

“Time is money," Benjamin Franklin said.

We convert time into money by income from work, enhancing our well-being by the utilitarian benefits of what money can buy, and we convert money into time, freeing us from work and enhancing well-being by the expressive and emotional benefits of what free time can provide. We combine time and money and substitute one for the other to increase our well-being.

The typical American home of 1900 had no electricity, wrote journalist Derek Thompson, and only the rich had indoor plumbing. The decades that followed brought time-saving refrigerators, stoves, washers and dryers, and vacuum cleaners.1

People could have converted their newfound time for the expressive and emotional benefits of leisure, but most chose to convert it into the expressive and emotional benefits of laundered clothes and clean homes. “Because we housewives of today have the tools to reach it,” said a woman in the 1920s, “we dig every day after the dust that grandmother left to a spring cataclysm.”

Few people have all the time and money they want. Money squeeze is common and so is time squeeze. But these two types of squeezes take different forms among the working class and the elite.

Time and Money Among the Working Class

A Brookings Institution report describes Kevin, a working-class father working in his financially strained family business. He cares about his children and would like to provide them with all the money and all the time they need, but he feels squeezed, compelling him to choose money over time. “Right now, all my time is on making money, any which way possible. ... I try to give the kids stuff ... just all the stuff I didn't have.”2

Trevor, a working-class father working in pest control, faced the choice between time and money when his son asked to take him to the Renaissance festival. Trevor, like Kevin, chose money over time. “I've got to make this money,” he told his son. When Trevor’s wife said that his son was upset, he said, "Yeah, but you got to understand."

Working-class mothers are pressed into choices between time and money as much as fathers, if not more. More working-class mothers now work full-time while continuing to do most of the household work and child care. Single-parent families are now more common, especially among mothers at the lower end of the working class, adding to the pressure to provide both time and money. Working-class mothers typically feel they never have enough time, are unable to catch up and have the nagging sense that their work is never done.

The Brookings report describes Wendy, a married mother of four who is homeschooling her children and picks up “Uber deliveries, Instacart, and all that kind of stuff” on top of running her household. “I never have enough time,” she explains. “That's the one thing I always say I'm short on...time. I feel like there needs to be three of me...because I just don't have time to do everything.”

Wendy chooses to take on additional work, sacrificing time for money, to improve her children's experiences in both time and money. “I'm trying to get ahead or make money, so I can spend more quality time with them and go more places and do more things.”

Many of the working class, especially women, lack advanced scheduling in their work, diminishing their well-being by squeezing both their time and money. When her employer calls Maria, a woman working in retail, “It doesn't matter if that day someone passed away or someone had a birthday,” she must go to work.

Maria worries that her work makes it hard to find time to teach the right values to her children, yet she must work to provide her children with food and shelter. “I mean, you love your child...you want to be there. But you also want to be able to provide for them. So how do you put focus on one?”

Time and Money Among the Elite

Members of the working class typically place money over time to provide financial security for their families, not to keep up with the Joneses. Yet many members of the elite place money over time to keep up with the Joneses or get ahead of them.

The century-long American trend of declining work hours reversed around 1970 as many men of the working class and poor reduced their working hours or left the workforce altogether, while many men of the elite increased their working hours.

Economists Peter Kuhn and Fernando Lozano concluded that members of the American elite work longer hours because doing so provides greater utilitarian benefits. These utilitarian benefits are not necessarily immediate, as the salaries elite workers earn rarely include overtime pay, but the longer hours increase their likelihood of future bonuses, raises, or promotions at their current or future companies. And as job security has declined among elite workers, long work hours may enhance their likelihood of keeping their current jobs in layoffs.3

Emotional Benefits vs. Utilitarian Benefits

Emotional benefits matter beyond utilitarian ones. Many American elite workers derive emotional benefits from work they perceive as a vocation, even as religion. Journalist Derek Thompson called it “workism,” a belief that work is the centerpiece of one’s identity and life’s purpose.4

“The best-educated and highest-earning Americans, who can have whatever they want, have chosen the office for the same reason that devout Christians attend church on Sundays: It’s where they feel most themselves.”

Management scholars Christine Beckman and Melissa Mazmanian found that members of the elite strive to be ideal workers, perfect parents and diligent stewards of their health. “We expected people to be like, ‘Ugh, I want to do less,’” Mazmanian said. But what they heard was, “‘I want to do it all better.’” She added, “The idea of doing less is just not coded into high-achieving people’s sense of self.”5

Expressive Benefits

Expressive benefits matter beyond utilitarian and emotional ones. Many American elite workers derive expressive benefits from long hours of work in high social status. Status symbols vary by culture and time. Leisurely lifestyles signal high status in some cultures and times, whereas overworked lifestyles signal high status in others.

Marketing scholar Silvia Bellezza and coauthors placed side by side a quote from Thorstein Veblen’s 1899 book, The Theory of the Leisure Class, and one from a 2014 Cadillac Super Bowl commercial.

Veblen wrote: “Conspicuous abstention from labor...becomes the conventional mark of superior pecuniary achievement.” In contrast, the Cadillac commercial said: “In other countries, they work, they stroll home, they stop by the café, they take August off — off! Why aren’t you like that? Why aren’t we like that? Because we are crazy-driven hard-working believers, that’s why!”

Bellezza and coauthors found that in the U.S., busyness and lack of leisure time connote high social status, driven by the perceptions that a busy person is competent, ambitious and in demand in the job market. In Europe, however, leisure still connotes high social status, as in Veblen’s time.6 When members of the American elite are asked, “How are you?,” the correct answer is “So busy,” indicating that they are in great demand.7

Do long work hours add to the well-being of elite Americans or detract from it? Have elite Americans forgotten that buying free time is the goal of work?

Management scholar Ashley Whillans and coauthors asked more than 1,000 college students whether they generally prioritize time or money, asking whether they are more similar to Tina, who is willing to sacrifice money to have more time, or Maggie, who would rather work more hours to make more money. They also asked students to report their well-being.

Whillans and co-authors followed up with the students within two years of graduation and asked them to report their well-being. They found that students who prioritized time enjoyed higher well-being than those who prioritized money.

The students who prioritized time over money did not work less. Instead, they enjoyed higher well-being because they got more enjoyment from their work. This was true regardless of their parents’ wealth or how much they cared about luxuries.

Still, it is easier to focus on time when we have money.8

Endnotes

1 Derek Thompson, “Three Theories for Why You Have No Time,” The Atlantic, December 23, 2019.

2 Tiffany N. Ford, Jennifer M. Silva, Morgan Welch, and Isabel V. Sawhill, “No time to spare: Exploring the middle class time squeeze,” Brookings Institution, February 16, 2021.

3 Peter Kuhn and Fernando Lozano, “The Expanding Workweek? Understanding Trends in Long Work Hours Among U.S. Men, 1979–2006,” Journal of Labor Economics, Vol. 26, No. 2 (April 2008): 311-343.

4 Derek Thompson, “Workism Is Making Americans Miserable,” The Atlantic, February 24, 2019.

5 Corinne Purtill, “Ideal, Perfect, Ultimate: What Drives Parents to Seek the Unattainable?” The New York Times, September 1, 2020.

6 Silvia Bellezza, Neeru Paharia, and Anat Keinan, “Conspicuous Consumption of Time: When Busyness and Lack of Leisure Time Become a Status Symbol,” Journal of Consumer Research, Vol. 44, No. 1 (June 2017): 118–138.

7 Daniel Markovits, The Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite, (New York: Penguin Press, Kindle Edition, 2019), 4.

8 Ashley Whillans, “Are New Graduates Happier Making More Money or Having More Time?” Harvard Business Review, July 25, 2019.

Provided courtesy of Avantis Investors

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.