Value of time

In transport economics, the value of time is the opportunity cost of the time that a traveller spends on his/her journey. In essence, this makes it the amount that a traveller would be willing to pay in order to save time, or the amount they would accept as compensation for lost time.

One of the main justifications for transport improvements is the amount of time that travellers will save. Using a set of values of time, the economic benefits of a transport project can be quantified in order to compare them to the costs (thus forming the basis of cost-benefit analysis). In particular, savings (or, for that matter, increases) in travel time form part of the change in consumer surplus for a transport project.

Values of time are used to calculate the non-monetary costs incurred as part of a journey, so that the generalised cost of the journey (a combination of both monetary and non-monetary costs) can be calculated.

The value of time varies considerably from person to person and depends upon the purpose of the journey, but can generally be divided into two sets of valuations: working time and non-working time. This division is appropriate because the value of working time (i.e. time spent travelling in the course of work) is calculated differently from the value of non-working time (i.e. time spent travelling outside work).

For example, if a worker on a salary of £20 per hour travels to a meeting, the value of time in that case is £20 per hour, because that is the amount the employer would be willing to pay to reduce travel time (as travel time can be considered to be "wasted", i.e. not spent working).

In practice, time spent travelling on certain modes (especially train, but also bus and car passengers) can sometimes be used to carry out some work, while time spent using certain other modes (especially car drivers, cyclist and walkers) cannot be used to carry out work. This means the value of travel time (and thus the value of travel time reductions) for modes where the employee could carry on doing some work is lower for employees already using any such mode. Conversely the value of travel time reductions for such modes for employees currently using a mode that does not allow carry out work (and who would switch mode) is larger.

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