What Is Time Worth?

It’s 9.06 am. You’re standing on Platform 4 awaiting your train, due in just a few minutes. Will it matter if it’s running late? How much will it cost you – or your employer – if your journey is delayed? What if you get on and have no seat? Does overcrowding have a cost too?

For more than a decade, researchers at the Institute for Transport Studies (ITS) have been trying to answer abstract questions such as these. Collaborating with government and business clients, our economists, statisticians and mathematical modelling experts analyse data to come up with monetary values for ‘non-market goods’. These goods include time, comfort and punctuality – aspects of travel that benefit people, but which they cannot buy or sell in the market place.

value of time shutterstock_440x250px

What difference does it make to know how much a minute is worth?
Although our valuations of time, punctuality and crowding might appear abstract, they have a huge impact on UK public policy. These numbers – the output from years of rigorous data collection and analysis – make an important contribution to transport policy decisions and large public infrastructure investments in road and rail.

Economic assessments are critical to all public transport development schemes. The Department for Transport (DfT) has developed a standard set of appraisal procedures for transport projects, known as WebTAG. The time valuations from Transport Systems Hub researchers are integral to this appraisal process. Cross Rail, HS2, the M6 toll around Birmingham – all these large-scale investments followed the WebTAG protocols and used our numbers to calculate the economic value of journey time savings.

Of course, investment decisions do not rest solely on economic assessments. However, monetary calculations provide significant input into the decision process. Indirectly, our research has helped to release huge sums of public investment into the economy. Moreover, improved infrastructure and faster journeys subsequently deliver additional economic gains, opening new markets, creating jobs, and benefiting citizens and businesses with greater connectivity.

The Office of Rail Regulation (ORR) has worked with us to link forecasts of passenger demand and revenues with time valuations. Our modelling and valuation work in this context has helped to inform ‘Schedule 8’ calculations that set compensation rates, known as transfer payments, for late-running trains. In 2013-14, Schedule 8 accounted for £85 million in compensation.

Entering new times
Our researchers continue to support the work of DfT investment appraisal schemes. In 2013, the DfT published several reports undertaken by the Institute for Transport Studies (ITS). The two main reports examined the latest evidence on the value of travel time savings for business and commuting  and leisure journeys.

Crucially, the researchers found that circumstances had changed dramatically since the previous time valuations were first used as a standard in WebTAG. ‘Since our first time valuations nearly 10 years ago, society has changed a lot’, explains Richard Batley, Professor of Transport Demand and Valuation at ITS. ‘Back then, people saw travel time as wasted time, because they could not work and generate wealth on the move. Now, with mobile technology and WiFi on buses and trains, this is no longer the case. It is high time that we revisited this question.’

The 2013 reports recommended that the DfT update its values to account for the many social, economic and demographic changes over the past decade. The study also suggested a range of additional research projects that could improve models of the combined employer/employee value of travel time savings.

The reports also highlighted some important gaps in valuations of commuting and leisure travel time savings. ‘Here we found that valuations needed to account for the effect of more reliable transport systems’, Professor Batley remarks. ‘We compared several valuation exercises conducted in other countries, such as the Netherlands and Sweden. We concluded that the UK needed a comprehensive nationwide study using similar modern statistical modelling methods.

Responding to these recommendations, in 2014 the DfT commissioned ITS, working with Arup and market research company Accent, to re-estimate national average values of travel time savings. The new study will investigate the factors that cause variation and uncertainty in these values. The research team will also provide values for the benefits derived from improved reliability or reduced overcrowding.

www.its.leeds.ac.uk/research/themes/reliability www.its.leeds.ac.uk/research/themes/rail www.its.leeds.ac.uk/research/themes/pricing www.its.leeds.ac.uk/research/themes/economicappraisal

(This article is re-posted from the University of Leeds’ Transport Systems Hub:  http://tsh.leeds.ac.uk )


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s