Using the relationship between rents for New York city apartments and commute times, fivethirtyeight.com finds that the average commuter is willing to pay $56 a month to reduce commute times by 1 minute.
Here's a picture:
Assuming a commuter commutes about 23 days per month, and assuming those are 1-way commute times (so they are willing to pay $56 per month in higher rents to reduce commute times by 46 minutes per month), that works out to $1.22 per minute or $73 an hour. That's really high.
These kinds of numbers are important to economists who do a lot of cost/benefit analysis because the value of time gives us an estimate of the price of travel. The price of travel is important for estimating the demand for trips. The demand for trips is important for estimating the value of trips and how the value of those trips change when environmental quality changes.
As a rough rule of thumb, we typically use the hourly wage rate as the value of one-hour spent traveling--under the assumption that a worker can choose to either work and additional hour or spend that hour in leisure. If the worker is a salaried worker (a worker who can't choose the number of hours to work) then we often use a fraction of the wage rate as the value of time (usually 1/3 the wage rate).
According to the BLS, the average weekly wage rate in New York city in 2015 was $2,847 per week. Assuming a 40 hour work week, that's $71.18 per hour. That is shockingly close to the $73 per hour calculated from the rent study mentioned above.
Shockingly close.
And I didn't even rig the numbers.
I just calculated the numbers as I was typing this and I am stunned.
So based on these really crude numbers, the market for rental properties in New York fully captures the value of time as indicated by the labor market.
I love the smell of markets in the morning.
