As Germany equates permanent Daylight Saving Time, and Portugal to keep the clock change, it begs the question of what would happen to the economy under these circumstances and could there be an option that would provide a better outlook. A growing number of studies shedding light on the negative effects of the clock change, and living in the wrong time zone, like what happens during the transition to Daylight Saving Time, can help us answer that question.
There have been claims that DST benefits certain business areas [Mich18]. And there have been claims that standard time benefits other business areas [Bria13]. This sort of discourse reflects fears and the influence of special interests (i.e. lobby groups) and specific corporations, rather than Economy concerns. The bottom line is that the market goes where the money is.
What needs to be created are the conditions to prosper and succeed. The rest, as always, follows. And DST is not a condition for success but the opposite.
The Economic Impact of the clock change to Daylight Saving Time
When the clock change to Daylight Saving TIme occurs, people have observed a number of negative effects on the Economy:
Workers are 20-27% less productive [WBLF12];
Healthcare costs increase (loss is estimated to be 4 million euros per 1 million citizens, over the time course of 4 days) [JiZi20];
Work related accidents increase 5.7% [BaWa09];
Workers lose 67.6% more work days due to injuries [BaWa09];
Sudden mortality increases due to a sudden increase in heart attacks (24% increase in daily heart attacks [SaSG14]) and car accidents (6% increase overall, being locations further to the west in the time zone more affected [FVWV20]). An estimation on the costs of loss-of-life has been put forward of 0.44 million euros per 1 million citizens [JiZi20, Smit16].
Thankfully, the effects here listed, as a consequence of the clock change, subside over time. However, there are persistent effects resulting from the time zone misalignment.
Bad Sleep, Poor Economy
It is undisputed that sleeping well makes us happier, more productive, more relaxed, and better thinkers. Insufficient sleep, on the other hand, is involved in increased mortality and morbidity, which means an increase in healthcare expenditure. But there are also other losses, like a loss in productivity, an increase in work-related accidents, and poor decision-making, all of which ultimately end up costing the Economy billions of euros [HSTT16]. Data collected on 5 industrialized nations, Canada, USA, Germany, UK, and Japan, supports that there is a combined 680-billion-euro loss each year. The figure below shows the individual values for each nation, along with its relative percentage of that nation’s Gross Domestic Product (GDP).
To put it into perspective, table 1 compares the economic cost of insufficient sleep to the investment per nation in “research and development” and “healthcare”. If nations would create better conditions for sleep, not only would that lower healthcare costs, but also independently regain enough capital to sponsor 50-100% of R&D programs.
Table 1: Comparison of expenditure in R&D, Healthcare, and the economic cost of insufficient sleep as percentage of GDP.
For Germany, it was estimated that 30% of people are sleeping less than 7 hours (9% sleep less than 6 hours and 21% sleep between 6 and 7 hours) [HSTT16]. Other sources even speak about 80% sleeping less than 7 hours [RoWK19].
For Portugal, an enquiry done by the “Sociedade Portuguese de Pneumologia” shows that an alarming 46% of the inquired people sleep less than 6 hours a day [Tiag19]. Furthermore, 32% of the enquired people say they sleep poorly and 40% admit to having difficulties staying awake during the day. Giving credibility to these numbers, another study looking into sleep duration, lifestyles, and chronic diseases, places short sleep duration (defined within the article as less than 5 hours of sleep) among the enquired people at 20.7% [RDRS18]. Based on the estimations for Germany, the impact of poor sleep in Portugal could very well around 2.4% of its GDP.
Daylight Saving Time Costs Sleep and Money
Most people have to use an alarm clock to wake up in morning [RPZW19]. This means that waking up does not occur because the body rested enough but rather due social obligations. Because people pay so much attention to social times, it is easy to miss what we actually do when shifting to Daylight Saving Time: we force people unwillingly to wake up one hour earlier. And, unsurprisingly, that is what is continuously reported: people sleep less and worse during Daylight Saving Time [BaWa09, JiZi20, WBLF12]. People and institutions do still say that one can adjust to Daylight Saving Time without referring to scientific studies [BrPh20, Clea20, Medi20]. That is a dangerous myth (see Myth “You get used to it“).
The Economic Impact of permanent Daylight Saving Time
An estimation has been put forward, comparing populations in the US lying at time zone boundaries, that could help us understand what would happen when choosing permanent DST [GiMa19].
As shown in figure 2, on the eastern side of the boundary, sunrise and sunset occur a social hour later than in the western site, although solar times remain the same (sunrise for example is happening at the same time in absolute terms, but on the eastern side of the boundary people would say it is happening at 8 o’clock for instance, while the on the western side people would say it is happening at 7 o’clock). The social jetlag of 1 hour equals the difference between standard time and daylight saving time and was estimated to raise health care costs for districts on the eastern side of the boundary by at least 82 US dollars per capita per year, corresponding to 2.35 billion dollars every year (around 2 million euros) [GiMa19]. Based on this calculation, using the healthcare cost value of 10738 dollars per capita for the US in 2017 (according to the Centers for Disease Control and Prevention - CDC), this would correspond to a 0.76 % increase in healthcare expenditure.
Figure 2: Local time of sunrise and sunset east and west of the time zone boundary. Source: [GiMa19].
This estimation does not consider the full spectrum of health complications arising from Daylight Saving Time. A comprehensive estimation, combining the cost of all known health problems created by Daylight Saving Time, is yet to be published.
Wages and Productivity
For productivity, the estimations vary but they all agree to be negative under Daylight Saving Time [GiMa19, GiSh18, HSTT16].A reasonable value for productivity loss under Daylight Saving Time is 1.1% (a loss of around 21 work hours per person per year)[GiSh18, JiZi20]. which agrees well with loss of productivity estimations for insufficient sleep [HSTT16].
Not surprisingly, it was also observed that wages tend to be 3% lower overall on average in Daylight Saving Time, meaning that a loss of productivity affects all workers [GiMa19, GiSh18]. DTo contextualize this loss, Portuguese citizens, on average, would lose around 760 euros per year and German citizens 1350 euros per year [Oecd20].
Energy expenditure has also been the subject of analysis and controversy. Some claim that having more natural light in the evening will reduce the energy bill by saving in street lighting – in this scenario Daylight Saving Time would be more advantageous. Others claim that having more natural light in the morning, will reduce the energy bill by saving in heating costs – in this case scenario, standard time would be more advantageous. Intuitively, heating costs outweigh electricity costs, since heating is more expensive then lighting. Actual expenditure may depend from country to country.
It is acknowledged that determining heating costs, or fuel consumption, is difficult to estimate [ArNe08, HaHI18, IrHH17]. Hence the plethora of studies available focuses on electricity consumption as a measure of energy savings.
For instance, a Study about Great Britain, projects that with permanent Daylight Saving Time 0.3% of the electricity costs would be saved [HDGC10]. However, another study from 2009, estimates for the US state of Indiana that staying in permanent Daylight Saving Time would increase the electricity costs by 1 – 4%, reflecting money of nearly 9 Dollars million per year [KoGr09]. It was noted that most studies reporting savings, place them below 1%, independently of where the savings are reported to lie (standard time or Daylight Saving Time), and that the level of disagreement is high [ArNe08, HaHI18].
A more recent meta-analysis of the publications surrounding the topic of clock change and energy savings has been performed and concludes that the best guess concerning the effect of Daylight Saving Time on electricity consumption is close to zero [HaHI18, IrHH17].
Even considering latitude effects, the potential electricity saving effect is not really present [ArNe08, HaHI18]. For Turkey, a lower latitude country, the potential benefit from standard time would be 0.06% while for Germany the potential benefit of summer time would be 0.1% [HaHI18, IrHH17].
The number of time zones is not a problem
Regarding the European Union, there have been concerns that too many time zones would disrupt commerce [Euro19, Scha19]. And yet, the biggest single-country economy, the USA, has 4 different time zones, a reminder that being an economic powerhouse has very little to do with the number of time zones. With the rise of information and communications technologies, there are many tools that compensate for geographical distance, effectively providing unphased trading of goods and services. This is the case for finance and insurance services, where most of the information exchange can be handled via online services. Similar behavior is expected to similar industries.
Nevertheless, the effects of geographical distance and time zones were also examined. In particular, sales by affiliates in other countries were used as an indicator of the effects of different time zones. For trading in other countries, companies use affiliated companies in the country of their trading partner. Since these retain a percentage of sales, the use of such affiliates by companies must always be weighed up. A study shows that trade between countries with up to two time zones takes place without increased use of affiliate companies [Chri17]. A significant increase in the need for affiliates was only observed when the time zone difference was 5 hours or more.
Data reported by the observatory of economic complexity allows us a better glimpse of each country’s trading partners and allows us to infer if business would be affected by time zones [Oec: 00].
The top export destinations of Portugal are Spain ($12.3B), France ($6.91B), Germany ($6.69B), the United Kingdom ($3.96B) and the United States ($3.5B). The top import origins are Spain ($24.2B), Germany ($10.6B), France ($5.74B), Italy ($4.25B) and the Netherlands ($4.16B). For Portugal, any choices regarding time zones would not influence business: for trading partners within the European Union, the difference in time zones would not play a major role (0-2 time zones of difference), while for partners outside the continent, the geographical distance would be the only factor to consider.
The top export destinations of Germany are the United States ($111B), France ($103B), China ($95B), the United Kingdom ($90.3B) and the Netherlands ($84.5B). The top import origins are China ($109B), the Netherlands ($89.9B), France ($69.1B), the United States ($61.6B) and Italy ($58.5B). For Germany, any choices regarding time zones would not influence business: for trading partners within the European Union, the difference in time zones would not play a major role (0-2 time zones of difference), while for partners outside the continent, the geographical distance would be the only factor to consider.