WHEN TIME IS MONEY: THE EFFECT OF HOURLY PAYMENT ON THE EVALUATION

OF TIME (DEVOE & PFEFFER, 2007)

AND

TIME, MONEY, AND HAPPINESS: HOW DOES PUTTING A PRICE ON TIME AFFECT

OUR ABILITY TO SMELL THE ROSES? (DEVOE & HOUSE, 2012)

Sarah Drysdale, Adam Gibbs, Lauren Evers, Sofia Palios, Jessica Fox, James Rooney

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WHEN TIME IS MONEY: THE EFFECT OF HOURLY PAYMENT ON THE EVALUATION OF TIME

(Devoe & Pfeffer, 2007)

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EXPERIMENT 1 – (DEVOE & PFEFFER, 2007)

Hypothesis: exposure to hourly payment makes people evaluate time more economically in a similar way to money.

Predictions: Hourly workers would be more likely to endorse the same statements of mental accounting for time as for money compared to non-hourly workers.

Mental accounting model – a set of cognitive operations used by individuals to help organise, evaluate and keep track of financial activities (Thaler, 1999).

Method:75 participants- 10 excluded 16 statements on mental accounting for money

and time

Conclusion: Hourly payment associated with economic evaluation of time.

Results:

Fig 1. Endorsement of mental accounting model for money and time by hourly status.

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EXPERIMENT 1 (DEVOE & PFEFFER, 2007)

Critique: Time constraints Other commuters? History of income

Further research: Hourly vs. non-hourly vs. never worked Life stages

However, Some of the issues from this experiment were addressed in the next one.

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EXPERIMENT 2 (DEVOE & PFEFFER 2007) Hypothesis: Thinking about time as a function of money

makes people see money as more a financial construct – Evaluability theory (Hsee,1996 & Hsee et al. 2003). Hourly payment increases peoples willingness to trade more of their time for money.

Predictions: People paid hourly more willing to sacrifice time for extra money.

Method: May 2001 Current population survey (CPS) work schedule supplement.

Results: 32.1% paid hourly would sacrifice time for money compared to 17% non-hourly.

Conclusion: Supports hypothesis and prediction

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EXPERIMENT 2 (DEVOE & PFEFFER 2007)

Critique: Correlational not causal

People who see time as a financial resource more likely to have a job that is paid by the hour. - controlled for in experiment3

People paid hourly more familiar with being offered overtime. Situation of individual 50% hourly workers said they had enhanced income by 30-300%

more than non-hourly workers (Evans et al 2004)

Further research: Attempt to demonstrate a causal relationship Test the effect of people who have recently changed pay scale.

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EXPERIMENT 3 (DEVOE & PFEFFER 2007)

Hypothesis: Hourly payment plays a role in people’s willingness to trade their time for money

Predictions: The greater prior exposure an individual has to hourly payment over the course of their working life the more willing they would be to trade more time for money. And vice versa for non-hourly.

Method: Asked to explicitly calculate their hourly wage vs. questions to gage hourly wage.

Results: Prior exposure to hourly payment doesn’t play a role in people’s willingness to trade time for money – high and low exposure both exhibited a similar high willingness

Conclusion: Just thinking about hourly payment is enough to invoke an increased willingness to trade time for money – due to the salience of economic criteria in decision making

= hourly payment affects the economic evaluation of time

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EXPERIMENT 3 (DEVOE & PFEFFER 2007)Critique:Positive :

1. Paid $5 – highest valuation of time of all experiments Negative :

1.Paid $5 – average hourly wage is $26.18 – realistic incentive?

2. Groups not truly random

3. Did not find a link between hourly wage and prior experience

4. Control condition still asked questions on how much earned – salient in their mind.

Further research:Same experiment without pay to see if make a differenceRepeat but take into account the age differences in the population.

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CRITICAL APPRAISAL (2007)

Is the study question relevant and does it add anything new?

Confirms and expands previous research

Generalisable - building on previous research

Data conclusions:Sample size sufficient?

Was the study design appropriate for the research question?

Correlational = does not show causality

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TIME, MONEY, AND HAPPINESS: HOW DOES PUTTING A PRICE ON TIME AFFECT OUR ABILITY TO SMELL THE ROSES?

(DeVoe & House, 2012)

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EXPERIMENT 1 (DEVOE & HOUSE, 2012)

Hypothesis: Thinking about our hourly wage activates a mind-set featuring the goal of maximising the economic value of time.

Predictions: Participants prompted to think about their expected hourly wage would derive less happiness from an unexpected period of free time compared to participants who were not prompted to think about their hourly wage.

Methods: 53 undergraduate students – $5 pay 2 groups:

1. Time/money group – calculated hourly wage

2. Separate income/hours – control group

Results: Time/money group – no difference in happiness pre- and post- leisure time

(p=0.23). Separate income/hours – an increase in happiness post-leisure (p=0.02).

Think about time in money = derive less happiness from internet

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EXPERIMENT 1 (DEVOE & HOUSE, 2012) Critique:

Leisure time not constant for everyone (Liu, Smeesters and Vohs, 2012)

Paid to do experiment Background of individual Expected income – High vs. low hourly wage

Future research: Happiness Questionnaire (Hills & Argyle, 2002) Categorise expected income (DeVoe 2011)

However, Some of the issues from this experiment were addressed in the next one.

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EXPERIMENT 2 (DEVOE & HOUSE 2012)

Hypothesis: Thinking about the value of ones time has a negative effect on enjoying leisure time and increases impatience

Prediction: People who calculated their hourly wage will enjoy listening to classical music less and experience more impatience

Methods: 368 participants; 3 groups1. Calculated hourly wage

2. Control – reported yearly salary and number of hours they work

3. Weren’t asked anything about money or work

Results: 2 controls no significant difference – both showed significantly less impatience and more happiness when listening to music

Conclusion: Thinking about hourly wage makes you less happy during leisure time, mechanism – impatience

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EXPERIMENT 2 (DEVOE & HOUSE 2012)Critique:Paid $1 – amazon credit card Larger sample size than ex1 and ex3.Claims to replicate ex1 but measures happiness differently (survey vs visual scale).Music tastes may alter between subjects, may induce boredom. Regression – don’t take into account other factors such as boredom/ state of mind/ being paid as an incentive

Further research: Try paying people more for their time to see if less impatient.

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EXPERIMENT 3 (DEVOE & HOUSE 2012)

Hypotheses and prediction: Being explicitly compensated to listen to the music would boost enjoyment of the music for participants prompted to think about their time in terms of money and would have no effect on those participants asked to complete the same computations with meaningless numbers

Methods: Time/Money condition Vs. meaningless calculations Compensated Vs. No compensated

Results: Participants who calculated their wage derived more enjoyment from music when compensated to listen to it – also reported feeling less impatient

Conclusions: that thinking about time in terms of money leads to impatience when one perceives that the economic value of time is not being maximised

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EXPERIMENT 3 (DEVOE & HOUSE 2012)

Critique:Controlled:

Wage calculation vs. arithmetic calculation

Negative points 50 cent reimbursement

Reimbursed onto card (Pettit & Sivanathan,2010)

Poorly worded analysis

Poor stats- p<0.09

Further research:Reimbursement - something worthwhile – physical money not a card e.g. hourly wage.

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CRITICAL APPRAISAL (2012)

Does the data justify the conclusions? The overall conclusions support the data, but the reference to

support of Experiment 3 at p<0.09 seems unjustified

Was the study design appropriate? 2007 paper recognise students are not suitable to investigate hourly

wage, yet Experiment 1 uses a student population

Anchoring: Emotion amplifies the effect – Bodenhousen, Gabriel & Lineberger

(2000)

Recallability: Extreme of wages one year, base earnings on this.

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GENERAL CRITIQUE Categorisation of hourly wage – low versus high (DeVoe

2011) Yearly wage still calculating money/ time - not looking at

long term only short term and not explain why – further research

Status Quo Bias and Loss Aversion Thaler& Johnson (1990) –an increase in wealth reduces the effect of

a future loss.

Framing Effects Recallability Errors of prediction

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HOW DO WE DO THIS EXPERIMENT IN A STUDENT POPULATION?

Compare 2 degrees – eg medicine and music (large difference in average earnings once graduated)

Asked to think/ told about average wage of coming out of university = do they evaluate their time differently

Eg do music students see their work as ‘work’

Academic work – no of hours work. Calculate how many hours you should work per week. Credits = money. However, may be overconfident in their ability and so cause a ceiling effect (Cramer, Duncan & Howitt, 2005).

Comparing students who have part time jobs with those that don’t.

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Thank you for listening

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REFERENCES Bodenhousen, G. V., Gabriel, S. & Lineberger, M. (2000) Sadness and

Suseptability to Judgement Bias: The Case of Anchoring. Psychological Science, 11 (4), 320-323

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Cramer, D., & Howitt, D. L.(2005). The SAGE Dictionary of Statistics: A Practical Resource for Students in the Social Sciences (Third ed.). London: Sage.

DeVoe, S. E., & House, J. (2012). Time, money, and happiness: How does putting a price on time affect our ability to smell the roses? Journal of Experimental Social Psychology, 48(2), 466-474.

DeVoe, S. E., Lee, B. Y., & Pfeffer, J. (2010). Hourly versus salaried payment and decisions about trading time and money over time. Industrual & Labour Relations Review, 63(4), 627-640.

DeVoe, S. E., & Pfeffer, J. (2011). Time is tight: How high economic value of time increases feelings of time pressure. Journal of applied psychology, 96(4), 665-676.

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Hills, P., & Argyle, M. (2002). The Oxford Happiness Questionnaire: a compact scale for the measurement of psychological well-being. Personality and individual differences, 33, 1073-1082.

Hsee, C. K. (1996). The evaluability hypothesis: an explanation for preference reversals between joint and separate evaluations of alternatives. Organisational Behaviour and Human Decision Processes, 67, 247-257.

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