How Valuable is Flextime?

March 5 | Posted by mrossol | American Thought, Work world

Workers underestimate the benefits of a flexible schedule
WSJ – BY RAYMOND FISMAN AND MICHAEL LUCA

EARLIER THIS MONTH, the city council in Copenhagen voted unanimously to give all municipal workers greater control over their schedules. The city’s 10,000 employees will work the same number of hours as before but with greater freedom to decide when that work gets done. Though Copenhagen’s all-in commitment to flextime is unusual, arrangements such as telecommuting and flexible working hours have been around for a while, with nearly a quarter of the U.S. workforce doing some work from home.

Workplace flexibility has obvious appeal as an alternative to the traditional 9-to-5 day. It allows employees to get to the doctor, stop for a haircut or attend a school assembly during the day and to wrap up work after the kids go to bed. And if employees value this flexibility, companies may benefit as well—by attracting better employees or making existing ones more productive because they are happier on the job. But how much do employees value this flexibility? And how good are they at assessing the factors that contribute to their own happiness? The answers are not what you might think.

Economists Alex Mas and Amanda Pallais recently partnered with a call center to find out exactly how much job seekers value flextime. Their premise was that if job seekers really value flexibility, they should be willing to choose a job offer with more freedom even if it pays a little less. The results, reported in a National Bureau of Economic Research working paper released last September, clearly indicate that, whatever people might say about their desire for greater scheduling choice, most employees aren’t willing to give up much pay to get it.

The study involved a simple experiment in which the company varied the job options communicated to more than 3,000 applicants. Prospective employees were given two possible work schedules: a standard 9-to-5 day and a second option with either more or less flexibility. The less flexible option gave the company the power to assign last-minute shifts (including nights and weekends). The flextime options offered more freedom in the days, times or number of hours the employee would work per week. But these options came with a catch: Applicants had to take a pay cut in exchange for increased flexibility.

The average applicant, it turned out, was willing to take a sizable pay cut—about 20%—to avoid having hours scheduled at the whim of the company. Who, after all, wants to work weekends or nights on short notice?

But flextime didn’t fare so well. About 60% of would-be employees weren’t willing to take any wage cut, even a tiny one, in exchange for flexibility in the number or scheduling of hours. About a quarter of applicants were willing to take a cut of about 10% in exchange for schedule flexibility, and about a quarter were willing to take a 6% cut for flexibility in the number of hours. Perhaps unsurprisingly, the applicants that valued flexibility were disproportionately women with young children. Does this mean that most applicants don’t value flextime? If we assume, as economics research often does, that people have a good sense of what makes them happy, then that is the study’s main takeaway. Moreover, for the employees who do value flexibility, there may already be efficient sorting into jobs with more scheduling discretion. That is surely part of the story.

But research in social psychology suggests that we might not be so adept at making decisions about when, where and how much we work. In particular, people may not realize the cost—in terms of their happiness—of working harder to make more money.

A 2016 study in the journal Social Psychological and Personality Science, based on surveys of thousands of Americans, found that while most respondents reported that they would prefer more money to more time, the ones favoring time were more apt to report being happy. (A second study, published last year in the same journal, yielded very similar findings.) This shouldn’t be surprising. Research has shown that money does indeed buy happiness, but only up to a point. In an influential 2010 study in the Proceedings of the National Academy of Sciences, Nobel laureates Angus Deaton (an economist) and Daniel Kahneman (a psychologist) found that rising income increases emotional well-being for those with relatively modest earnings but that the effect stalls at around $75,000 a year. This suggests, for example, that a job paying $100,000 a year, with a flexible schedule, may leave you happier than a job paying $10,000 more but with inflexible hours.

If people overestimate their ability to buy happiness and underestimate the joy they derive from more time and freedom, flextime appears in a very different light. The applicants in the Mas and Pallais study may be unwilling to pay for flextime simply because they don’t realize how much happier they would be with shorter or more flexible hours.

Looking at today’s labor market, these findings point to both challenges and opportunities. We should be discouraged that more jobs have less security and more last-minute demands. Many of the 9-to-5 jobs that are disappearing are turning not into flextime positions but into less predictable contracts that people would be willing to pay to avoid, if given the chance. But there is promise in today’s trends as well. Technology has given us an unprecedented capacity to trade time and flexibility for money. Employers such as Uber and TaskRabbit allow people to make granular, hour-by-hour decisions about whether they want to work or play. And Skype and FaceTime make it easier to work from home.

With the number of such options growing, we may all come to a deeper appreciation of the power of flexible jobs to transform our daily lives. It may be time to start Skyping into more meetings, beginning the workday a little later and finding ways to meet your spouse for an afternoon coffee before going back to work.

Of course, employees don’t make decisions about when and where to work in a vacuum. Even when flextime is available, its attractiveness depends on how it is perceived by others, particularly by higher-ups. Employees may wonder, for example, whether they will be at a disadvantage for promotion if they don’t put in enough face time at the office during business hours. If we really are going to change the way that people think about the benefits of flextime, managers need to make it clear that there is no stigma attached to it.

The new labor market in the U.S. might develop in any number of directions, which leaves us with important choices ahead. We can converge on a world in which we all work 9 to 5 (and often longer), with little flexibility. Or we can find a way to build everyday routines that are more accommodating, more flexible and potentially a lot happier.

Mr. Fisman is the Slater Family Professor in Behavioral Economics at Boston University. Mr. Luca is an assistant professor at Harvard Business School.

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