The Impact of Daylight Savings on the Economy

This month Daylight savings will end, and the clock will go backwards. The lower eastern states of Australia will be plunged back into darkness before 7 P.M. and their spending will fall off a proverbial cliff. That is the economic impact of daylight saving, but it goes further than most would realise, in ways that are not immediately obvious.

Come next october, people will furiously debate if it is really necessary to move the clocks forwards again. Ever wondered how that one-hour shift twice a year can ripple through our economy? Over the past twenty years, more and more states are ditching the time switch. Now only the four most southern states in Australia participate in daylight savings. Let’s be honest though, if you are from one of those southern states who doesn’t want an extra hour of sunlight in their evenings? Despite having an uplifting effect on everyone’s mood, it also has an effect on your wallet quite significantly. 

There are historical reasons for daylight saving, notably energy consumption. One of the original reasons for adopting daylight savings was to lower household energy consumption. The idea being that people would spend a combination of more time outside and less time with the lights on in their house. When first introduced during World War Two, it made a certain amount of sense. They were looking to conserve the nation’s resources. They desperately needed coal for the war effort, rather than powering peoples homes. 

Now, the advent of modern electronics has likely wiped out most of the positive environmental impacts caused from daylight savings. On top of that, we rely less on coal for our electricity in modern times. At best, in a modern home the energy consumption savings is no more than 0.34% during daylight savings. That is less than a half of one percent. Not quite sure how much that is actually helping.

Shifting our focus to the economy, daylight saving significantly influences retail and restaurant spending. The most obvious benefit of daylight savings is an increase in sales. Unfortunately I am not referring to discounts but rather an increase in transactions for businesses.

Retail benefits the most with far greater foot traffic at major shopping centers. Personal budgets benefit the least. This is because retail spending increases by ten per cent across the board during daylight savings. 

Restaurants also see a large increase in spending. Although unlike retail, location often plays a larger factor on just how much of an increase the restaurant will see during summer. This makes logical sense because you’re more likely to sit at a nice restaurant in nice weather. You’re probably less likely during winter when it’s cold and raining to sit by the beach and eat at a nice restaurant. Daylight savings prolongs that time frame that people will sit down to eat. Instead of it being dark and gloomy by 7, you can sit until 9 and enjoy the nice weather. This is especially true for weekdays, with the effect on weekend spending being far less. In fact, daylight savings has basically no effect on spending on sit down meals during Friday and Saturdays.

This might not sound like much on paper. While these figures may seem modest, they translate into a substantial economic contribution. A few dollars extra here and there. Maybe an extra meal out in January for everyone. The truth on the matter is that daylight savings is worth roughly twenty one billion dollars to the Australian economy. That’s right, on average we will collectively spend roughly three and a half billion dollars more than usual for each month of daylight savings. No wonder there is such a resistance to any notion of getting rid of it. 

What may come as a surprise to some is that not only will total takings be up for both retail and restaurant the average each customer will spend also goes up. It seems people are just far more likely to spend frivolously the longer the sun is out.

Daylight savings has another, at first less obvious benefit to our economy. Beyond its economic implications, daylight saving also plays a role in societal well-being. There is considerably less crime. More specifically, less robberies. Criminals seem to like the cover of darkness, with more light for longer they have less cover to commit robbery. At first you would think that the robberies just moved in the time that they occurred. After all, daylight savings doesn’t mean no sunset. That reasonable presumption would be wrong. Overall robberies decrease by roughly seven percent a day during daylight savings. 

It’s not all sunshine and rainbows however, in the day that follows the clock change over an estimated four hundred million dollars of productivity is lost. Workplace accidents go up the week of the change to daylight savings as well. Doctors have found a roughly eleven per cent increase in depressive episodes in the month that follows the end of daylight savings. 

So what do you think? Is daylight savings worth the loss of sleep? How about the headache of moving your clocks forward?

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Special thanks to MIT for their data on crime rates, Muenchen University for their insights on energy consumption, and JP Morgan Chase for their information on retail spending. Your contributions were invaluable to this article.