The Retired Investor: Economics of Daylight Savings Time

On Sunday, Nov. 6, 2022, Americans turn their clocks back to Standard Time. Earlier in the year, the U.S. Senate unanimously approved a bill that would have made Daylight Savings Time (DST) permanent as of Nov. 20, 2023. What happened?

 

The U.S. House of Representatives has failed to act on the measure. In order to become law, the measure would need to pass the House and be signed into law by the president. Fundamental disagreements over the language of the Senate bill, called the Sunshine Protection Act, ultimately focused on which was the proper time to make permanent -- Daylight Savings or Standard Time.

 

Recent public opinion polls say most Americans would like to see DST made permanent. You might ask why and when did the present system develop, and what is the economic impact of changing it?

 

Benjamin Franklin came up with the idea in 1784, but it was Europe, specifically Germany, that first implemented the change back in 1916. In America, DST has had a checkered past, beginning with President Wilson, who first made it a law in 1918. It was repealed seven months later, reinstated in 1942 by FDR, and made official by Lyndon Johnson in 1966, who made the start and end dates of DST uniform across the country.

 

Arizona, Hawaii, Puerto Rico, American Samoa, the U.S. Virgin Islands, and the Northern Marianas do not recognize DST. Only 70 countries worldwide observe it, but those that do, are strict about it. For example, on Saturday, Oct. 30, 2022, clocks in most of Europe were set back an hour as DST ends.

 

In passing the Sunshine Protection Act, legislators in the U.S. Senate justified the permanent switch to DST by arguing that it could boost consumer spending, while reducing energy consumption by adding an extra hour of daylight at the end of the workday.

 

Historically, not everyone in the U.S. liked the concept of daylight savings. Farmers lobbied against the concept because it would give them one less hour of sunlight to send their crops to market. They also claimed the cows didn't like it because milking is done on a schedule and DST disrupts that.

 

As for energy savings, at one point the U.S. implemented DST year-round (from January 1974 through April 1975) to combat the energy crisis back then. Once again in 2005, Congress extended DST by a month to also keep energy costs down. Unfortunately, studies have shown that the fraction of savings on one's electric and gas bills from DST was more than offset by higher energy usage in other areas.

 

The U.S. Chamber of Commerce has long been a supporter of DST. The Chamber contends that consumer spending increases during DST. Retail sales jump due to more people shopping after work. Energy usage increases as well. More air conditioning and fan usage, and additional driving occur as consumers take advantage of extra daylight to care run errands. That explains the minimal gains in energy savings overall.

 

Two of their members, the golf, and the barbecue industry, have put numbers to their arguments. Golfers take advantage of the extended hour of play to the tune of $200-$400 million annually, according to the Chamber of Commerce, while profits to BBQ-related companies increase by more than $150 million per month. Restaurants, hotels and those businesses in tourism areas are also in favor of DST because they say visitors stay out later.   

 

On the negative side, William F. Shugart II, an economist at Utah State University, states that the changing of clocks itself can cost the country $1.7 billion in lost opportunity costs. He argues people could be doing something more productive. In addition, the Air Transport Association, as far back as 2007, believed the airline industry suffers more than $147 million in snarled time schedules worldwide as a result of the clock change.

 

Beyond the economics, which seems to have as many pros as it does cons, the social impacts are just as confusing. Longer daylight promotes safety for children playing outside, joggers, and dog walkers, and increases visibility causing fewer auto accidents.

 

Countering the pros, are arguments that moving clocks forward provides less sunlight in the morning when most children are going to school. Since most robberies are committed at night, however, extra daylight may cut down on crime.

 

In any case, do not expect Congress to move on legislation to make one or the other time change permanent this year. Depending on the outcome of the mid-term elections, something might change in 2023, but given the partisanship in Congress, I wouldn't hold your breath. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.