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The Economics of Sleep

Sphurti Srivastava

We all must have heard how sleep is important for our health. A night of good sleep helps in healing and repairing our heart and blood vessels and helps in better concentration. In the global era of competition, sleep is the most neglected component of everybody’s health. Most of the people nowadays are sleep-deprived. Sleep deficiency is responsible for causing problems with learning, concentration, focusing and decision making.

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Sleep also affects economic growth to some extent. Studies suggest that on average sleep deprivation causes economic loss up to 3% of GDP and increase in sleep could actually add billions to the economy. Shocking, right? However, this is indeed true. In the United States of America, insufficient sleep has been declared a public health problem by The Centre for Disease Control and Prevention (CDC)

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A research was conducted by RAND corporation (an American non-profit institution which helps in decision making through its research and analysis) on economic effects of sleep deprivation. The research showed some interesting findings:

Canada loses $21.4 Billion (1.35% of GDP) every year due to sleep deprivation, UK loses $50 billion (1.86% of GDP), Germany loses $60 Billion (1.56% of GDP), Japan loses 138 Billion (2.92% of GDP), USA loses $411 Billion (2.28% of GDP) and Australia loses $66.3 billion.

This is a huge loss of productivity. When we see it in terms of working days, we find that the USA loses 1.2 million working days, Japan loses 600000 working days, UK and Germany lose 200000 working days while Canada loses 80000 working days annually costing the economy billions.

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Now the question arises how does sleep cause such a huge economic loss? The answer lies in the fact that sleep-deprived people react 50% slower as compared to their well-slept counterparts and make more mistakes due to lack of concentration and focus. Also, sleep-deprived people are much less productive at the workplace. Sleep-deprived people are more prone to heart attacks, obesity and diabetes and take more sick leaves or work at a sub-par level causing huge economic losses.

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Another question that arises is what are the reasons for poor sleep in working individuals in today’s world? First and foremost, it is the lifestyle. Working overnight, or working late drinking coffee just before sleep also contributes to poor sleep. Lack of self-discipline, stress and health conditions are responsible for poor sleep. Moreover, nowadays most of the people have irregular working hours significantly impacting their sleep pattern.

Studies by the Wellness Council of America also show some interesting findings. According to this study, a proper sleep schedule could –

·     Help employers save loss up to $1300 to $3100 per employee which occurs due to fatigue.

·     Help employers save an annual loss of $1 million which occurs due to fatigue.

·     Avoid $536000 in healthcare costs.

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Companies are recognizing the importance of good sleep among employees. Companies like the Huffington Post, Uber, Google, Ben & Jerry’s and PricewaterhouseCoopers offer nap rooms or nap pods to their employees. However, the sad reality is that these companies are beyond the reach of most employees. And not many companies pay attention to their employees’ sleep schedule. Some of the steps which individuals can take are- exercising, limiting the use of electronic devices and caffeine before sleeping, and exercising self-discipline. Companies can also take initiatives in this matter.

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Sleep deprivation has serious economic effects. However, an interesting finding comes to light. In microeconomics, we aim to achieve maximum utility at the lowest possible cost subject to budget constraints. While applying this reasoning to sleep we make a terrible mistake. In today’s modern world, people believe that their utility will be maximised at a point where they sleep less and stay awake to do more work and be more productive. However, research indicates the opposite. In economic terms, our utility is maximised at a point where we require more sleep than we actually think. The strange thing is we look to maximise our wealth by reducing our sleep without realizing the fact that sleep is wealth itself.

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