Wednesday, June 29, 2005

TV's biggest crime - it's a thief of time

If you really want to be happy, throw away your television set. That's the bizarre finding of new economic research completely at odds with traditional assumptions. It has traditionally been assumed that people who choose to do a lot of something must enjoy it. And we certainly choose to watch a lot of TV.

I like to think of myself as a light viewer, but in truth I watch 30 to 90 minutes a night plus at least that much again of children's programs in the background each morning.

The typical Australian is said to watch two to three hours a day. Added up over a lifetime, that means someone who lives to 75 may have watched TV for nine years. The only things we do more of are work and sleeping.

So it's odd that economists haven't much studied TV viewing until now. When they have, they have found that we enjoy it. Most recently the Nobel Prize winner Daniel Kahneman asked 1000 women to record how they felt at each moment of the day. They felt their best when having sex, socialising, eating and watching TV...

They enjoyed TV more than they did talking to their spouse, shopping or caring for their children.

Now a team from the University of Zurich is suggesting that Kahneman and others have been looking at only half the picture. In a paper entitled Does Watching TV Make Us Happy? Bruno Frey and his colleagues argue that it is not enough merely to ask people how they feel at the exact moment when they are watching TV. It is also necessary to ask how people who watch a lot of TV generally feel.

They say that drug addicts feel great at the exact moment they are getting their fix, but they generally feel awful.

The team had access to data from a European survey in which 42,000 people were asked: "All things considered, how satisfied are you with your life as a whole nowadays?" They were also asked how much TV they watched. The team found that the people most satisfied with their lives were those who watched TV the least.

The effect was large. One of the most important predictors of happiness (for men) is whether they are married. The effect of not watching much television is about one third as big.

The team was left with a paradox. Watching TV made people feel good while they were doing it, but seemed to make them less satisfied overall.

Other activities affect us in the same sort of way. One is smoking. Cigarettes hurt smokers, but they do so slowly. Immediately, they offer relaxation - which becomes addictive.

Bruno Frey could see how television might act like that. It offers an immediate benefit - relaxation, with the costs not apparent until later. Those costs include tiredness, weak social relationships and insufficient attention to study and careers.

People who don't care about the future or who lack self-control will watch more TV than they should, and will be less happy as a result.

Opinion polls suggest that this is the case for many Americans. Forty per cent of US adults and 70 per cent of teenagers say they spend too much time watching TV.

But there is another possibility which Frey and his team have not been able to rule out completely. It's that rather than excessive TV use making people unhappy, people who are already unhappy may choose to watch a lot of TV.

Frey thinks this is not the case, and he designed a test to back up his opinion. He says if he is right about heavy TV viewing causing unhappiness, it won't do it to everyone.

The only people seriously harmed by heavy viewing will be those who have other things they can usefully do with their time. (Economists call them people with "high opportunity costs" of time.)

They include the self-employed, senior managers and people in professions where the work never ends. For them, lost time matters.

By contrast, pensioners and the unemployed (with low opportunity costs of time) shouldn't be that much harmed by the hours taken up watching TV - they might even welcome them.

Frey has gone back to the European data and found exactly that pattern. Watching TV for more than 1½ hours a day doesn't appear to hurt pensioners and the unemployed, but it makes a big dent in the happiness of the professionals who do it. Denied time in which they know they could be really achieving things, they feel perpetually unsatisfied.

TV appears to play with our minds in other ways as well.

The European survey asked people about their anxieties. One question asked: "How do you feel about your household's income these days?"

Another asked: "How important is it for you to be rich?"

Frey found that heavy TV viewers were both more anxious and more greedy than were light viewers on the same incomes. They were also more scared about the outside world.

Other questions asked whether people could generally be trusted, and whether it was safe to walk outside at night.

On both counts heavy viewers were more frightened.

Television viewing is by far our biggest leisure-time activity. And it's not all bad. (I happen to work in television.) But until now discussion of its impact has moved little beyond debates about whether or not it makes us violent. Its biggest crime may be to steal our time.


Wednesday, June 22, 2005

Honey, we can't afford the kids

If you are thinking about having a child, stop. I have a financial warning: you probably can't afford it. Don't take my word for it, look at the result of a massive financial exercise conducted as part of the Government's recent review of the Child Support Act. It is relevant more broadly to anyone considering having a child, even if their relationship stays intact. If there is a mortgage involved, the outlook is chilling.

There are two completely different ways to work out the cost of having a child, and the review used both of them. One is to measure what couples with children spend and to work out how much it exceeds what similar couples without children spend.

The problem with this approach is that it examines "what is" rather than "what should be". Many parents might not spend enough on their children (they might not be able to); others may spend far too much.

The other approach is daunting, if not impossible. It is to identify and cost every single extra item of spending needed to raise a child (including, for example, each extra toothbrush and the extra toilet paper) and to add up those costs. In all, there are more than 700 such costs...

The task is made more difficult by the knowledge that a lot of the costs involve goods that are shared between the child and the parents. For example, a fridge is used by an entire household, but if there is a child in the house extra spending might be needed to make it bigger or to replace it sooner.

Much of the work involved calculating what a couple without children should reasonably be spending. A researcher, Paul Henman, began the task a decade ago at the then Department of Social Security, and finished it off in his present post at the University of Queensland.

He had to make value judgements, among them: no household needed to spend money on cigarettes; everyone needed an annual visit to the dentist; each household needed a car (a 12-year-old Corolla) and membership of the NRMA or such like, but not membership of a union.

His team prepared budgets for two different standards of living: "modest but adequate", based on the prices of the leading brands sold at Woolworths; and "low cost", based on the prices of Home Brand and No Frills products.

When it came to adding in the costs of children, Henman erred on the low side. He says that was deliberate. He told me this week he was under enormous pressure from his employers at the Department of Social Security to keep the estimates low. They might later be used to set benefit levels. These low estimates, adjusted for present prices, were presented to the Child Support Review.

They appear to be comprehensive. A six-year-old girl is assumed to need 49 different items of clothing and footwear, all purchased at Target. Among the toys needed for a 10-year-old boy are a bicycle, skateboard and cricket set. Where there are two children in the house, they are permitted a second, portable television set.

But a lot is left out. Children up to 14 are assumed to get their hair cut at home. All their visits to the doctor are bulk-billed. They go to government, rather than private, schools. And, even when they are teenagers, they continue to be outfitted at Target. Most bizarrely, to my way of thinking, teenagers are assumed not to own, or make calls to, mobile phones. They are limited to two local calls a day.

I put it to Henman that he was out of touch with the needs of the modern teenage girl. He conceded that he didn't have one of his own and said the assumptions underlying his work were in need of revision.

But even so, the costs he came up with are large. The cost of a three-year-old to a couple trying to eke out a "modest but adequate" living is estimated at $17,620 - most of it spent on child care. Without child care, the cost is a more modest $6500 a year, but it climbs as the child gets older, reaching $10,300 in the teenage years ($7850 if buying "low-cost" items).

To put these costs in perspective, they are said to account for between a fifth and a quarter of a typical household's disposable income.

A typical mortgage takes up more than a third of household income. I know many home buyers who can barely make the repayments. Henman's numbers suggest they cannot afford to have children.

And the other set of numbers prepared for the review, using actual spending patterns, are worse. Spending on children is said to climb over time to $19,500 a year for middle-income couples or $13,520 for low-income couples. This amounts to between a quarter and four-fifths of gross family income.

There are also indirect costs not taken into account in either of the studies. They include the income lost by the parent who withdraws from work to look after the children. Even if both parents continue to work, one is likely to seek a job where there are easier hours, less responsibility and less pay.

About the only bright side is that incomes tend to rise over time, making the cost of caring for a child in the teenage years less daunting than it would seem at birth.

It might be a good thing that most of us don't do the financial calculations. We close our eyes and dive in. We manage by cutting our spending or by extending already impossibly large mortgages.

We sense that children bring benefits that can't be described in financial terms. They give us a sense of purpose - they believe in us, idolise us and depend on us.

It is almost financially impossible, but it's worth it.


Wednesday, June 15, 2005

Ricardo Semler - Brazil's Caring Capitalist

Ricardo Semler - Brazil's Caring Capitalist was the subject of a quick and surprising story while on location for SBS TV in Brazil. (There is a video link too)

George Negus's introduction:

With John Howard proposing radical changes to this country's industrial relations system - a look at a very different system with a very different boss on the other side of the world.

In Brazil, on the factory floor and in the office, workers at the SEMCO manufacturing and services conglomerate pretty much call their own shots. Some might call it Anarchic Socialism, maybe others, cutting-edge capitalism - whatever, it's certainly paying financial dividends.

Indeed, it's so successful that it's unorthodox "worker participation" approach is being extended to other fields as well.

Well you might ask is there anything this bold Brazilian experiment could teach us here in Australia? Imagine if you will, students sacking their teachers!

SBS economics correspondent Peter Martin starts his report in exotic Rio.