In transport economics, the value of time is the opportunity cost of the time that a traveller spends on his/her journey. In essence, this makes it the amount that a traveller would be willing to pay in order to save time, or the amount they would accept ascompensation for lost time.
One of the main justifications for transport improvements is the amount of time that travellers will save. Using a set of values of time, the economic benefits of a transport project can be quantified in order to compare them to the costs (thus forming the basis ofcost-benefit analysis). In particular, savings (or, for that matter, increases) in travel time form part of the change in consumer surplus for a transport project.
Values of time are used to calculate the non-monetary costs incurred as part of a journey, so that the generalised cost of the journey (a combination of both monetary and non-monetary costs) can be calculated.
The value of time varies considerably from person to person and depends upon the purpose of the journey, but can generally be divided into two sets of valuations: working time andnon-working time. This division is appropriate because the value of working time (i.e. time spent travelling in the course of work) is calculated differently from the value of non-working time (i.e. time spent travelling outside work).
For example, if a worker on a salary of £20 per hour travels to a meeting, the value of time in that case is £20 per hour, because that is the amount the employer would be willing to pay to reduce travel time (as travel time can be considered to be "wasted", i.e. not spent working).