Sports, exercise, and labor market outcomes

Participation in sports and exercise: Theoretical considerations

Before discussing the labor market and other effects of sports and exercise, it is informative to consider why people participate in these activities and who is more, or less, likely to participate [3]. From an economic point of view, there are several potential motives for increased physical activity.

• There is the consumption motive. Sports and exercise are enjoyable and thus yield an immediate reward, similar to many other leisure activities that directly increase utility.

• There is the investment motive. Individuals believe that being physically active increases their general fitness, which is good for their health and their physical appearance, as they are reminded by many public-information campaigns and “get-active” campaigns in developed countries (and in some less developed countries too).

• Some people are aware that today’s investment in health is likely to lead to additional labor market returns in the future through the potential positive effects on various hard and soft skills. It is probably fair to assume, however, that knowledge of these positive labor market outcomes is not as widespread as knowledge of the positive health effects.

(There may also be future returns from improved fitness in other realms, such as an improved position in the marriage market.)

Rational individuals will spend some time participating in sports and exercise when the expected and discounted returns from the investment plus the consumption value of spending time in sports and exercise (net of direct costs, such as expenditures for gear, the expected costs of possible injuries, and any disutility such activities may have for some individuals) exceed the net gains from other activities (remembering that all activities, including sleep, compete for the scarce resource time, whose supply cannot be increased). Such calculations are, of course, approximate and may include some irrational elements. Furthermore, the calculations are not based on the true future effects, as they are unknown to the individual at the time of the decision, but on their subjectively expected values. Individuals may also be affected differently by the related uncertainty—both the general uncertainty about the type and magnitude of possible rewards, some of them occurring in the distant future, and the additional knowledge necessary to reasonably predict the likelihood that such returns will actually be realized. Naturally, this uncertainty will have a greater impact on the investment motive than on the (short-term) consumption value.

These simple ideas can be formalized in various types of mathematical models.

• The consumption motive is most commonly analyzed using Cawley’s Sleep-Leisure-Occupation-Transport-Home-production (SLOTH) model [5] (for examples, see [3]). This static model explicitly considers the trade-offs involved in allocating time to different activities, one of them being sports and exercise.

• The investment motive is captured by models built along the lines of Grossman’s investment-in-health-capital model [6] (for examples, see [3]).

Individual levels of participation are expected to vary because people differ in many ways that affect the decision to engage in sports and exercise, including their opportunity costs for different types of leisure and work, their taste for sports and exercise, their valuation of its side effects (such as physical appearance or injuries, for example) compared to work and other leisure activities, the potential gains they expect from sports and exercise, and their valuation of future consumption compared to current consumption.

Factors related to participation in sports and exercise

The variables associated with participation in sports and exercise have been investigated empirically by epidemiologists, sports scientists, and economists, among others (see, for example, [7]). The factors influencing participation can be classified into five general groups:

• individual socio-demographic characteristics;

• environmental characteristics;

• peer influences;

• costs;

• direct financial and non-financial incentives.

In addition, many studies emphasize the importance of habit formation as a key determinant—simply becoming accustomed to engaging regularly in sports and exercise and integrating these activities into one’s weekly routine [3].

Among the socio-demographic characteristics, studies emphasize age (younger people participate more than older ones, although the shape of this age-activity relationship remains somewhat unclear) and sex (men are more likely to be active in sports and exercise than are women, especially in a household with young children). Other socio-demographic characteristics found to be influential include religion, ethnicity, and immigration status. Being healthy and of normal weight are also associated with higher activity levels. Finally, higher education and better labor market positions go hand in hand with higher observed activity levels as well.

There is also substantial evidence that environmental factors are associated with activity levels. Factors that have been identified include the availability of appropriate facilities (gyms, tennis courts, football fields, running tracks, and so on) and public spaces (such as public parks), crime levels (higher levels increase the expected costs of outdoor activities), and climate and weather. As expected, more facilities and public spaces, less crime, and moderate climate, with more hours of daylight, make it more convenient, safer, and cheaper to be active and are thus positively associated with activity levels. There are also strong indications that individuals are influenced by the activity level of their friends and associates; when peers are more active, individuals are likely to increase their own activity level (and vice versa).

Many of the factors just mentioned are positively associated with health and with labor market outcomes as well, such as earnings and job position. That means that any study attempting to establish causal links between sports and exercise activity levels and labor market outcomes has to deal with the non-randomness of the participation patterns, which overwhelmingly suggest positive selection (people who are likely to do better in the labor market, even without being more active, are more likely to choose higher activity levels). For this reason, some randomized controlled trials have been set up to deal with the selection issue when examining specific research questions. These experiments exploit the fact that it appears to be possible to bribe people to increase their activity levels, using relatively modest financial incentives. However, it is also a common finding of these studies that once the (rather short-term) financial incentives stop, activity levels return to their levels before the intervention started.

Effects of sports and exercise

As mentioned, participation in sports and exercise has many expected positive effects, including greater happiness, improved health, greater physical attractiveness, improved cognitive skills, and enhanced non-cognitive skills such as self-discipline, endurance, self-confidence, stress management, and team work. Research in these areas is vast and interdisciplinary (including epidemiology, psychology, sports sciences, biometrics, and economics). Generally, studies find positive effects on all the factors mentioned, although not necessarily on other lifestyle indicators, such as weight and alcohol consumption.

Thus, almost by definition, it might seem that these positive effects would also be reflected in greater success in the labor market. This might not necessarily be so, however. For example, spending an additional hour in a gym in the morning before work might improve an individual’s health, but it could conceivably lead to a decline in productivity if the training is too intense and requires a long recovery period (which could reduce concentration and effectiveness on the job).

Another key consideration for positive effects on labor market outcomes is which activities are crowded out in order to spend additional time on sports and exercise, whether sleep, other leisure activities, educational activities, or even work hours. Obviously, if additional participation in sports and exercise cuts into work hours, then reduced earnings might easily outweigh any positive productivity effects. Furthermore, if additional participation in sports and exercise crowds out other non-work activities that may increase labor market success as well, such as vocational training parallel to the regular job, reducing them in favor of sports and exercise might also have ambiguous effects.