The economics of sleep

The global ‘sleep economy’ is estimated to be worth nearly $600bn this year, with high-tech wearables, sleep-monitoring mattresses and other slumber-boosting products being touted far and wide. But with widespread sleep deprivation damaging our health, happiness and productivity, are we doing enough to tackle what some have termed a ‘public health epidemic’?

 
 

In 2014, the American Centers for Disease Control and Prevention (CDC) declared sleep disorders a “public health epidemic”; two years later, the World Health Organisation released a study, Sleep Problems: An Emerging Global Epidemic?

Roll on a decade, and the world is finally starting to take note. Sleep trackers, wearable devices, digitised mattresses and sleep supplements – from CBD oil to herbal remedies – are everywhere. Hotels are putting the focus on sleep tourism, while corporate sleep programmes are being introduced to help employees get a better night’s kip.

Sleep has become big business – so much so that consulting firm Frost & Sullivan predicted the global sleep economy could be worth $585bn this year. That’s opening up a whole new raft of opportunities for start-ups and investors, as well as targeting an issue at the core of society. But how pervasive is the sleep ‘epidemic,’ and are we doing enough to tackle it?

A global health crisis
Experts agree with the CDC’s analysis; we aren’t getting enough sleep. “It is 100 percent on point to say lack of quality sleep is a health crisis,” says John Lopos, Chief Executive of the National Sleep Foundation (NSF), an American non-profit founded to improve public health and wellbeing by educating the public on sleep issues.

Long-term sleep loss is also linked to a higher risk of depression, anxiety disorders and burnout

Research by the organisation found that nearly six in 10 adults in the US are not getting the recommended seven to nine hours of sleep a night. “Our results tell us that if a letter grade were given to US adults and teens for sleep satisfaction and practice of healthy sleep behaviours, we would get between a D and an F,” he says.

“NSF data from the US and some other global markets make it clear too many of us are not getting the recommended amount of sleep, we are not satisfied with the sleep we are getting, and there are strong associations between our sleep and priorities like mental health, public safety and performance,” he says. It isn’t unique to the US; a 2023 survey by Nuffield Health found that in the UK, the average sleep time was just under six hours, with 11 percent of those asked getting just two to four hours a night. A 2021 study by the OECD meanwhile found that Japan ranked the lowest of all 33 countries surveyed for average hours of sleep – with 71 percent of men in the country regularly getting less than seven hours a night, according to the Japanese Society of Sleep Research – prompting widespread concern from health officials.

The health impacts of insufficient sleep have been researched far and wide – and experts are concerned. “Sleep duration of less than seven hours is associated with increased risks for cardiovascular disease, obesity, diabetes, hypertension, depression, and all-cause mortality,” wrote researchers in a paper, Workplace Interventions to Promote Sleep Health and an Alert, Healthy Workforce.

A study by academics in the UK and Italy meanwhile found that sleeping less than six hours per night raised mortality risk by 12 percent compared to those getting six to eight hours.

“Sleep is vital in cleaning the brain,” sleep neuroscientist and adjunct Professor at IE Business School, Els Van der Helm, told World Finance. “During wakefulness, the brain builds up waste products; sleep clears these toxins, helping prevent cognitive decline associated with neurodegenerative diseases such as Alzheimer’s disease,” she says.

“Alongside physical health risks, long-term sleep loss is also linked to a higher risk of depression, anxiety disorders and burnout,” she says. “It’s also important for immunity; just one night of poor sleep weakens the body’s ability to fight infections.”

In 2017, acclaimed book Why We Sleep: The New Science of Sleep and Dreams, by British neuroscientist Matthew Walker, put a further spotlight on the health impact of insufficient sleep, getting the public talking about a “low level exhaustion” that has for many become an accepted norm. “Individuals fail to recognise how their perennial state of sleep deficiency has come to compromise their mental aptitude and physical vitality, including the slow accumulation of ill health,” he wrote.

The bottom line
It is not just our minds and bodies bearing the brunt of sleep deprivation, though; widespread lack of sleep is impacting businesses’ bottom lines, too. “Lack of sleep has a measurable impact on business performance,” says Van der Helm, who helps leaders and organisations address sleep issues. “It affects memory, focus and problem-solving and impairs creativity and logical reasoning. Sleep-deprived employees make more errors, have slower reaction times, and are more likely to make poor decisions. Research shows that two nights of restricted sleep can lead to a 300 percent increase in errors,” she says.

Just one night of poor sleep weakens the body’s ability to fight infections

“Research also shows that sleep-deprived workers are 50 percent less productive than well-rested colleagues,” she continues. “Sleep-deprived employees are also more likely to experience burnout, leading to higher turnover rates and hiring costs. In addition, employees who sleep poorly are more likely to take sick days and require costly medical interventions. On a leadership level, sleep deprivation impairs emotional regulation, leading to increased stress and strained workplace relationships,” she says.

A large-scale survey by the CDC found that more than 23 percent of those asked (almost 50 million people) reported problems concentrating during the day due to lack of sleep, while 8.6 percent (18 million people) said sleep deficiency was directly interfering with their job performance.

That is taking its toll economically, according to statistics; a study by research organisation Rand Health (Why Sleep Matters – The Economic Costs of Insufficient Sleep) estimated that up to $680bn was being lost every year across five OECD countries as a result of insufficient sleep, owing to factors including absenteeism, reduced performance and mortality. $411bn of that was in the US, while Japan ranked second with an estimated annual loss of $138bn. In the UK, losses amount to up to £50bn – or 1.86 percent of national GDP – according to research, resulting from decreased productivity, healthcare costs and accidents and errors linked to sleep deprivation.

It isn’t just on an economy-wide level, either; a study by LSE professors found that a one-hour increase in weekly sleep boosted an individual’s earnings by five percent in the long term. “These results are economically relevant,” wrote researchers in the report, Sleeping our way to being productive. “They suggest that an extra hour of sleep per week raises earnings by roughly half as much as an additional year of formal education.”

The ‘sleep economy’
The world is waking up to all this – and both consumers and employers are starting to take heed. “The general public started turning a corner on this about 10 years ago,” says Lopos. “Now the importance is even better understood by regular consumers who are willing to spend on things that can help them get enough of the quality sleep they want and need,” he says. According to research by the foundation, 93 percent of adults asked were willing to use a ‘sleep promoting environment’ to improve their sleep health.

That is taking shape in various ways – not least in the rapid rise of sleep tech. Wearable devices, timed lights, weighted blankets, smart thermostats and even smart mattresses that can detect sleeping conditions – and adjust firmness and temperature accordingly – are among the products being promoted, and consumers are making the most of them; in the US, more than a third of people have used a sleep-tracking device, according to a survey by the American Academy of Sleep Medicine.

That is not only going some way in addressing the sleep ‘epidemic’ – it’s also creating a whole new industry for investors and entrepreneurs. Venture capital funding for sleep tech rose from just under $400m in 2017 to nearly $800m in 2021, according to Crunchbase. Venture capital firms dedicated to sleep have also started to crop up; among them San Francisco-based Supermoon Capital, which launched in 2021 with a $36m fund for sleep-focused start-ups.

“There are real opportunities for products and services to help sleep health everywhere we have a lived experience,” says Lopos. “That could be in our residential spaces, in our work and social places, or on our bodies,” he says. “The list is hard to cap, limited only by the bounds of our entrepreneurial creativity.”

Slumber-focused holidays
Sub-sectors are opening up within the market, too. ‘Sleep tourism’ is being widely touted in the travel industry as hotels, airlines and others cater to consumers’ growing demand for a good night’s rest. Analysis by research firm HTF Market Intelligence estimated the sleep tourism market alone could grow by $400bn globally from 2023 to 2028.

“High-net-worth travellers are now seeking treatments for issues like insomnia, cognitive decline and disease prevention,” says Misty Belles, Vice President of Global Public Relations at Virtuoso, a leading global network of travel advisors. “These initiatives include bespoke spa treatments, sleep-optimised retreats, customised in-room amenities and cutting-edge technologies, such as smart lighting systems,” she says.

All of this is leading analysts to believe the ‘sleep economy’ to be a major area for growth. “The global sleep economy has been estimated at nearly $600bn,” says Lopos. “But I think that is potentially underestimated when we consider the full range of daytime and night-time actions we understand can contribute to healthy sleep,” he says. “The global value starts expanding beyond the hundreds of billions of dollars and closer to estimates like McKinsey recently suggested for the wellness market – in the realm of trillions.”

The silver bullet?
These new revenue streams are good news for entrepreneurs and VC firms working in the sleep space; but are sleep-enhancing environments, sleep supplements and digital gadgets enough to fix deep-rooted issues?

Some experts are sceptical – among them Van der Helm, who points out that not all of these products are scientifically backed, for starters. “Wearables and smart products can help raise awareness around sleep by giving consumers day-to-day insights,” she says. “But many products on the market make unsubstantiated claims about improving sleep, and this is where I remain sceptical.

“Consumers are becoming more informed, and they will begin to reward products that are backed by solid science,” she says. “There is a growing need for companies to work with sleep scientists to validate their products and make real, measurable improvements in sleep quality.”

It isn’t just about the efficacy of the products, of course. While sleep-boosting products and sleep-focused holidays can go some way in raising awareness around sleep as an issue, we need to look beyond them. Corporate interventions are one potential solution.

Experts at Rand Health believe organisations have a role to play. “Employers should recognise the importance of sleep and the employer’s role in its promotion,” they wrote in the Why Sleep Matters paper. “They should design and build brighter workspaces; combat workplace psychosocial risks; and discourage the extended use of electronic devices.”

In recognition of the impact sleep can have on the bottom line, some companies have already taken action; back in 2014, American private health insurance company Aetna even began offering financial incentives for employees sleeping at least seven hours per night (monitored by sleep trackers). A few years later, Japanese wedding company Crazy Inc took a similar approach, awarding points to employees clocking up at least six hours a night, as measured by high-tech mattresses.

Specialist companies such as Circadian and the Sleep Works are meanwhile offering corporate sleep programmes to help employees get the rest they need.

While monitoring employees’ sleep might seem a step too far, employer interventions could certainly have their place; in the Workplace Interventions paper, researchers found that educational sleep programmes resulted in “self-reported improvements in sleep-related outcomes, and may be associated with reduced absenteeism and better overall quality of life,” suggesting clear value for organisations making sleep a focus.

But there is still some way to go; the majority of businesses still aren’t prioritising sleep, “despite compelling evidence of the negative impact,” according to the researchers.

Damaging work culture
And in any case, while these initiatives can go some way in addressing sleep-related issues, they can only go so far; a plaster does not heal the wound. For that, we need to dig deeper and get to the root of the issue; and that starts with fundamental working models. It’s no surprise that long working hours in industrialised nations correlate to poorer sleep; an oft-cited study by economists Jeff Biddle and Daniel Hamermesh estimated that for every extra hour of work, sleep was reduced by 13 minutes. A recent survey by the Sleep Charity meanwhile found that three-quarters of respondents had experienced sleep problems due to work-related stresses in the previous six months.

“Access to screens and the 24/7 economy is a clear sleep disrupter,” says Joan Costa-Font, Professor of Health Economics at the London School of Economics (LSE), whose research found that people sleep better during economic slow-downs, and worse when economic activity bounces back.

Lack of sleep has a measurable impact on business performance

That is backed by recent experience; Americans surveyed by the National Sleep Foundation during the pandemic said they were getting more sleep than before, attributed to the extra flexibility working from home gave them.

Continued hybrid working models have gone some way in maintaining that flexibility, but some experts believe it isn’t enough. “We are seeing shifts in work models, particularly with the rise of flexible and hybrid working,” says Van der Helm. “This allows people to align their work schedules with their natural sleep patterns, improving wellbeing and productivity – but there is still more work to be done.
“Many businesses still equate long hours with high productivity, which is a damaging mindset,” she says. “From my experience working with companies, those who prioritise sleep see significant improvements in both employee wellbeing and business performance.”

Higher powers
But while individual companies can do their bit in changing corporate culture and working hours, it is perhaps policymakers that hold the greatest powers. In 2021, the Japanese government recommended companies allow staff the option to work four-day weeks as part of a wider plan to create a better work-life balance across the country, amid growing health concerns. Trade unions across Europe have also called for shorter working weeks, and some have bitten; in 2022, Belgium gave workers the legal right to request a four-day week, becoming the first European country to do so. Several other countries in Europe have also trialled shorter working weeks. Reducing working hours or providing increased flexibility could go some way in addressing sleep issues, but it is not just the workplace affecting our sleeping patterns.

Constant screen use, blue light exposure, late-night TV and round-the-clock connectivity are all interfering with our sleep, too.

The impact of all of this is well-documented. “Playing video games, using PCs or smartphones and watching TV or movies are correlated with shorter sleep duration,” wrote researchers in a study, Broadband internet, digital temptations, and sleep. “The ubiquity of media devices and the ‘digitalisation of the bedroom’ before sleep can interfere with human circadian rhythms, the physiological processes that respond to the dark-light daily cycle.”

In his book, Why We Sleep, Walker meanwhile highlighted how modern societies have diverged from more traditional – and arguably evolutionary – sleep schedules. “Midnight is no longer ‘mid night’,” he wrote. “For many of us, midnight is usually the time when we consider checking our email one last time. Compounding the problem, we do not then sleep any longer into the morning hours to accommodate these later sleep-onset times. We cannot. Our circadian biology, and the insatiable early-morning demands of a post-industrial way of life, denies us the sleep we vitally need.”

Calling for change
In light of all this, many are advocating for higher-level change, and for sleep to be prioritised as a global health issue. Last year, experts from the World Sleep Society’s Global Sleep Health Taskforce (established in 2022) published a paper in The Lancet calling for sleep to be “promoted as an essential pillar of health, equivalent to nutrition and physical activity,” and for the World Health Organisation (WHO) to take action.

A one-hour increase in weekly sleep boosted an individual’s earnings by five percent

“We recommend developing sleep health educational programmes and awareness campaigns,” they wrote. “We also recommend increasing, standardising and centralising data on sleep quantity and quality in every country across the globe; and developing and implementing sleep health policies across sectors of society. Until sleep is recognised as a health priority by WHO, countries are less likely to include sleep in their national health agenda,” they wrote. Experts behind start-up Sleep Sanity agree more needs to be done. “Policymakers must start taking sleep deprivation seriously, incorporating public health campaigns and potentially even regulatory changes to encourage better sleep health,” they wrote in a recent article. “As a society, we must push for structural changes that not only acknowledge the importance of sleep but actively promote it. The sleep loss epidemic is not just a personal issue; it is a societal one that needs urgent attention.”

Curbing an ‘epidemic’
They might well have a point. If the reams of research are anything to go by, this is a serious issue that needs attention on both an individual, corporate and societal level. And while entirely transforming the way we live our lives from the inside out might be a tall order, implementing feasible changes to our daily lives and work schedules might be a good first step.

If the right steps are taken, in time we might lessen the need for sleep trackers, digitised mattresses and other gadgets. In a perfect world, we might not need them at all (dark and light sufficed for our ancestors).

For now, it looks like we do – and that at least has some benefit. If nothing else, this flurry of new products is putting the spotlight on an issue that has long pervaded society, and acting as a literal wake-up call for us to all make sleep a priority.

If we heed the alarm and start to address the root causes, we might just be able to start curbing what some scholars have termed “the most prevalent risky behaviour in our society.” If we don’t, only time will tell of the impact – but it’s clearly not just businesses’ bottom lines that stand to lose from this ‘epidemic.’