Time Banks Provide New Way to 'Spend' an Hour

In these small, alternative economies, the doctor and the babysitter are equals.

Time banking is based on the simple notion that time is equal for all people. In this system, services can be exchanged based on how long it takes to complete them, rather than on a market value determined by supply and demand.
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The ability for people to serve each other is universal and therefore abundant, he says. But precisely because of its abundance, that capacity is undervalued.

"We are devaluing kinds of activity that are fundamental to community," Cahn says.

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Time banking seeks to promote that sense of community, along with an affirmation that just because the market won't pay money for a skill doesn't mean it's worthless. Indeed, the downturn seems to have opened people's minds to the viability of a time-based currency.

"Given the recession and unemployment, the notion that we've got untapped capacity in community—I do not have an uphill battle of convincing people of that anymore," he says.

The idea has gained recent traction, but time banking has been around for decades, under a variety of different names, such as service exchanges, time shares, and hour exchanges.

Some communities had been exchanging services as early as the 1970s, Hogan says, but the program gained a foothold in the early 1980s, when Cahn—a lawyer by training—introduced the idea of time dollars and did work on the feasibility of the system. In the late 1980s, the Robert Wood Johnson Foundation invested $1.2 million to boost the program at six health care organizations. Cahn acted as an adviser for the initiative.

While many organizations simply facilitate the exchange of hourly services, others are committed to helping specific populations, like troubled youth or the elderly. Partners in Care, a Maryland-based service exchange, connects volunteers to elderly members who need services such as rides and grocery shopping.

The Grace Hill Settlement House in St. Louis allows members to purchase actual goods with the time dollars they earn. A store run by the organization sells donated personal items and toiletries like toothbrushes. This allows members to "earn" the things that they buy.

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"We support the notion that this is about creating care for one another where people own that care and deliver that care one to another," says Rod Jones, president and CEO of Grace Hill Settlement House.

Frances Garrison, a retiree who volunteers with Grace Hill, gives seniors rides in exchange for time dollars. The exchange is satisfying, she says, because it allows people with limited earnings to still get value from their good deeds.

"I'm doing a good deed for them, and they're giving me something nice in return. And since they're on a fixed income, they don't have too much money to blow," she says. "The time dollars are very precious dollars."

Some adherents speak of time banking with an almost religious fervor, using not only the language of finance ("value," "exchange") but also of altruism and harmony ("community," "human dignity"). It's a philosophical movement as much as an economic movement, but amid the lofty goals, there are practical concerns. Time banks must be sure to restrict their activities to services and not bartering. While exchanging goods is taxable, says hOurworld's Hogan, exchanging favors is not. This means that time banks helped to bring about this surreal-sounding IRS ruling:

"The IRS has ruled that you cannot tax time."

That's how Hogan puts it; the IRS is more verbose. The agency ruled in 1985 that time banking is not bartering. Barter exchanges—organizations where property and services are traded—can be taxed. However, the IRS distinguished this from time banking, and has ultimately agreed that time dollars are not taxable.

"It's the labor that we're exchanging," Hogan says. If she were cooking a meal as part of her time bank service, she says, "then I'd bring you the receipt from the store for the ingredients, and you would pay me cash for that."

In part because of tax rules and in part to uphold the time banking ethos, Hogan says that it is necessary to ensure that the rules are followed.

Transactions must be on a strictly hour-for-hour basis. Participants cannot bid with their time, offering two or three time dollars for an hour of service that they particularly want.