The Economics Behind Work

Allison Wagner

    Everyone knows what they make from their work, but many are either over or underestimating what they make on an hourly basis. A friend once told me whenever she got fed up with work, she would add up all the different components of her compensation, including bonus, pension top-ups, health and dental benefits, travel opportunities, and sum up all the time she spent getting to work and working, and figure out how much she was getting paid on an hourly basis. That number was usually motivating enough for her to finish whatever cumbersome tasks laid in front of her.

    For some professionals, this kind of angst simply does not exist. Somebody who had undergone a dozen years of medical training will most likely not need to think about her hourly pay to motivate her in the operating room. My neighbour from first year dorm life used to read three-inch thick chemistry textbooks the way I used to read Stephen King novels. For him, getting paid to do a PhD now is far from an economic decision, but one that stems from, well, passion.

    For those of us with less clear callings, finding work that fit us, and working out the economics behind our choices, may result in considerable anxiety. This is never too clear than during business school recruitment season, when salary and bonus offers were the barometer of someone’s worth. One guy was rumoured to have given up a position in a highly reputable firm for a better salary and bonus package with an employer less prestigious. Given we knew little about the long-term competitive landscape in the industry and future trajectory of those prospective employers, clearly, choices like these were driven purely by economics.

    But numbers alone do not give you a good picture that accurately portrays the value you are providing to your work and your compensation. Some jobs come with benefits that are non- monetary. Meeting people and building connections, learning skills to be leveraged for the rest of your career, providing you with a readily available social circle – all these can open doors for the future.

    At the same time, you are giving back something in return: your time, for those privileges. Consider your time spent at work, your time commuting to work, your time spent doing unpaid work, your time thinking and worrying about work when you’re not working, your time spent shopping and dry-cleaning clothes that you wear to work. Alas, most of us never break our days down to miniscule pieces. With email and Blackberry nowadays, few can truly enforce that blurry line between work and personal time. Besides, we are social animals. And the social environment at work holds too much sentimental values to us to be compartmentalized so crassly.

    A much-neglected issue that is difficult to quantify, but nevertheless important, is the opportunity cost of working. The older we become, the more we’ll come to realize that time, is all we have. The time spent working on one thing means time not spent working on something else. This “something else” could be work in another industry that is fascinating but promises little stability for a steady paycheck. Or it could be striking out on one’s own, taking chances with little guarantee of success. I know that entrepreneurship is not all about inspiration and clever risks-taking, many times it’s done out of necessity and pure foolhardiness. Nor is working for someone else risk-free and anything less of a rollercoaster ride, as many found out recently.

    But the question still begs, for someone in the relative early stages of their careers, is it better to spend it learning the ropes in a business that provides steady and ever-rising compensation (provided there’s a low likelihood of structural adjustment in the industry going forward), or will there be a higher payoff from taking chances and living with career and financial uncertainties?

    The crust of the argument here is the idea of potential. Should one trade in unproven, largely untested and unleashed potential against measurable progress, however mediocre it may be? The issue of potential is a complex one, because it is unknown, unquantifiable, and matters little without success. To put it simply, you can’t cash in a check today for your future potential.

    It also sparks off a slew of otherwise unrelated questions. Does the society one resides in encourage risk-taking, both socially, and economically? How does one’s upbringing influence and impact his tolerance of risks and uncertainty? How does one view social acceptance and self-worth? And how does one deal with timing, self-doubt, self-motivation, and self-discipline? Because however one may resent grinding away at a job, the prospects of generating value and providing for others may be an even more terrifying experience.

    I will continue this discussion on another day. But in the meantime, are you willing to trade in your “worth” today for your potential tomorrow?

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