On the Pareto frontier in salary-vacation space

Dear (Prospective Employer),

Thank you for your monetarily very generous offer of employment!  Honestly, it’s not obvious to me how I could spend $X a year, as I am currently living quite comfortably on about one Nth of that amount.  Actually, that’s not entirely true; I’m sure I could spend it all if I got a mortgage on a big house out in the suburbs, bought a fancy car with which to commute to work, ate out frequently, and had a few kids I planned to put through college.  However, I prefer to live simply in a small home, cook my own meals, bus or bike to work, and I may very well choose not to reproduce.  I also prefer, in my all too limited time on Earth, to experience the wilderness that still remains in the world, and the myriad human cultures, cuisines, and languages that have emerged in the last 50,000 years.  Those experiences will not come easily sitting in front of a computer in an office park, and they often cannot be had on weekends or whirlwind tours.  Thus, I am concerned about the following potential scenario with your offer of employment as it currently stands.

I will very likely make the maximum allowable contributions to my (401(k) | 403(b)) retirement account and IRA, and still have roughly $Y left over to invest in a taxable account each year.  However, because my ultimate goal is to accrue a diversified portfolio of interesting memories and life experiences, and not to accumulate wealth, I will at some point make the choice to convert that excess income into opportunities for non-work experiences.  Because my time on Earth is finite, it makes no sense for me to defer those opportunities indefinitely.  I could be hit by a bus or discover that I suffer from a terminal illness long before reaching retirement, and so from my point of view it makes sense to pursue variety in the relatively short term.

It’s important to me that this not be construed as my being uninterested in working for you.  On the contrary, I am very excited about the possibility of being employed at (your company), helping to make progress toward a more sustainable and durable human civilization, and I hope that this work will make up a significant and stimulating part of my life.  At the same time, I can’t imagine doing the same thing, no matter how stimulating, 50 out of 52 weeks of the year for very many years.  Under your normal schedule for accruing vacation time, my only real option will be to eventually quit.  The most logical timing for that would be upon fully vesting in the (pension | employee stock purchase) plan, N years after commencing my employment, but it could be sooner, depending on the timing of my partner’s opportunities for non-work experiences.  Another way to say all this is that the combination of $X and two weeks vacation each year is far from my Pareto frontier in salary-vacation space.  I realize of course that two weeks of paid vacation is normal for offers of new employment in the US.  Obesity, diabetes, grossly negative household savings rates, four hours of television per day, vehicles that get 18 miles per gallon, and poorly engineered energy guzzling commercial buildings are also normal in the US.  I would like to suggest that a better arrangement between you and your employees would be generous opportunities for unpaid time off, in combination with more modest salaries.

I’ve already explained why I think this arrangement would be superior from my perspective as an employee, but I really do think it’s potentially to your advantage as well.  A major enterprise risk in any knowledge based industry is loss of expertise, and discontinuity of institutional memory.  Companies regularly have to re-learn things they already knew, at great expense, because they’ve lost key personnel.  Alternatively, employees who know they are irreplaceable, or at the very least, who know they hold disproportionate value to their employer, are able to command higher salaries, and have significant economic incentives to ensure that they remain relatively irreplaceable, which puts them at odds economically with their employer.  Many businesses understand that this dynamic exists and at least in theory, strive to avoid vesting too much organizational value within any individual employee.  In practice this is not easy, because ensuring that multiple individuals are capable of performing every task, and understanding every aspect of the organization, often appears superficially to be a wasteful duplication of effort when resources are stretched thin, or the organization’s operative time horizon is short.

Now consider an alternative arrangement, in which each employee is present for only 9 months out of each year, and occasionally absent for four consecutive weeks.  In such an environment, duplication of knowledge and expertise would be absolutely imperative from the employer’s point of view.  At the same time, employees who want to be able to take their time off without disrupting operations and inconveniencing their managers and coworkers would have a large incentive to fully and continuously document and communicate the work that they do.  The systems and procedures which would be developed and put in place to deal with these regular absences would also make the organization resilient against employees leaving, and against unplanned staffing losses due to illness, disability, death, pregnancy, etc.  Currently the possibility of such an arrangement would also serve as a valuable recruiting tool, and potentially enhance employee retention.  Ultimately it is a question of which kind of employee duty cycle produces the best value for the organization: relatively short, continuous employment followed by perhaps sudden and permanent loss, or potentially indefinite, intermittent employment and a high degree of institutional continuity.

The arrangement I’m advocating would involve doing the same amount of overall work with more employees.  There are undoubtedly some fixed per-employee costs, and while things can be done to minimize overhead, like dynamically allocating workspace instead of allowing each person persistent possession of their cubicle, I wouldn’t expect a simple linear relationship between time worked and pay received, e.g. 75% salary for 75% employment.  The actual numbers would depend on the exact costs of employment, but I think I could be happy indefinitely with something like 2/3 pay for 3/4 time work.

Eagerly awaiting your response,

Zane A. Selvans, Ph.D.

6 thoughts on “On the Pareto frontier in salary-vacation space”

  1. Dear (applicant),

    Thank you for your thoughtful suggestions. Unfortunately H.E.A.D. (Hedonic Engineering and Development) is not able to offer you a 3/4 time job at 2/3 pay. HEAD employees work whenever they feel like it but that usually rounds out to about 6 ten hour days a week for, on average, 50 weeks a year. Why? Because working for HEAD is just about the most rewarding activity a human can engage in. Our employees want to work and love the work they do. Plus they can work wherever and whenever they want – our global satellite network allows our people to travel, work, and play from any location.

    We appreciate your suggestions as to how to restructure our employment policies and encourage you to keep thinking. However, there are a couple of problems with your ideas. First, the cost of an employee to the company is about twice his or her salary. The matching part of that cost that is non-salary is fairly fixed per employee (e.g. benefits like health care). Increasing the number of employees increases that cost to the company and increases it not by your reduced 2/3 salary but by the full amount of salary you would normally have been paid. Further, four employees working 3/4 time is not equal to 3 employees working full-time as the redundancy of knowledge and skill sets necessary to cover for each other reduces the efficiency gained by specialization.

    Reducing your salary (e.g. 2/3 salary as you suggest) would certainly reduce company costs. However, many employees find the full salary offered by HEAD is required to maintain their homes, families, and lifestyles. While we have no feelings one way or the other on whether you personally choose to procreate, we are not about to discriminate on the basis of family size as to salary size. Surely you are not suggesting we only hire single or non-reproducing humans ? Are you suggesting we only pay a father of three whose children will be attending Stanford a 2/3 salary ? He would have to find another job.

    Finally, if you are really interested in working 3/4 of the time and getting paid about 2/3 of what you’re worth we suggest working as a teacher in the public school system of any of the fifty United States.

    Thank you (applicant)
    HEAD

  2. If all employees were amenable, and there were enough in a certain department (we currently have 3 full-ish time geotechs, all of which value time off a lot) I don’t see why the 2/3 pay for 3/4 time doesn’t work out? 3 full time employees would produce 3 units of work at 6 units of cost, four 3/4 time employees at 2/3 pay would produce 3 units of work for 17/3, or slightly less than 6, units of cost (assuming fixed cost of benefits equal to full time salary).

    This is a subject near and dear to my heart, as I am firmly in the camp of people for whom money is somewhat secondary to relaxation and family time, enjoyment, travel, relaxation, new experiences, gardening. This has generally meant a lot of job hopping, as I quit to try something new for a while or travel or have a family. This is somewhat a loss to the employment world as I am fairly intelligent and well-trained and good at problem solving/etc when motivated. Part of motivation for me is being relaxed and able to take time away. I suspect that the efficiency gained by highly specialized people working longish hours at a standard job is quite offset by all the time they take surfing blogs and wiki and other things to bring a break and a new interest to their intelligent brain.

    I am fairly happy, currently, with my nominal 30 to 38 hours a week (I am hourly, not salary – mostly because I sometimes get insane overtime – but that is always while working in a remote community in the field and is thus quite enjoyable). I get tuition reimbursement and unpaid time away to take classes and I take unpaid leave (usually a week or two beyond my two paid weeks) to travel or lounge. I take off an hour early and spend time with my kid if things aren’t hopping at work. Ideally I think I would like to work 20 hours a week, eventually, and occasionally take a month or two for my own purposes. Expenses, for me, seem to follow income. When I make very very little, I spend very very little and am happy. When I make a lot I save up and buy an apartment building and save up to insulate it, and go out to eat a bit more. I feel no more flush or happy. Any difference I am really making to the world by greening an apartment building is probably offset by my slightly higher standard of living. Most professionally employed people, even with children etc, can make choices, and still be very happy, on much less money. Not that anyone would be forced. I think many would choose this employment model if it was offered as a choice, especially in these days of personal empowerment. I agree there are gains to be made in training, etc too – I replaced someone who quit to travel and try out some new things, who then came back and worked for a competitor. This was a big loss to the company in terms of expertise and skills, not all of which I totally fulfill, even after 3 years (I like to believe I have other benefits as an employee, but that is beside the point).

    I certainly would never work for a company that routinely expected me to work beyond 40 hours a week. I want to work, and I want to love the work I do, but I can not imagine any job that would be fulfilling enough to take up the normally alloted time for work. My experience is that even if I absolutely love what I do, I have an overriding sense of duty to the boss/company or the business (if my own) to be productive and efficient that I need non-work time to let that part of my brain relax. This means I am an extraordinary employee for the part of my time that I am efficiently involved in work, and a sucky employee if I must put in my time, for the sake of putting in my time.

  3. I don’t doubt that Ron (whom I worked with at SCO in Santa Cruz… for that brief 20 month period during which I had a “real job”) is approximately right about the size of the fixed costs associated with employees. This is yet another class of reasons why coupling health insurance and the ability to efficiently save for retirement so directly to salaried employment is a Bad Idea. It makes large portions of the possible space of economic decisions functionally off-limits. If we were simply paid the cash value of the insurance and retirement benefits, and given the choice of how (and when) to spend it, and the option of getting the group (pooled risk) insurance rates that large employers have access to, individuals could much more easily manage to work fewer hours overall, if that’s what they wanted to do (without forcing anyone to do anything in particular). Sometimes I wonder if it’s a conspiracy to keep people working, even when strictly speaking, it’s not economically necessary.

    I think Ron is wrong in his argument about specialization, turnover and efficiency though. At some level, institutional robustness or resilience is fundamentally at odds with efficiency, because to be robust, you ultimately have to have some duplication of efforts and knowledge. We tend to optimize for efficiency in times of calm, and fool ourselves into thinking that resilience is unnecessary, and then suffer serious consequences when faced with instability, which could have been avoided if we’d been willing to be slightly less efficient. This is short term thinking and the quarterly earnings report at work. In our current economic system, only privately held companies can “afford” to think long term (cf. Google and Berkshire Hathaway, which are both functionally private firms).

    I worry because I see our entire civilization optimized this way. Short term efficiency and profit, over long term stability and resilience to the unknown bumps we know are out there on this long road.

  4. As a more direct example for Ron… Remember adamp (Adam Paul)? I was hired to take over his job, doing Build and Integration for OpenServer 5. He moved into Escalations. He was bored with Build and Integration (and I don’t blame him), and he was the only person who could really do it. I tried to learn what I could from him, but that was a drain on him, and there were others in the group always pestering him too. Eventually he gave up, unable to really get away from that part of the job, and was sick of working on arcane bug fixes for a dead end product. He quit, to go work at Sun. I tried to learn as much as could before he left, but my knowledge was incomplete, and the packaging and build systems were held together with digital duct tape and chewing gum anyway. Then I was alone. Alex Wong was hired into the group, in part to try and duplicate this (imperfect) knowledge. Then I got bored, and decided to quit and go kayaking in Alaska, and canyoneering in Utah for a year. Even with 3 months notice, Alex couldn’t really pick it up. Shortly after I quit, he also quit. Nobody was left with any kind of memory of how the system worked. I have no idea what all those legacy customers using OSR5 for their POS systems are doing now! Or Siemens who used it in (god forbid) nuclear power stations.

    Of course, then SCO became a bankrupt den of IP lawyers. So maybe it didn’t make any difference. But really, this kind of failure is not unusual.

  5. The efficiency discussion reminds me a bit of a paper I just read on the sustainability of the European manor system, which apparently traded productivity (successfully for quite a few hundred years) for stability, sustainability, equitability. Very high food productivity was deemed less worthy than these other factors, and diversity was encouraged to further them. A bit off topic…

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