Saturday, July 01, 2006

Calculating an "hourly wage"-- does it matter?

There are a lot of suggestions about evaluating whether doing such-and-such is worth your effort, typically by calculating out the equivalent of an hourly wage and comparing it to what you make on the job. (This can apply either if you're spending time to make money or spending time to save money.)

My problem with this is that it's way oversimplified. Say I get sent a $5 Pinecone survey which will take me 20 minutes to do. That's the equivalent of $15 an hour. But my hourly pay at my regular job works out to $20-ish an hour... so should I not do the surveys?

The only way this really makes sense would be if I had the opportunity to spend an extra 20 minutes at work and chose instead to dedicate that time to the survey. (Actually, that still wouldn't make sense since I'm salaried, but you get the idea.) But that's not usually going to be the situation.

What you really need to do is honestly evaluate what you'd be doing with your time otherwise. If you'd be wasting it, then you might as well do whatever-it-is, regardless of how much it pays/saves. (Explaining why I, and 9,999 other people, drew a sheep for 2 cents.) If it's time you'd otherwise use on things like spending time with your family, well, that's a consideration far beyond money, and I can't see how knowing the "hourly wage" will help you much.

Otherwise, all your calculations will do is make you grumble, "This work is paying me the equivalent of $8 an hour, I haven't been paid that since high school, that's lame," and then you'll go back to eating popcorn and watching TV and making $0.


Mike said...

You can also calculate how much you make an hour 24 hours a day to determine how much your time is actually worth. I believe this is discussed in automatic millionaire. Take how much you make a day, and divide it by 24 to determine how much you are actually worth per hour.

Einzige said...

"...and then you'll go back to eating popcorn and watching TV and making $0."

Yes, but maybe I value my leisure time at $30/hour (particularly after working a 60-hour week), so even though I'm not "making" $8, I am subjectively better off by "wasting" the hour instead.

You touched on this with your comment about spending time with family, but I thought I'd put a finer point on it. Hope you don't mind!

Penny Nickel said...

Yeah, einzige, I totally agree. But I guess I was just thinking that it's hard to really put a dollar value on it, and if you do put at $30/hr or something, that really isn't because of the amount you make at work. (I guess you could make the case that if you work a stressful, high-paying job, then leisure is more important to you; but what about the people working a stressful, low-paying job?)

So I'm not saying that you should always choose to do the surveys or whatever... just that the "hourly wage" concept isn't a good tool to help people decide.

Annette said...

What happens if you have limited time and a choice of two frugal activities to do? In that situation you do need to know how much each is worth, so you can chose the one that is most valuable.

David Marks (423)902-4075 said...

Men Should make a lot more money than women.