By Dr. Gary L. Deel, Ph.D., J.D.
Associate Professor, Dr. Wallace E. Boston School of Business
Years ago, when I was just a teenager beginning college, I attended a professional development seminar. Our speaker asked the audience a rhetorical question: If you could choose to have either more time or more money, which would you choose?
I remember my instinctive answer. Money, I thought. Definitely money.
In hindsight, I suppose this way of thinking was understandable. I was a poor college kid. At 18 or 19 years old, time was something I felt like I had plenty of – but money was something that I decidedly did not have enough of. At least not enough for the lifestyle I wanted for myself.
But the speaker was a wise man, and he promptly enlightened my thinking. After giving the audience a moment to think about the question, he informed us that the correct answer, at the end of the day, is always time. He went on to explain that we can always earn more money, but money has fleeting and ever-decreasing value.
Time, on the other hand, is the one thing that we cannot simply buy more of, which makes it precious in comparison to virtually everything else. Roughly two decades later, I appreciate his wisdom through my own personal and professional experiences. Additionally, I now understand why this lesson is so important in the world of workforce compensation.
Workforce Compensation Takes Different Forms
Businesses attempt to compensate their employees in a number of different ways. Ultimately, the aim behind this workforce compensation is always to attract, retain and motivate the very best workers to do the very best job for the least amount of compensation possible.
Workforce compensation comes in many forms. It includes direct pay, bonuses, and commissions, as well as additional benefits such as vacation time, employee development opportunities, and subsidized health insurance coverage. Collectively, these forms of employee remuneration are commonly called a “total rewards” package.
However, there are a lot of direct-time-related compensation components in these packages. For example, there is paid vacation time and paid sick time, which equates to the freedom to spend time away from work, as needed or wanted, while still earning the money you need to live.
There is also unpaid vacation and/or sick time, which may not be as attractive as paid time. However, it still represents a promise from your employer that you can have time away from work without losing your job. And that’s not nothing.
Why Do We Value Money So Much?
But if time is everything and money is unimportant, then you might wonder why salaries and monetary compensation are such an important part of these packages. In other words, if time is what matters, then why do we care so much about money?
The interesting truth here is that this value we place on money is something of an illusion. So you probably don’t actually care about money as much as you might think you do.
It’s important to point out that money is a quantification for time in the working world. It’s why wages are paid hourly and salaries are paid yearly; the amount of money you earn is most often predicated on some time interval to measure your investment in effort. Newer, unconventional pay models are challenging this idea. But for most of us, the rate that we are paid still dictates the amount of time we must spend at work.
Why does this pay rate matter? Well, we all have a minimum level of acceptable income that we need to pay our bills, put food on the table and maintain the lifestyles to which we are accustomed.
That level of income is different for each person, but it exists for pretty much everyone. Let’s say, for example, that your minimum acceptable pay is $1,000 per week. In other words, you require a minimum of $1,000 per week to stay afloat and remain financially comfortable. (We will ignore taxes and other deductions for the sake of this simplified thought experiment.)
Now if you make $25 per hour at your job, then you can accomplish this minimum threshold in a standard 40-hour workweek. If you found a job that paid you twice that amount, then you could meet your minimum financial requirements in just 20 hours per week, leaving you 20 hours of free time to do as you please, but with the same quality of life.
On the other hand, if you are forced to take a pay cut that reduces your wages to $12.50 an hour, that means you will now have to work 80 hours per week – or the equivalent of two full-time jobs – to make ends meet. Now you’re spending twice as much time as before to reach the same goals. And your waking hours are almost certainly not going to be as enjoyable under those circumstances.
But here’s another related point: Imagine you are offered a job, and the employer tells you that you can set your own salary.
That’s right. You can demand to be paid any amount you like.
However, there’s one condition: You cannot spend any of it. So you can have all the money in the world, but you cannot buy anything with it. All of a sudden, the money itself doesn’t seem to be worth much, does it?
The point of this thought experiment is to demonstrate that money itself is not the goal. The goal is what money can help us attain. And that is very different, because money is just a transfer medium for value.
The Pleasure of Owning Possessions Depends on How Much Time We Can Spend with Them
But what about all the things we can buy with money? For example, if I buy a new sports car with my salary, that’s a material object – not time.
So how does that square with the idea that time is paramount? Well, let’s try the same thought experiment. What if you could buy that sports car, but you’re never allowed to drive it? Would that vehicle still be worth anything to you? Probably not.
Even with material purchases made with money, the value is not – generally speaking – in possessing objects. No, the value lies in the experience of pleasure derived from interacting with those possessions.
And the extent of value derived from experience can often be quantified in terms of the amount of time that we have to invest in that experience. Here are a few examples:
- A new sports car is only worth buying if you have the time to drive it.
- A nice house is only worth buying if you have the time to be home and enjoy it.
- New clothes and jewelry are only worth buying if you have the time to wear them.
- An exotic island vacation is only worth booking if you have the time to go.
So the value of most – if not all – material things is ultimately reducible to the amount of time we have to experience pleasure from them in one form or another.
Saving for Retirement and Time
What about monetary retirement benefits like pensions and 401(k)s? These retirement benefits are quite clearly tied to time in the sense that employees who invest in them are planning for when they retire from work and are dependent upon their savings to enjoy life and live comfortably. So again, we are talking about money spent simply to safeguard our pleasurable experience during a future period in time.
If a person doesn’t save enough for retirement, then they may not be able to retire as early as they like – or in some extreme cases not at all. As a result, the time that would have gone toward enjoying the “golden years” of life is instead converted to more time spent working. So retirement benefits are essentially a means of paying for the type of future time we want, instead of the type we are forced into as a matter of economic necessity.
Health Insurance and Time
What about health insurance benefits? How can these benefits be related to the value of time?
Actually, there are two ways. First, healthcare benefits help us to lead healthier lives through affordable, accessible medical care. Hopefully, this medical care maintains and/or adds to the time that we have to be alive and to be healthy enough to have pleasurable experiences.
Second, even if an individual doesn’t necessarily live a longer or healthier life through health insurance benefits, these benefits still cut down on what could ultimately be crippling medical care costs in the event of an emergency under the current American healthcare system. If a person experiences a catastrophic health problem here in the United States but has no insurance, he or she will likely go bankrupt trying to pay for their care.
As a result, they will likely have to work – longer and harder – to dig themselves out of endless debt, provided their health even allows them to work at all. So these healthcare benefits protect our time in the sense that we are not forced into a lifetime of hard labor to pay off insurmountable medical bills.
Employee Development Benefits and Time
What about employee development benefits such as college tuition reimbursement programs? How do these benefits relate to time?
Again, the answer lies in the monetary value of time for each employee. Why do most students go to school? They do it to improve themselves. Sometimes, there is an intellectual or personal growth mindset to these pursuits.
But most often, the motivation is to learn new workplace skills or abilities. We’ve already discussed how pay rate translates to time value, so employee development programs are really just opportunities to improve the circumstances of employee time.
Because young people have a lot of years ahead of them and tend not to have much money, it is common for young employees to be myopically focused on monetary figures without much consideration for time – much as the way I did in that seminar years ago. However, as employees age, their way of thinking starts to change.
Older employees may have plenty of money. But they may begin to focus more on how much time they currently have to do the things they like and also how much time they have left to enjoy their later years.
Employers should be mindful of these differences among employee groups when considering their demographic spreads. But educating employees on the integral value of time and designing workforce compensation packages with time value in mind is often a very smart way for businesses to attract and retain employees of all ages in the 21st century.