Consider Earning Less

By ElliotJDavies @ 2023-07-01T12:45 (+123)

This post is aimed at those working in jobs which are funded by EA donors who might be interested in voluntarily earning less. This post isn't aimed to influence pay scales at organisations, or at those not interested in earning less.

When the Future Fund was founded in 2022, there was a simultaneous upwards pressure on both ambitiousness and net-earnings in the wider EA community. The pressure to be ambitious resulted in EAs really considering the opportunity cost of key decisions. Meanwhile, the discussions around why EAs should consider ordering food or investing in a new laptop pointed towards a common solution: EAs in direct work earning more.

The funding situation has significantly shifted from then, as has the supply-demand curve for EA jobs. This should put a deflationary pressure on EAs' salaries, but I'd argue we largely haven't seen this effect, likely because people's salaries are "sticky".

One result of this is that there are a lot of impactful projects which are unable to find funding right now, and in a similar vein, there's a lot of productive potential employees who are unable to get hired right now. There's even a significant proportion of employees who will be made redundant.

This seems a shame, since there's no good reasons for salaries to be sticky. It seems especially bad if we do in fact see significant redundancies, since under a "veil of ignorance" the optimal behaviour would be to voluntarily lower your salary (assuming you could get your colleagues to do the same). Members of German labour unions quite commonly do something similar (Kurzarbeit) during economic downturns, to avoid layoffs and enable faster growth during an upturn

Some Reasons you Might Want to Earn Less:

You want to do as much good as possible, and suspect your organisation will do more good if it had more money at hand.
Your Organisation is likely to make redundancies, which could include you.
You have short timelines, and you suspect that by earning less, more people could work on alignment.
You can consider your voluntary pay-cut a donation, which you can report on your GWWC account. (The great thing about pay-cut donations is you essentially get a 100% tax refund, which is particularly nice if you live somewhere with high income tax).

Some Reasons you May Not Want to Earn Less:

It would cause you financial hardship.
You would experience a significant drop in productivity.
You suspect it would promote an unhealthy culture in your organisation.
You expect you're much better than the next-best candidate, and you'd be less likely to work in a high impact role if you had to earn less.

ElliotJDavies @ 2023-07-01T12:46 (+122)

To put my money where my mouth is, I will be cutting my salary back to "minimum wage" in October.

lincolnq @ 2023-07-01T19:16 (+40)

I don’t believe this is an unbelievably terrible idea; it makes sense to do this in some circumstances. That said, take resentment buildup seriously! If you feel that you are the sort of person who has even a small chance of feeling resentful about this choice later on, it is probably not worth it. You need to feel unambiguously good about this decision in the short and long term.

Jeff Kaufman @ 2023-07-01T20:39 (+24)

More on the trade-offs around voluntary salary reduction: Passing up Pay.

You can consider your voluntary pay-cut a donation, which you can report on your GWWC account.

When I asked them about this last year they said you could count it if it was voluntary and easily reversed.

Luke Freeman @ 2023-07-01T23:32 (+27)

Yep! A few of our team members have chosen to do this (including myself).

(Note: It’s always been initiated by the team member themselves and there isn’t any expectation from the organisation which I think would be a problem.)

I do still donate to other things too. I think that beyond the direct impact of those donations it helps to be able to advocate to a broader audience when some of my impact-focused donations are more legible and relatable.

Also at GWWC we budget salaries at the full amount (calculated by a formula) as any salary sacrifices as donations are voluntary and reversible and we also want to ensure we have budgeted for the cost to replace someone using the same salary formula (eg if a researcher at our 3B level based in Oxford with 5 years experience leaves we’d want to have budgeted to replace them). For cost effectiveness calculations the salary sacrificed donations is ideally counted as income and the budgeted/offered salary counted as costs.

harfe @ 2023-07-02T20:24 (+22)

A reason that is missing from the "contra" list: You could stay at a higher salary and donate the difference to a more cost-effective org than the one you work for.

I would expect that most people who work in EA do not work for the org that they consider to have the highest marginal impact for an additional dollar (although certainly some do).

Accepting a lower salary can be more tax-efficient than donating if the donation is not tax-deductible. But if you think that cost-effectiveness follows a power law, then its quite possible that there is an org is more than twice as cost-effectiveness than your current employer.

Jason @ 2023-07-02T20:52 (+9)

Although if you think the major funders do a good job at allocating resources, it seems that the marginal additional dollar at org X should be roughly equal in effectiveness as the marginal additional dollar at your org. Given that the tax disadvantage of earn-then-donate in the US will generally range from about 20% (SS + Medicare + state taxes; no federal income tax due to itemizing) to 42%,^[1] you'd need to think the funders made at least a moderate miss to outweigh the loss in tax advantages. Moreover, your contributions to the more cost-effective org could be significantly funged, which would reduce the benefit of you making a better allocation decision.

^{^}
I'm assuming that anyone in a marginal bracket over the 22% bracket is itemizing.

Patrick Gruban @ 2023-07-13T20:53 (+12)

Thank you for the inspiration! I reduced my salary from now to the end of the year and will be able to contribute a mid-four-figure amount more due to saved social security costs compared to donating it. Additionally, it helps save taxes as only 20% of salary is tax-deductible in Germany.

This post was pretty impactful!

Jason @ 2023-07-01T19:03 (+10)

One observation: if some but not all employees do this in an organization under financial pressure, it could change how and where any redundancies are applied. Salary reduction is sort of like giving the organization a grant that can only be used to employ a specific individual. If the org is only having to pay half your salary, it's much less likely to lay you off to conserve money vs. laying off a somewhat more productive employee at full salary. On the other hand, lower payroll costs --> fewer layoffs needed, which is good.

One crux might be if you think the organization's financial pressure is the new normal vs. a blip. If the latter, is there a greater risk that salary reduction could cause the org to lay off the "wrong" employees to minimize short-term pain?

NickLaing @ 2023-07-01T20:22 (+8)

I completely agree and the argument is compelling. I hope we see uptake on this suggestion.

I know its not part of the core reason for doing something like this, but taking a bit of a personal hit like this can also signal to those both inside and outside the movement how serious we are about trying to do the most good we can, potentially motivating others to think about taking EA more seriously.

Nathan Young @ 2023-07-01T15:56 (+4)

I guess it's also just a different way to give. Some orgs have salary sacrifice schemes for this reason.

No drama @ 2023-07-01T16:46 (+2)

In all seriousness, I think this is a good point