Accounting for Foregone Pay
By Jeff Kaufman 🔸 @ 2023-11-26T03:35 (+23)
While the effective altruism movement started out with a strong focus on donations, over time it has shifted more towards careers. If you're trying to understand how levels of commitment have changed over time, or you're just trying to get a ballpark estimate of the financial opportunity cost of choosing a lower paying career, this can be quite tricky.
For someone earning to give this is relatively straightforward: AGB recently wrote a thoughtful post looking back at ten years of earning to give, and a statistic he gives is that he and his wife have donated an average of ~£150k over ten years, on a combined income averaging ~£320k. Clear cut! [1]
The case of someone choosing a lower-paying higher-impact career seems initially relatively simple: perhaps they're currently paid $100k, and if we look at their highest paying opportunity maybe they would be paid $300k, so we could say they're effectively sacrificing 2/3 or $200k. But this misses several factors that point in different directions:
If they had been optimizing for income all along they'd probably be in a much stronger position than they are today. Sure, they could get a job offer for $300k now, but if they'd been keeping their corporate skills sharp and climbing the ladder perhaps they'd be at twice that. What I've learned about genetic sequencing in the past year and a half is somewhat marketable, but way less so than what I would have learned if I'd continued in software engineering management and browser technology. So you need to compare the likely earnings of career paths, and not just of current opportunities.
Many careers run on an up-or-out system, where there are fewer senior roles than junior ones and people who are not able to get promoted have to leave. If someone leaves an apparently well-compensated career it can be hard to tell from the outside whether they had been on track to remain successful in that path.
Leaving a high-paying job for a more meaningful one (or one with better working conditions) is reasonably common, enough that there's a bit of an industry around it. Would they actually have followed the earnings-maximizing path, or shifted to something more happiness-maximizing?
This isn't a competition, and we don't need to be able to decide how much a specific person is giving up with the goal of making the world better. But making aggregate estimates with the goal of understanding things like how commitment within EA has changed over time is still valuable, and without considering some of these stickier factors it's easy to be way off.
(This also gives me a better appreciation for why the Giving What We Can pledge only counts donation via salary sacrifice if it's easily reversed.)
[1] But of course the real world is always messy. He writes that in
2018 he dramatically changed his career for EA reasons in ways that
decreased his long-term earnings, and we should probably count that
somehow.