Job-onomics: How to Think About Your Career Like an Economist
One of my favorite classes in graduate school was economics—the study of how people maximize outcomes with scarce resources. I liked learning about how the slightest push or pull of connected levers led to significantly different results.
The economic concepts I learned about in grad school can be applied to your career. You have a limited amount of time and limited resources with which to maximize outcomes such as earning a paycheck, establishing work-life balance or experiencing increased work satisfaction. As with a business, career choices require that you consider risks, benefits and costs.
Most people automatically account for risks and benefits when considering career transitions. However, there is good reason to also consider costs, specifically sunk and opportunity costs, of staying in your current job. Thinking about sunk costs and opportunity costs may present your career options in a new light.
A sunk cost is money that you have already spent that you cannot recover. For example, if a failing company decides to continue to sell an unpopular product solely to justify the cost of the machinery it purchased to make that product, it will continue to lose money, assuming that no radical changes are made.
In some cases, it makes more sense to cut losses and do something different. By focusing on a sunk cost, the company is letting a bad investment from the past affect the success it can have now and in the future.
Making career decisions based on sunk costs is similarly problematic. Perhaps you’re only working in a job because it’s related to the degree that you earned or because you’ve worked a number of years in that field. If you don’t enjoy doing the work, or if you find that it’s largely unsatisfying, then you’re letting a sunk cost dictate your success and happiness.
Instead of looking back, consider how you feel about your current situation and brainstorm opportunities that could allow you to accomplish your personal and professional goals. In business, you don’t have to abandon what you are currently doing if it isn’t successful; you merely have to halt production to identify and fix the problem. Similarly, you don’t have to completely change your career path if you are not currently satisfied. Take some time to identify the things that make you happy, determine transferable skills and seek out options that match these conditions.
Another cost to consider is opportunity cost, which is the value of an alternative that you could have selected but that you didn’t. If you have the choice between chocolate and vanilla ice cream, and you choose chocolate, then the enjoyment that you could have experienced by eating the vanilla ice cream is the opportunity cost.
With every professional decision you make, there’s an opportunity cost—something that you could spend your time doing that you did not select. As you assess satisfaction in your current role, you should also think about the trade-offs and consider how making the choice to do something different may impact your life.
It’s worth noting that opportunity costs are not necessarily as equal as the ice cream example. The opportunity cost of your current career path may not be a parallel career option; it’s anything that you’re giving up by staying in your current job. If you are in a high-stress occupation but earn a high income, your opportunity cost could be a more easy-going lifestyle and a lower salary. Each option has good and bad aspects, so there isn’t necessarily a “best” choice. The challenge is not to choose the best option, but rather the best option for you.
A world with limited resources and many options means that hard decisions must be made. With every choice, consider the things you can lose (risks) and the things you can gain. You should also take inventory of your current situation to see if it is actually costing you to stay in your job. With clarity and a focus on what you want, you’re better able to make the right decisions for a satisfying outcome.