In Part II of this series, I recounted the story of Jim. The story of Jim is unfortunately one that happens everyday in the workforce. Jim gave his best years to his employer only to be fired when they no longer found him useful. In this final part of the series, I will continue the discussion about the perils of depending on any employer as it relates to securing your financial future.
Drastic and widespread increases in corporate restructuring, downsizing, outsourcing, and the unintended consequences of globalism have reduced job security to a relic of the past. Gone are the days of working for a single employer for thirty or forty years.
As soon as you walk through the doors of your employer’s building, the clock that marks your termination starts counting down. Your employer sees you as a product with a limited shelf life. It does not matter whether you are in an upper management position or a lower-level employee, if you work for a corporation, there is an expiration date on your employment status.
We often feel, and sometimes know that our jobs and careers get in the way of our vision for winning in life, but we choose to do nothing about it. We choose to stay at a dead-end job because of the temporary benefits it brings. You already know how it will end yet you choose to hang in there. I am suggesting to you, do NOT hang in there.
Rather than utilizing your skills and professional experience to fill the coffers of your employer, you ought to convert that energy and effort into personal wealth-building initiatives, i.e., investing in mutual funds, real estate and entrepreneurship. Think about it. Why should you spend twenty to forty years of your life investing in a company that treats you as a disposable commodity?
Someone may be saying, “My job offers insurance, tuition reimbursement, cost-of-living pay, bonuses, pension, and so forth.” While you may be excited about those benefits, the sum total of those benefits added with your salary pale in comparison to the money you would have made for your employer in your working lifetime. And let’s not forget about Jim, who was certain that he would sail into the sunset to a life of ease and plenty.
Here are some numbers to consider.
The work-life earnings for full-time U.S. employees is around $1.6 million. This is the amount your employer(s) paid you in return for your many years of service. Here is a breakdown of the average life-earnings for full-time employees based on different levels of education.
- Professional degree: $4.4 million
- Doctoral degree: $3.4 million
- Master’s degree: $2.5 million
- Bachelor’s degree: $2.1 million
- Associate’s degree: $1.6 million
- Some college: $1.5 million
- High school diploma: $1.2 million
- Some high school: $1 million
Let’s evaluate $1.6 million more closely. Your employer(s) paid you $1.6 million in return for 40 years of service. So 40 years is the time it took to earn $1.6 million.
Let’s say the average workweek during that 40-year period was 40 hours, or 1,920 work hours per year. When multiplied by 40, that comes to 76,800 hours. So in one’s work life (40 years), that person would have worked close to 77,000 hours (not including overtime). This means a person would have averaged around $20 an hour. Not bad pay, considering that the federal minimum wage is significantly less, right?
Before you celebrate, let’s look at the $1.6 million from another perspective. Remember, a person in his or her work lifetime would have been paid $1.6 million by his or her employer(s). Sounds like a lot? Well, not quite! Using a future value calculator, if a person invested half of $1.6 million, or $800,000 (netting 8% average growth), for 25 years, s/he would have accrued $5,478,780 before age 60.
Using the numbers above, how much money do you think you would have made for your employer in your work lifetime? My conservative estimate is somewhere between $5-$20 million. If you were such a darling in the eyes of your employer, then why did your employer(s) pay you only a fraction of what you made for them? It is because your employer does not value you as much as you would like to think.
There’s more. The $1.6 million that you thought was a lot of money turns out to be much less when you factor the debt-to-income ratio. The debt-to-income ratio for most Americans is around 50 percent or more. That means for every dollar they have, they owe fifty cents (or more) to a creditor.
In essence, $1.6 million earned in the forty years of one’s working life is closer to half a million dollars. This means the average hourly earnings during that person’s work lifetime of forty years would be $6.50 ($500,000/76,800 hours). So, for nearly a half century, this person would have lived below the poverty threshold while enriching his or her employers.
I really hope you see how ridiculous this “employer loyalty” idea is. Why should you or anyone else invest in an employer; particularly, if that employer is not going to reinvest in you? Why should anyone give his or her employers the best years of his or her work life only to come out on the losing end?
Working for someone else, whether it is a Fortune 100 company or a mom-and-pop operation, is not the best way to secure your financial future. If being an employee is your preferred option, then that is a choice with which you have to live. Even so, it would behoove you to have other wealth-building plans in place so as not to be at the mercy of an employer who can fire you at will.
Lifetime loyalty to any employer is a relic of the past!