Posts Tagged ‘capitalism’

In 2012 I wrote about the economic advantages I had experienced by moving companies. Although it is, of course, an extremely limited data set, I had witnessed a consistent and pronounced difference between increases in my income when I stayed with the same company and moved to a different one.

Some of this could perhaps be explained by the concept of reference points, as discussed by Daniel Kahneman in his book Thinking, Fast and Slow.

One of the issues with gaining a large salary increase with your current employer is that your current salary forms a reference point. Say you are a graduate and took a £18,000 a year job. It is now a year or two after and your skills are now worth £28,000. All of that seems reasonable in the software industry.

The problem is that to your current employer, they would have to accept a £10,000 increase in costs – a 56% increase! So they probably make you a far more modest offer of £23,000. This then also becomes a reference point. When you ask for £28,000 that is not only £10,000 more than they pay you now, but £5,000 more than they had mentally prepared themselves for. They are left feeling like they are losing £5-10,000 a year.

In comparison, a different company can come at this from a neutral perspective. They look at what someone with your experience is worth and price you accordingly. This could result in a wider range of offers. Some high, but some even lower. However, this is of no consequence as obviously you will cherry-pick the high offers and pursue those.

To be clear, you shouldn’t quit your job. Well, maybe you should. In any case, read on…

We’re all trapped like rats in a capitalist system, right? None of us enjoys going to work. Sure, many of us are in jobs that we describe as liking, and in many ways, I do like my job, but that is a subjective term.

What we mean when we say we like our job is that we’re content with it – as jobs go, we’ve got one we want to be in, with the alternative being in a job that we don’t want to be in. But ultimately, we’re not doing jobs for fun, or voluntarily, we’re doing it because we live in a society where we are forced to work to live.

Unfortunately, it’s very difficult to break out of said system so the best most of us can hope for it just to play the game as best we can. The better you play the game, the more money you earn and the better job you can get – better probably meaning less work, because it’s an inverse pyramid – those Crew Members at £4.30 an hour (and that is what they are paid if they’re under 18!) are doing a lot tougher work that us sat in our offices in salaried jobs. Meanwhile, Richard Branson starts each day with a swim around his private island – more money equals less work.

So how do we play the game better?

The best tip I can give you is to leave the company you are currently with.

It almost never pays to stay with the same company. Even if they’re giving you good promotions and good pay rises, you can almost certainly get even more by going elsewhere, to a different company.

Why? Because the current company has you and thinks you will probably stay with them because it’s a hassle to switch jobs. Another company doesn’t have you, and is hiring, so it clearly in need of extra resource and knows it will have to pay to go out there and get it.

Don’t just take this statement is automatically true, though. I’m not claiming to be an expert on the subject. But I got the inspiration for this blog post when doing analysis on my pay rises over the years. Here are the results:

The results are striking – the years when I stayed with the same company, I achieved pay increases of 19 and 21 percent, while the years I moved to a different company, I achieved 58, 39 and 124 percent.

Those aren’t small, insignificant differences – we’re talking double the pay increase, at least, by moving company. Clearly, it pays to go elsewhere.

Jack having mentioned Jennifer Government a few times, I decided it was worth giving a read.

It’s a science fiction book, though set in the present day, except that society has taken a very different course of action. Capitalism has been allowed to run rampant and now almost everything is privatised – even the police is a private company. It was almost about to say “even the healthcare system”, but then I remembered that isn’t some kind of horrible nightmare, that is just present-day United States.

I enjoyed it, but to discuss the reasons why would only end in spoilers, so I will simply say, if you’re a fan of Brave New World and Nineteen Eighty-Four, then you’ll probably enjoy this.

Emily Barran has written an excellent feature on how capitalism is being blamed for the economic crunch in the October 24th edition of LS2.

While it’s easy to blame banking executives, she rightly points out people aren’t pointing the fingers at themselves after taking out 100% mortgages that realisticlly, they could never really afford. I was listening to a woman who is now a single parent complaining the bank was repossessing her house. Of course they are. Indeed, as a shakeholder in Nothern Rock now it has been nationalised I insist they do repossess your house to get their money back. You can’t afford your house, move to a cheaper one, they are desperate to sell them at the moment.

And what exactly is the result of the credit crunch anyway? Having discussed it on my podcast, neither myself nor Gijsbert said we had changed our lifestyle because of it. How has it really affected your life? Probably not that much. A capitalism economy fluctuates, that doesn’t given you an excuse to take out a massive loan then complain when you can’t make the payments. That just makes you an idiot.

I’m not going to use the phrase economic crisis because we’re not in one. Everything is fine. The only reason we’re in a recession because we decided to call it a recession which then scares everyone and it becomes a self fulfilling prophecy. I would however like to throw a few ideas out there on the current economic climate.

Government’s all over the world are in the middle of nationalising banks. Like everywhere. Iceland’s Glitnir, which I’m told was a rather large bank, has recently been nationalised. Here in the UK, Bradford & Bingley have just gone. We’re still bailing out Northern Rock. Me, my tax money is bailing them out.

Point is, this isn’t how a free market capitalist economy is supposed to work. There shouldn’t be government bail outs, a free market only really works when the market is free. Companies go down, other companies take their place, circle of life and all that jazz.

Surely the way to encourage economic growth in such times is to increase the capitalist freedoms and reduce the socialist state rather than the current trend of increasing the socialist state with government bailouts and suprise taxes. Slash taxes, slash minimum wage, make it more profitable to actually generate profit than go cap in hand to the government.

We’re all moaning about these huge salaries the city big wigs are getting paid then coming to the tax payer for the bail out. Who can blaim them? That’s just common sense. They don’t lose it all when their company goes down to the toilet, most boards are remaining intact when the company is nationalised. Who wouldn’t take up that offer?

If we’re going to this whole capitalist economy (which we are, because it works, get over it) we should just get on with it. The world economy well go down the pan if government’s don’t intervene. But it will be back again. Bigger, better and even stronger than before.