July 26, 2011

What You Make: Yearly vs. Hourly

"What do you make?" should always be answered as an hourly rate.

Let's say you make $35,000 a year. And you decide to switch jobs for a nice 20% pay bump up to $42,000/yr. That's a hard increase to turn down. A number that might take you 5 years in annual mini-bumps at your current company. So, you switch, knowing that the new job is going to be quite a bit more demanding. In fact, you are now consistently putting in 60 hours a week. Whereas, at your old position, it was a pretty regular 40.

Are you getting paid more at the new position? Sure, if we're looking at annual income. But, we shouldn't be.

60 hrs/wk x 50 wks/yr = 3,000 hours
$42,000/3,000 hrs = $14/hr

40 hrs/wk x 50 wks/yr = 2,000 hours
$35,000/2,000 hrs = $17.50/hr

Sure, that $7,000 bump is a lot. But, it's not a pay increase. And there might be a more efficient way to increase your income.