Month: February 2021

You’ve seen the blog posts about calculating your true hourly wage, haven’t you?  They take a hypothetical $100,000 annual salary and start adjusting it for how long your commute is, how much gas you burn getting to work, cost of work clothes, the extra hours you work outside of normal hours and other costs associated with your job.  By the time you finish you find $100K is barely equal to minimum wage.  This is a prime example of making the data fit the story you want to tell. I think I can do much better.

So, let me take a shot at this.  Let’s take some hypothetical worker making $100,000 a year, me maybe in the middle of my earning years.  $100,000/2080 hours worked per year equals $48.08.  2080 hours comes from multiplying 52 weeks times 40 hours per week.  It isn’t exact but its close enough for my purposes.  So Pat, as we will call our imaginary earner made $48.08 in 2020.  We are assuming the pandemic did not disrupt Pat at all.

This is where the normal writer would start to deduct all the indirect and hidden costs of having a job to show you poor Pat didn’t really make $48.08 per hour in 2020, instead Pat made much less.  But nobody ever called me normal so lets look at the other side of the coin.  Maybe Pat made more than his how much more Pat made instead.  Pat works where I did so I know the inside numbers.  First every paycheck Pat get his employer, Megacorp, pays 6.2% into Social Security.  If Pat were self employed he’d have to make that payment.   Pat’s pay just went up from $100,000 a year to $106,200 per year.  Pat’s employer also pays 1.45% into Medicare so that brings Pat’s pay up to $107,650. 

Next, there is the little item of health insurance.  Megacorp opens its corporate wallet to pay $14,563  per year to pay for Pat’s family’s coverage.  Pat’s salary is now up to $122,303 per year.  Megacorp doesn’t offer all that much in terms of life insurance but they do insure each employee for two years coverage regardless of their health, that is worth $432 per year increasing Pat’s salary to $122,735.  Like almost all companies, Mega trains their employees, that makes money for the company but it also keeps Pat’s skills marketable.  That’s a direct benefit to Pat worth $1,096 per year.  Pat is up to $123,831.  Since Pat works where I did I also know Pat has two kids in college right now and Mega provides $1,500 per enrolled college student for employees children.  That’s another $3,000 bringing Pat to $126,831.

While this might be rare, when I had Pat’s job I also was provided a company car and free gas, insurance and maintenance.  Cars cost $0.56 per mile to own and operate, according to the Internal Revenue Service, and at the average US driver’s mileage of 13,500 miles per year this is worth $7,560 per year to Pat.  Pat is now up to $134,391 in annual compensation!  My imaginary friend is ambitious and pitched getting an MBA online to his boss last year.  His supervisor came back with the news that the company would be happy to cover that through their tuition reimbursement program.  That is a big win so Pat enrolled in a nearby university’s distance learning program and obtained his MBA in less than a year for a total cost of $12,474.  The company reimbursed 100% of that as soon as Pat graduated which upped the effective total annual salary to $146,865. 

Then there is free coffee at work, that’s about $0.27 per cup at three cups a day.  $0.27 times three times 250 work days per year equals another $202.50 a year.  Plus, lets say four lunch meetings a year where work buys the food at $12 per meal for a total of $48.  Add those two  and we are up to $146,865.  And I saved one of the best for last, Megacorp has a 6% match in their 401K program.  That’s $6,000 a year in free money to Pat.  Add that to the compensation and that brings Pat up to $152,865 per year.  But wait, there’s more.  Mega is slightly unusual in that every single employee gets a bonus and a stock award every year the company is profitable.   Pat’s bonus was 4%, or $4,000.  Pat’s stock award was worth $8,000. That’s an additional $12,000 in annual income which brings the total to $164,865!

Now what about those hours?  2080 hours per year is based on 52 weeks at 40 hours a week.  But Pat gets 11 paid holidays and four weeks of vacation which amounts to another 20 days off.  Eleven paid holidays at eight hours a day is 88 hours not worked and the 20 days of vacation are worth another 160 hours.  Therefore the total hours worked is actually 88 plus 160 hours less than 2080.  The math is 2080-88-160 = 1,832 hours actually worked.  If you divide that into the $164,865 it turns out Pat’s true hourly rate is $88.99 per hour.  That is nearly twice the The $48.08 per hour we thought Pat was making! 

What is my point to all this?  I have two, actually.  One is that it is pretty easy to slant things in the direction of the story you are trying to tell (or sell).  I was/am a lobbyist some of the time, for entertainment purposes, so I’m used to seeing people sell things by only telling half the truth.  But the other is that 9 to 5 employees often have no idea how much money their employers are spending behind the scenes in ways that directly benefit them.  My wife and I will receive nearly $75,000 a year in Social Security when we claim in five years half of which is due to the fact that my employer contributed a lot of money in my name.  My million dollar plus 401K got that big, in part, because of the generous 401K match funded by Megacorp.

If you think I was reaching too far and exaggerating the add on benefits of a corporate job you are wrong, I’m being conservative.  I received bonuses and stock awards way more generous than Pat did in my examples.  I also received closer to $15,000 a year in training  when I was at Pat’s level.  I didn’t just get four company meals a year I got closer to 100 of them a year.  Plus, I got to keep a lot of frequent flyer meals and hotel points.  I also got to go on some vendor sponsored trips worth thousands of dollars. 

But I was a fast mover being groomed for senior management, Pat, in the example, is much more typical of the middle managers I worked with, and even at that the example is conservative. If you take a balanced look at the corporate 9 to 5, at a six figure level, I think you’ll find the extra incentives that come with the job do adequately offset the extra costs that come along with having the job. And yes, I picked Pat based on the SNL character because that way I could totally avoid any gender issues with my protagonist.

What do you think?  Do most company jobs provide a lot of benefits that employees overlook?

Was my experience at Megacorp a unicorn of the job world, are benefits much worse at other companies, or are they much better?

Am I low balling the value of a job because I left out things that my company did not provide but other companies do?  Things like onsite daycare, free breakfast and lunch, free health and fitness centers, free snacks and exotic coffee services to name a few. 

As always, if you don’t see a comment section click on the title at the top of the post!

I cannot remember another time in my fairly lengthy life when there was so much talk about colleges and money.  And it is spread over a wide spectrum of topics.  There is the student loan crisis, student loan forgiveness possibilities, the out of control inflation of college tuition prices, college admission bribery scandals, discussions about whether a four year college degree is becoming irrelevant, arguments over private versus public universities, whether elite colleges really pay out over time, community colleges versus four year institutions, and the value of online universities versus brick and mortar institutions.  

What I don’t hear much about is people whose experience has been as positive as mine.  I went to a public university in my own state.  It was less than fifty miles from the home I grew up in.  I majored in chemical engineering because I was that nerdy kid that never had to study. Tuition my first year was $250 a semester for a full load of classes, but I didn’t have to pay that since anyone in the top 5% of their high school class had tuition waived for the first year.  I think my dorm and food fees totaled less than $1,500 a year.  Books were maybe sixty bucks a semester.  My parents, middle class earners, just easily cash flowed those costs.  My brother went to an elite university, being the National Merit Scholar that he was, but that horrendous $1,400 a semester tuition was offset mostly by scholarships. We both graduated debt free with debt free parents who had already paid the house off early.  They were that kind, the kind that put cash in envelopes and bought absolutely nothing on credit, not even cars. 

When I graduated mid term there were 120 companies scheduled to come through the placement office looking for chemical engineers.  There were five or six of us graduating and almost everybody I interviewed with offered me a plant trip to interview for a job at their office or industrial complex location.  Almost everybody I interviewed with offered me a job.  It was like being a five star high school football player being courted by colleges. Business was booming and they were very short on engineers.  So, yes, I think my four year degree was an awesome value.  It made me millions of dollars in compensation over my career and allowed me to have jobs that were a lot of fun, most of the time. It didn’t put my parents or me in debt.  

But that was then and not now, so let us consider my three millennial kids who range in age from their late twenties to mid thirties.   What was getting them through college like?  Because I was a high earning millionaire when they graduated from high school we intended to cash flow their education at the same public university my wife and I attended.  Tuition, fees and room and board added up to about $16,000 a year per kid.   Or they would have if we would have had to pay for them.  But because my kids were genetically predisposed to be good learners and because my stay at home wife(her choice) made learning fun and held them accountable for their results, my kids were naturals at scoring high on college entrance exams and AP courses.  They generally were the curve setters in a very effective high school.  They weren’t National Merit Finalists but they had nice enough scores to make them attractive to State U.

 Something not everyone knows is that universities are desperate to grow their rankings in the US News poll,  often desperate enough in a poorly educated southern state like ours to offer free rides to gifted students.  And by free, I mean free.  Free tuition, free fees, free books and free dorm rooms and meal plans.  All from the state government coffers. Plus there were also smaller scholarships from my company, from young democrats or republicans(we had both) and from any number of other sources.  And these were not needs based or tested.  We were millionaires and I was earning well over $100,000. It did not matter. 

Another unique scholarship that only came along in time for our youngest provided free tuition and fees for five years to every student that graduated from our public school system.  Everyone got it, again, it wasn’t means tested.  A lottery scholarship also was created that helped on our last two kids, again, no means testing.  All three kids had to turn back money every year because there was no way to spend it on eligible expenses.  As an aside, I had informed our kids they could attend any college they could earn admission to. However, if they chose an institution that cost more than State U. then the extra cost was all on them.  They wisely chose State U.  

So that was the financial part of the equation.  What about the value of their degrees?  Kid one chose chemical engineering like his old man.  He excelled at it because he actually did study.  He graduated with zero debt, because, it was free of course. He got a job, got married and proceeded to put his wife through medical school.  Then he decided to become a doc too and put himself through medical school.  His four year degree did not lead to his career but chemical engineer is hella difficult and that no doubt helped him gain admission to medical school.  He is a cancer doctor now.  

Kid two also chose engineering, in fact she got two degrees.  The bachelors degree was free and she paid her own way through a masters in engineering by working for the university.  She is now a regulator in an environmental agency.  Its a good job with a lot of great benefits.  I think the free education was a solid investment in her case. 

Kid three was the rebel.  No way she would become an engineer.  She majored in business, graduated Summa Cum Laude and is an education specialist at a division one University where she helps athletes maintain their academic standing.  After the business degree she got a masters in adult education on her own money, and like her sister she worked for the university to pay for that. She even graduated with money in the bank.  She is working on a PhD at her university now so there is no telling where her career will go after that, but like her dad, she loves her job. Was college a good deal for her? No doubt, loving your job is not that common.  

You might be thinking this is just too weird, nobody gets free college for all their kids and then sees them go on to have meaningful and rewarding careers.  But that isn’t true.  I’ve met quite a few other parents and when we discussed what college cost I’ve found it was free for many of their kids.  A lot of boomers and Gen X parents never had to pay for their kids’ college. Much higher than the number who have received free college because of prowess at some type of athletics.  

But there are some choices you have to make to improve your chances.  You have to indoctrinate your kids with the idea that learning is fun.  They have to realize pretty early that nobody they know is going to make a living playing sports but that if they apply themselves to the hardest subjects in school then they are very likely to earn a much better than average living.  You also have to have conversations about why there is very little difference in the value of a degree from a school costing $50,000 a year and in one costing less than half of that. And they have to work hard at applying for scholarships like it is a paying job.  It is also important that they understand that all degrees are not equally monetizable.  If they choose a low paying field then they need to understand that going in.  I pushed engineering pretty hard because it has reasonable job satisfaction rankings and it also pays bank.  But my business major/educator is doing just fine and really loves her work.  And she made informed choices that led her there. 

 I realize college is not the best choice for every child.  You may have a child who would be better served by going into a skilled trade, coding bootcamp or entrepreneurship. It is up to you to encourage your child to pursue the things that they are most likely to succeed at.  My experience is you don’t chase passions, you chase what you can excel at and that will cause passion to grow.  As a parent a big part of your job is to help your kids figure out what those areas of excellence can be for them.  But if college does appear to be something that your kids will benefit from then try to do it for as little cost as possible, maybe even for free.

What about you, did any of you get free four year degrees or know of others who did?

What about the parents of millennials, what was the college experience like for them and you? 

Do you know people that chose not to attend college but are killing it anyway? 

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