A business will hire anyone they believe will make them more money than they cost. It is as simple as that, but as Ryan Ferguson explains in this Guest Post, most people think about employment and jobs in a complex and abstract way.
A business will hire anyone they believe will make them more money than they cost. It is as simple as that, but most people think about employment and jobs in a complex and abstract way.
People talk and think about jobs like they are things. Like you can possess one, lose one, or like you need to go get one from someone. So they go to job boards looking for the people who are giving away jobs. They go through the societal rituals that are expected of job seekers. But they are making a fundamental mistake -- because jobs are not things, they are abstractions.
Getting lost in this abstraction causes a lot of pain and confusion. Seeing past the abstraction lets you see the countless opportunities you have available to you.A job is an abstraction to describe a relationship between one person and another individual or group of people that agree to a certain type of ongoing trade. To get a job, you don’t need someone to create it and give it to you; you simply need to convince someone that you can make them more money than you cost.
When you see jobs for what they truly are, the world opens up to you.
Resumes, interviews, degree requirements, and references checks are tactics to help businesses measure their confidence in your ability to make them money. But at a fundamental level, all that you need to do to get a job with any business in the world is convince them that you are going to make them more money that you will cost.
What you cost is more than just your salary though. There are employment taxes, legal risks, and training costs on top of the money you are paid. Businesses need to be confident in your ability to make them money over the long-term to enter into an ongoing relationship with you. That is why references, previous work experiences, and projects you’ve completed are valuable. They show that you can actually create value.When you see jobs for what they truly are, the world opens up to you. Like Neo learning to play with the rules in the Matrix, you can see the path forward to countless opportunities. You simply need to increase your ability to create value and your ability to convince others that you can create value.
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Ryan Ferguson hosts the World Wanderers podcast. He has been a participant in Praxis and the Carl Menger Fellow at the Foundation for Economic Education.
His post previously appeared at FEE, and at RyanFerguson.Com.
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13 comments:
I think that governments make it hard to be an employer. Too many things are prescribed by governments for employers to have to do.
That is true, but it's secondary to the positive point being made here. As he describes in the 2nd last paragraph, it just means the margin between the money you make for them, and what you get paid needs to be greater.
With the exception of certain jobs such as sales reps, this is false. The vast majority of jobs are basically 'cogs' that allow the company to function, with no $X value attributable to their work.
That makes no sense. If your job doesn't have a value greater than what you're getting paid; even it's just the value of a 'cog' - why on earth would anyone want to pay you to do it? Whether you can precisely measure it is another matter, but to employ you in the first place, an estimation must be made that you'll deliver more value than what you'll get paid.
This article also has another hidden implication/lesson; that the decision whether or not to create a job is something that can be made by the employer. As such, this serves as a refutation of the idea that it is the federal government's job to create jobs. This is base upon the prevalent misconception that Americans have regarding employment: that from a macro economic perspective, we require focused gov policies to create jobs. This is sourced to the failure of people to realize that the end goal of any economy is to create consumer value, and that this can best done by using our resources (ie our scarce resources) to create the most consumer value. One such resource is labor.
The lesson should be that a stronger economy means a cause of more employment, In other words, higher paying jobs is a result of a stronger economy rather than a cause of it.
Have you ever seen cogs? Cogs are gears; they are vital to the running of a machine. Take a clock. Okay, granted, not many individual gears can be said to turn the hands on the face of the clock--but take one out, even the most apparently insignificant, and the whole thing stops. I've managed staff, and frankly have used staff. And on every job, every one of my staff members was either valuable, or was not a staff member for long! Business is cut-throat, and dead wood doesn't last.
I think you are onto something here. As things get cheaper and margins are squeezed there is less margin for wages. My wife works in IT and has worked with Indians both here and based in India. She found them highly qualified on paper but frequently not much good. They were being used because they were cheap and the funk ups came out of someone else's budget. The concept of value didn't seem to be a factor in the accountant's thinking. I gave away the corporate drudgery for a low wage driving job and see the same thing in that. Pay peanuts and get monkeys is so true and I wonder if that is the norm in big business. Small businesses can't afford such stupidity.
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For example Mark & Dinwar: There was an enterprising Australian IT worker a few years back who realised he could outsource his work to a Chinese guy, paying him a fraction of the salary.
The Chinese fellow did a great job, even earning his Australian counterpart awards for productivity. The scheme came to an end when a security audit found someone logging in from China.
The point being: employers will pay the lowest rate they can - it's the local labour market that determines what gets paid, not the productivity of the employee.
Rivi - Of course employers will pay the lowest rate they can for a service (all other things being being equal). It's a competitive labour market. But how on earth does that change the fundamental truth we're discussing here? It just emphasizes the point - which is the key to higher income is to maximize your benefit to your employer. Rather than resigning yourself to offering the same value as someone in China being paid $2/hour, organize yourself to offer something better!
No you're missing the point Mark. That Chinese IT worker was offering more value than the highly paid Australian IT workers. But he had the misfortune of being in the Chinese Labour market, and the labour market you're in determines your salary much more than your productivity.
Ok Rivi - so that means protectionism or social expectations can distort things, but it doesn't change the fundamental reality. Even when laws or social expectations can force you to use the highly paid Australian over the Chinese, The Aussie worker still must deliver more value than he's getting paid. Likewise, as the value and quality of products and services coming out of China increases, so will their wages over time. It took 100's of years for this to happen in the West. It's happening a lot quicker in places like China, but it still can't happen overnight.
This analysis also has implications for Government employees. They often create no obvious value. Therefore they are not subject to this rule, so you can just keep adding them.
It also fits with the idea that businesses start projects that will provide them with a positive return. They have a series of projects lined up and movements in the cost of capital move projects between positive return and not.
The minimum wage (and other government regulations) have the same effect on whether people are profitable to employ or not.
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