When It’s OK to Take a Pay Cut

The farmer is separating his farm from his parents’ farm. To say this has been a summer full of drama would be a total understatement. I would say that the drama has gone from his larger family, to our little family, and now, to the economics of the farm.

This is probably where the drama should be: The Farmer is essentially starting a new business. I have always thought he would do a great job on his own and it’s been fun to watch him.

He is experimenting, trying to figure out what he wants. This summer, for example, he let the pigs graze in our field of sweet corn after the season was done.

It’s hard for me to understand how revolutionary this is. Knowing very little about pigs or sweet corn, it seems logical to me that the pigs are next to the field, so why not let them eat what they want? But the Farmer keeps telling me that other farmers would think he’s crazy.

Then I think, “What? More crazy than you living out here with me and the kids?”

The Farmer will earn less money farming his smaller farm instead of combining it with his parents’ farm. But it’s a no-brainer. The pay cut is a small price to pay to get emotional independence.

To me and the Farmer it’s obvious that he’s making a good move for himself. Yet I see lots of other people in this situation: start over and take a pay cut or keep finances stable. The majority of people choose stability, even thought they shouldn’t.

So this post is about when it’s okay to take a pay cut.

If you want to change careers. Look, you are stopping doing something that you know how to do, and you are going to start doing something you have not done before. Why would you think you will not take a pay cut? Don’t be a brat. Take the cut.

If you are over 40 years old. Pay peaks about age 40 for everyone except surgeons and lawyers. So if you are 40 and job hunting, take a pay cut. It’s not going to kill you, but holding out for a raise might lead to fears of starvation.

If you have been unemployed for six months. Statistically speaking, you will have to take a pay cut to re-enter the workforce. So instead of holding out to be a superhero of job hunts, just take a job. So much of our self-worth comes from working that ditching unemployment far outweighs avoiding a pay cut.

If you’re relocating back to family. Research from Nattavudh Powdthavee of the University of London shows that to make up for the decrease in happiness that you experience when you leave family and friends, you would need to make $133,000 more than you were earning before the relocation. So it stands to reason that you can take a substantial pay cut to move closer to family and still gain a net happiness benefit because close relationships are so important to one’s happiness.

If you will get a great boss. When it comes to the job hunt, getting a boss who will be a great mentor matters more than the job you’ll be doing for that boss. The number-one factor that determines your earning power is your schooling. The number-two factor is the quality of mentoring you get. Since most of you are out of school, mentoring should be your number-one concern, and you’ll more than make up for a pay cut by gaining a good mentor.

If you are having mental health problems from not working. Work provides a lot of things: a sense of belonging, sense of purpose, structure and balance to a day, as well as financial security. You can get all these things by short-circuiting your job hunt and taking a lower-paying job. Wondering if you are having problems big enough to qualify for this one? Are you gaining weight during unemployment? That’s a sign that you’re masking new emotional problems. Get a job.

If you need better insurance. Taking a pay cut to get better insurance is like buying peace of mind. And at a bargain rate, really. If all you need to do is take a pay cut to know that you will not go bankrupt from medical bills (the most common cause of bankruptcy, by the way) then it’s worth it. Also, I often contemplate becoming a customer service rep at Microsoft so I can get to their amazing health coverage for kids with Autism. (Asperger’s is genetic, and Microsoft knows their employee pool, you’ve gotta give them that.)

Okay. Look. Can you tell by now that a pay cut is always fine? Really, the only exception would be when you have a job you love. Because we are all looking for a career that provides stability, engagement and a way to support us financially, and often that comes in the form of a pay cut.

You are not your salary. You are not worth less in the world because you are paid less in your job. Get your self-worth from a wide range of things and a pay cut won’t matter to you. Focus on the components of a good job: learning, personal growth, friends at work, and a good family life. All those things are worth a lot more than a pay cut.

 

Posted in Fulfillment, Job hunt, Money
64 comments on “When It’s OK to Take a Pay Cut
  1. Joseph Fusco says:

    The last paragraph is the most important in the whole essay. Nice post…

  2. Joseph Fusco says:

    The last paragraph is the most important in the whole essay. Nice post…

  3. Joseph Fusco says:

    The last paragraph is the most important in the whole essay. Nice post…

  4. Tymissha says:

    Thank you for this post.  I’m at a career crossroads right now and I know that I will probably have to take a pay cut to be more available for my children.  My oldest daughter is an ASD kid and the peace of mind that I will gain from being more “present” will far outweigh a decrease in salary.

  5. Deanna Shrodes says:

    Excellent

  6. Dannielle says:

    I am glad to hear that your family is solidifying and declaring independence from the clan. The rest of it is good too, but this is most definitely a dramatic piece of good news for all of you personally. Mazal Tov.

  7. Dannielle says:

    I am glad to hear that your family is solidifying and declaring independence from the clan. The rest of it is good too, but this is most definitely a dramatic piece of good news for all of you personally. Mazal Tov.

  8. Gena says:

    This post couldn’t have come at a better time. I am looking for another job, and I know and am preparing myself that I will be making, most likely, awhole hell of a lot less. But I know I will be much happier being away from this job. Money really isn’t everything, and I’d rather be happy starting from scratch then resenting a job that’s just not worth it.

  9. Gena says:

    This post couldn’t have come at a better time. I am looking for another job, and I know and am preparing myself that I will be making, most likely, awhole hell of a lot less. But I know I will be much happier being away from this job. Money really isn’t everything, and I’d rather be happy starting from scratch then resenting a job that’s just not worth it.

  10. Cmyers says:

    You said, “The number-one factor that determines your earning power is your schooling.”  

    Aren’t you also the one saying that a college degree is a waste of time and money?

    • Anonymous says:

      I thought of that when I was writing that sentence. The research about how schooling and mentoring having huge impact strikes me as correct, though. 

      Here’s why: If you go to Harvard, or even apply, you are in a way way different situation in life than if you are in a rural community and go to a Title 1 high school and a community college. I think we are used to splitting hairs about college — Brown or Berkeley? for example. But the equation is much more binary, like, parents who read to you or not. Penelope

      • Fubar says:

        Are you saying that the connection between education and career success is mere correlation, and not causal? In many cases, it is correct that a person from a higher social status, better educated and wealthier parents will be more successful regardless of their education. But not all. There are many examples of a person from a “humble” background that gets a significant career boost from a good education.

        Unfortunately education has become corrupted and overly expensive for the “humble” people, so it is not as much of a road to success as it used to be.

  11. Cmyers says:

    You said, “The number-one factor that determines your earning power is your schooling.”  

    Aren’t you also the one saying that a college degree is a waste of time and money?

  12. Alex Dogliotti says:

    You’re right. And yet, we tend to measure our life through numbers. Your salary, the value of your house, of your car, of your restaurant meal. Nice expensive things are better than crappy things, so we believe the higher the number the better the thing. Learning, friendships, happiness can’t be measured and we have issues with things that can’t be measured (at work, ‘if it can’t be measured, it doesn’t exist’). Obviously this is just plain wrong. Incidentally, also right and wrong can’t be measured. That’s likely why they’re so often ignored.    

  13. Kathryn C says:

    sometimes I’m weirded out with the timing of your posts, each one you write is something I’ve been thinking about, literally thinking about it a few days before you write it, and just haven’t yet talked about it with anyone yet. Then BOOM you surprise me with a personal memo (well, I feel like it is!), you’re amazing!
    Kathryn

  14. kate says:

    this is exactly what i needed.  i keep *saying* i want to move closer to family and a lower cost of living yet have been fearful of the pay cut/new job scenario.  Advantage to moving #498739187 would be getting out of a job i feel very trapped in, due to the pay.  Even when all signs point to DO IT, it’s still really scary. 

  15. Hayburner50 says:

    thank you for this post. makes me really think about where I am currently and my life in general. My mom just died and it brought home how to live each day and to be doing something that makes sense, that fulfills you. Steve Jobs said “Don’t waste your time living someone else’s life”. WOW!! You can’t measure your happiness with objects, things that you buy. Yes it’s important to have money to pay your bills, and make ends meet. Obviously it’s necessary. But I sit and look at what I do, day in and day out and while it’s not the worst job in the world, I’m not doing what I love, or even feel good about most days. Would I take a pay cut to be doing my life’s work? I think so….if I could manage, yes I would. I’m a single mom, newly separated – it’s scary, but thinking about my Mom…life can end in the next minute. I really have to think about this. Thanks Penelope. Also, I love the pig and your Farmer’s idea….makes complete sense doesn’t it? Best of luck with your new venture! 

  16. Katy says:

    I took a 60% pay cut to try out something new. I had to reduce my lifestyle and am living closer to student levels than I would like. The something new isn’t working out and will likely not be my next career. But having been unemployed for a year it is great to get some current work back on the resume and I’m meeting a lot of new people through this job.

    If I had held out for a job with the same salary as my last position, I would still be unemployed and sinking farther into debt. 

    I have been thinking about relocating and to somewhere with a larger job market. That stat on needing to make 133k more is scaring me and making me reconsider.

    As always, timely advice. 

    • Jeremy says:

      When you consider that stat about moving away from family, remember not to look at it in a vacuum. If you’re (among other things) not enjoying what you do, not working, and/or experiencing serious stress that’s directly related to whatever you’re switching from, the benefits of moving away may outweigh changes tied to distance from family (at least in part). It’s maybe not the greatest thought, but you can develop another local support network with some effort. For me, the emotional boost that comes from employment and feeling like I’m doing something productive is worth leaving familiarity.

  17. Katy says:

    I took a 60% pay cut to try out something new. I had to reduce my lifestyle and am living closer to student levels than I would like. The something new isn’t working out and will likely not be my next career. But having been unemployed for a year it is great to get some current work back on the resume and I’m meeting a lot of new people through this job.

    If I had held out for a job with the same salary as my last position, I would still be unemployed and sinking farther into debt. 

    I have been thinking about relocating and to somewhere with a larger job market. That stat on needing to make 133k more is scaring me and making me reconsider.

    As always, timely advice. 

  18. Katy says:

    Oh, and the massive pay cut has allowed me to work less and really get a handle on my health for the first time in eight years. I’ve dropped over 30lbs and am the healthiest I’ve every been (which says a lot because I used to be a national team rower). I also finally have a social life and have gotten back out there and started dating. Just need to start making a bit more so I can afford to buy new clothing now that everything I own is too big for me. Also gave me the time to write and be more creative. 

    So the pay cut has given back more than it has taken.

  19. Katy says:

    Oh, and the massive pay cut has allowed me to work less and really get a handle on my health for the first time in eight years. I’ve dropped over 30lbs and am the healthiest I’ve every been (which says a lot because I used to be a national team rower). I also finally have a social life and have gotten back out there and started dating. Just need to start making a bit more so I can afford to buy new clothing now that everything I own is too big for me. Also gave me the time to write and be more creative. 

    So the pay cut has given back more than it has taken.

  20. Beyondbeige says:

    Yes, this is true Pen. I left my six figure job to go and teach. I took a huge, I mean huge pay cut.  I love my teaching career so much more.
    Before I left my highly paid but sucky job my husband and I squirrelled away a substantial amount of money.  I believe it really pays to think head and not worry about how your going to pay that mortgage etc. We also changed our priorities. It stopped being about acquiring and more about service, connecting with others and being a force that matters in our community.

  21. Beyondbeige says:

    Yes, this is true Pen. I left my six figure job to go and teach. I took a huge, I mean huge pay cut.  I love my teaching career so much more.
    Before I left my highly paid but sucky job my husband and I squirrelled away a substantial amount of money.  I believe it really pays to think head and not worry about how your going to pay that mortgage etc. We also changed our priorities. It stopped being about acquiring and more about service, connecting with others and being a force that matters in our community.

  22. timeforachange says:

    Best way to take that pay cut, if you can’t get good benefits, is to go into business for yourself.
    I hate to sound like a paranoid middle-aged woman, but the farmer might be looking to reduce his and his family’s exposure risks if he goes for a divorce.  Protect yourself.

  23. timeforachange says:

    Best way to take that pay cut, if you can’t get good benefits, is to go into business for yourself.
    I hate to sound like a paranoid middle-aged woman, but the farmer might be looking to reduce his and his family’s exposure risks if he goes for a divorce.  Protect yourself.

  24. Jennifer says:

    That last paragraph was exactly what I needed to hear today – thank you!  I’m leaving the day job to focus entirely on my own businesses at the end of the year, and will be repeating that paragraph to myself like a mantra.  :) 

  25. Jennifer says:

    That last paragraph was exactly what I needed to hear today – thank you!  I’m leaving the day job to focus entirely on my own businesses at the end of the year, and will be repeating that paragraph to myself like a mantra.  :) 

  26. MzMM says:

    great article and the pig foto made me lol!!!  (which i so needed!) =)

  27. Lisa Kretchman says:

    Great post! Seems like the key to allowing yourself to be happy is not equating your value with your income. 

    I recently left an extremely stressful/depressing job for freelancing and began working as an artist. I tried my best to find the path that made me happy, and as a result am now working in a great environment at an art museum. My husband and I had to be more conservative in our spending, but we now have more time together and are much happier. 

    It was a scary change to make, more so because of the current economy. It is also hard to explain to some friends who see more money as a better life. So you have to really know yourself and what is important to you to keep the nay-sayers at bay. It also helps to not be trapped by your “stuff” or your pride.

  28. Lei Han says:

    I completely agree.  great post!  So many people don’t do this because they are worried about status or how others may perceive them.  We worry way too much about what others think and ironically most people spend 99.9% of their time worrying about their own issues.  

    It’s so important to not let other peoples’ opinion or society norms dictate your career choices.  For more on this topic, read this post from my career advice blog (130+ articles) – Are You Making Career Decisions Based on Other’s Opinion?  http://bemycareercoach.com/629/career-advice/career-decisons-others-opinion.html

  29. Lisa says:

    Very timely, but I think you may have overlooked one option – flexibility.  I am looking to cut back on my hours to gain the flexibility of being able to pick up my kids from school.  The emotional gain of being able to sit with them right after school, decompress and get their homework completed will more than make up for the 10% cut in salary.  Even if it means I will force my 40 hour workload into 30 hours a week.  

    Now for a post on how to negotiate this…

  30. Sadya says:

    This is such a fantastic post. Good solid advice, crisp writing and some really hard hitting facts. It has a good balance of personal story and career advice.
    We give too much emphasis on what others will think if we take a paycut. Building your life around people’s opinion is a recipe for misery, always.

  31. Whitney says:

    I’m glad you mentioned developing mental health problems from not working. I’ve tried to explain this to people who are employed but they blow it off as if I’m being dramatic or just filling the space with words that don’t mean anything.

  32. MJ says:

    As a dissatisfied lawyer (albeit in a market where I do not make what NYC and Chicago lawyers do) the pay cut issue is probably what holds me back from change most.  But what if I have to take a $25,000 cut, oh no????!?!!!

    Eh, I could have a life back, that’s worth something….

  33. down from the ledge says:

    “If you are having mental health problems from not working” is right.  You become like an outsider to society, and it scars your self worth.  There was an article on Huffington Post recently linking suicide rates to economic conditions:
    http://www.huffingtonpost.com/lisa-firestone/suicide-financial-crisis-economy_b_982228.html

    The 3 months I worked this summer at half what I should be earning did more to bring me out of the abyss than anything else the past 4 years.  You can’t feel more worthless than sitting at home all alone not being able to contribute anything productive.  When I got laid off, it was hard not to go back to that place, but I at least had the confidence that I could get a job and am about to start in a completely new field in a week.  

    There’s nothing scarier than not knowing how you’re going to make it. 

  34. Pen says:

    This is the one bit that did not make sense to me:

    “Okay. Look. Can you tell by now that a pay cut is always fine? Really,
    the only exception would be when you have a job you love.”

    Why is having a job you love the exception to when it is okay to take a pay cut?  I would think that if you have a job you love, and for some reason you need to take a pay cut to keep it, that it might be worth it (not if the company are just jerking you around; but if there is an actual, good reason — and if you love your job it is probably a good company that might have a good reason).

  35. Toni says:

    In addition to lawyers and doctors, professor’s pay peaks typically after 50+, when one advances to “full professor.”

  36. Daniel Wong says:

    I love the last paragraph.

    Society values things that are measurable: number of A’s, GPA, net worth, salary, number of awards, ranking… It’s no wonder that, at an individual level, we get so caught up equating our self-worth with our salary.

    To find lasting happiness, we need to focus on the things in life that can’t be counted– but that truly count.

  37. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  38. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  39. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  40. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  41. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  42. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  43. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  44. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  45. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  46. Alan Kay says:

    Brilliant. I’d suggest that when taking a pay cut for the above good reasons, take a look at your long term goals (not just retirement) and ask how short trem adjustments you are making will help you get to the goal.    

  47. Lhamo says:

    I have a funny take on the paycut issue.  I knew I had run into trouble at my previous organization when they greeted my decision to return to full time with an offer to cut my FT annual salary — I wouldn’t go back to what I had been making prior to going PT (a change that  was something my boss had suggested, supposedly to “help” me after the birth of my second child, but in retrospect was probably part of some bigger plan all along).  The excuse was that they had reorganized and that my former position and its responsibilities no longer existed.  My new role was supposed to be assisting (i.e. doing the job of) someone they had brought in over my head to fill a new position that I was 150% qualified for and capable of doing but that they didn’t bother to tell me they were creating. 

     I fought the salary reduction, and eventually got back to my original pre-PT salary level, but not before a huge blow-out with my boss.  He gave me a negative performance review and basically told me to shut up and suck up, or get out.  I had major projects I wanted to finish, so I stayed on long enough to get those contracts signed, and then handed in my resignation. I had planned my exit strategy into something that gave me a decent income while I looked for the next gig.  Ironically, that came along RIGHT when I needed it.  Only problem?  It was a a salary even lower than what I would have gotten if I had stayed with the first “offer” at the old place.  But I negotiated and they bumped it up a bit, and I could see from how things went with the hiring process and the interview that the new place was a really humane and professional place to work. 

    It has turned out to be the best thing that possibly could have happened.  I started as seriously damaged goods.  I even cried at my interview!  I had been really traumatized by the way things played out with my previous boss — I really think he is a psychopath, to be honest, having seen what he has done not just to me but to many other people.  That previous job was my “dream job” in many ways, but it turned into a total nightmare.  What I do now isn’t such a “perfect fit” but it is much less stressful and I love my boss and coworkers.  I am no longer depressed/suicidal, which is obviously huge. I have proven myself over and over to my boss and our clients, and get regular praise and positive feedback on my work all the time.   I have gotten regular raises, in spite of tight budgets overall, including a 4% raise just a few weeks ago along with a nice bonus.  Considering the better benefits I have at the new place (lower cost insurance, better company retirement contribution, etc.) Aside from a horrible commute, which I can’t really change due to family reasons, my work life balance is also much improved. 

    So my advice to anyone in a really dysfunctional environment where they are not appreciated is GET OUT!  You deserve better and even if it means you have to take a paycut to start with it will probably be more than worth it.  You’ll be able to be so much more efficient/effective when you aren’t dealing with all the dysfunctional crap and the emotional fallout from it that you will probably get raises/promotions fairly quickly and before long work your way up to where you were, or maybe even higher.  Anyway, it isn’t always about the money.  The basics of life don’t really cost that much, and a higher salary isn’t worth it if you are miserable. 

  48. Greg Brickl says:

    Tell him to get in the truck and drive up to La Farge for a visit if he wants to recoup some profitability: http://www.farmers.coop/

  49. Michael L. Seery says:

    “…you would need to make $133,000 more than you were earning before the relocation.”

    Are you sure of that? For three-quarters of Americans, that amount would allow you to send home what you were already making, and start a new second life in another town. Maybe those are Singaporean dollars, or adjusted for Manhattan? Don’t high-hat me now–after all, I am not my salary–but I was consistently in the top 2% income group in my mid-sized Midwest city, and never made $133K in my life.

    Wait — that is per year, isn’t it? AT $133K over a 40 year career, you didn’t like your friends much. If you now make zero, and wouldn’t leave your friends for only $132K, what do you do? Occupy something?

  50. DorothyP says:

    “. So if you are 40 and job hunting, take a pay cut. It’s not going to
    kill you, but holding out for a raise might lead to fears of starvation.”

    Completely stupid advice. Do you think Clint Eastwood took a cut when he become a director?  Bad, bad advice.

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