Jussi Ahola

Curious humanist

Should you really be paid by the hour?

The majority of people are paid on an hourly basis for the work that they do. Even if you have a fixed monthly salary, you are still paid by the hour if you are required to work a specific number of hours per month (monthly salary/hours per month = hourly wage). In job listings the salary that comes with the job is often quoted on a yearly basis, which again equals a specific rate by the hour.

Last month Floyd Mayweather beat Saúl Álvares in a boxing light middleweight championship fight. Mayweather was reported to have made a whopping $19,212 for every second in the ring, netting a total of $41.5 million for the full 12-rounder. His calculated pay by the hour was $69 million.

Wrong. Mayweather’s pay isn’t based on the hours or minutes that he spends in the ring; it’s based on the value that he creates for the audience, TV spectators, his fans, sponsors, and promoters. It’s the monetary equivalent of this value that is stated in his contracts, rather than the hourly rate for his services.

Entrepreneurs are also often paid by the value that they create. This value is reflected in the profit that the company is making or in the price that somebody is willing to pay for ownership in the company.

The hourly wage is largely based on the standards of the industrial age; it makes sense in jobs where the value that is created is closely tied with the hours spent working. The value created by a factory worker doing mechanical, repetitious work at the conveyor belt is a function of the time that she spends doing that work. The value that a professional typist creates is closely tied with the time that she spends typing; the more words she can type per hour, the more value she creates. The value created by someone looking after children’s safety in a playground is based on the time she spends on the job; she cannot produce a spike of safety on Monday morning and then stay home for the rest of the week. The same applies to the doctor on duty in the emergency room.

Chances are that you are not doing this type of work. The industrial age ended or, writing this from a Eurocentric point of view, it moved abroad. Chances are that you are a knowledge worker, working with information, manipulating it, creating and executing ideas, connecting dots, meeting and serving people. The value that you create is not a function of the time that you spend creating it.

So why are you still paid by the hour?

Though the industrial age is gone, apparently we still have to deal with many of its practices. Trade unions, specialized division of labour, the hourly wage. Dinosaurs in space age.

If you create a lot value, the hourly wage is probably not a good deal for you. If you don’t create that much value, the hourly wage is like insurance; getting paid by the hour without creating any value. We all know those people.

I think you should be paid by the value that you create.

In one of the pay-by-the-hour jobs that I have had there was this one repetitious, boring task that basically consisted of clicking the mouse several times. If there were only a few files that needed this operation, the task took me a couple minutes. If there were a lot of files, it could take me a good half an hour of clicking the mouse.

Click. Click. Click.

After about the second time I had performed this manoeuvre I was fed up with it and started writing a small computer program that would automate the whole thing. When it was ready, the whole operation took a fraction of a second regardless of how many files needed the treatment. I shared this program with all of my co-workers who also had to perform this mind-numbing task every now and then.

I was saving everyone a lot of time and creating plenty of value. Did I get paid for the value I was creating? Did I get to work shorter hours and go out to enjoy the beautiful summer day as I could now complete this task in no time?

No. I was paid by the hour, so I had to work through the office hours regardless of the value I was creating.

So I left.