In economics class in college, students learn of the concept of “Opportunity Costs”. Opportunity Costs questions where it’s worth the time and money to do an activity, and if there isn’t a better way to spend your time and money. It’s about weighing and choosing the best option given the chance to do two activies but time to do one.
Most students grasp the concept of working on Wall Street instead of a fast food restaurant. But once they are employeed, some students twist the “Opportunity Cost” concept into something else. Once they have a dollar amount per hour pegged to what they earn in their primary job, from their perspective, all work that they do has to be worth at least an equivalent amount of money. So if they make, let’s say $40/hr, then if they look for a side job they feel that then need to at least make that $40/hr rate.
So, is that true?
No, it’s not. Often time the same student will watch a movie or go out to the bars. So instead of earning a rate of pay, they’ll actually pay for the “Opportunity” to not earn money… Eventually, even watching TV is a better opportunity than trying to work a side job to make additional money. The funny thing is, that they don’t understand the real concept of opportunity costs. Their leisure is costing them additional security and social interactions that could enhance their life above the rate of pay. If you work an additional job, you can choose something that you are passionate about.
Why am I bring this up?
One of my friends, use to make a decent amount of money for the city that he lives in. Well, he got laid off and is now on unemployment benefits. The funny thing is he had a few opportunities to be employeed, but decided not to because they were less than the rate of pay as what he use to make. Now he’s in the situation where his unemployment is about to expire, and he still doesn’t have a job. You can say that he was holding out for a better opportunity, but the hidden opportunity cost of deciding to hold out will cost him. His resume now has a huge hole, that he can’t honestly fill. He’ll be making a $0/hr rate of pay after his unemployment benefits run out.
I guess what I’m trying to say is, don’t twist a concept like “Opportunity Costs” into something that it’s not. My buddy twisted it to justify him blowing off great jobs that while not perfect, were great opportunities. Actually one of the jobs was for the same rate of pay, but the commute would have been a little over an hour for him… Unbelievable!