Optimal Employment

Re­lated to: Best ca­reer mod­els for do­ing re­search?, (Vir­tual) Em­ploy­ment Open Thread

In the spirit of offer­ing some prac­ti­cal real world ad­vice, let’s talk about em­ploy­ment ra­tio­nal­ity. Let’s talk about op­ti­mal em­ploy­ment.1

You’re young, smart, and hop­ing to have a pos­i­tive im­pact on the world. Maybe you finished col­lege, maybe you didn’t. You want to pay your bills but also have time to pur­sue your in­tel­lec­tual goals. You want a low-stress job that doesn’t leave you drained at the end of the day. And it would be nice to earn lots of ex­tra money, be­cause what­ever you value, money tends to be a good way to get it.

And it is pos­si­ble to find eas­ily ob­tained, low-stress jobs with flex­ible hours that al­low you to save as much money as some­one in the USA mak­ing $100,000/​yr… if you leave the USA to look for them.

Your in­stinc­tive re­ac­tion is prob­a­bly that there’s no free lunch, so I must be mis­taken or dishon­est. And while you may have the right prior, I hope to per­suade you that these jobs ex­ist and tell you how to get one if you’re in­ter­ested.

This, I think, is a spe­cial op­por­tu­nity for ra­tio­nal­ists, an illus­tra­tion that we can get bet­ter life out­comes from our in­vest­ment in ra­tio­nal­ity—bet­ter out­comes such as low-stress jobs that leave us with am­ple dis­cre­tionary in­come and enough free time to pur­sue what­ever else we’re in­ter­ested in, ob­tained by be­ing will­ing to break habits and think in num­bers.

Em­ploy­ment Biases

First, con­sider some cog­ni­tive bi­ases that may be lead­ing peo­ple away from op­ti­mal em­ploy­ment.

  1. Sta­tus Quo Bias—As a rule, we work the same jobs we worked the day be­fore re­gard­less of whether it’s still the best op­tion for us. Al­most ev­ery­one you know is do­ing the same thing. So you shouldn’t ex­pect to be able to just copy oth­ers’ be­hav­ior and end up with op­ti­mal em­ploy­ment. Most peo­ple stop search­ing too soon.

  2. Money Illu­sion—We rea­son in terms of nom­i­nal salaries rather than in ac­tual buy­ing power. This causes us to chase high nom­i­nal salaries ($100,000/​yr!) even when those salaries are cou­pled with an ex­cep­tion­ally high cost of liv­ing that de­creases our over­all buy­ing power.

  3. Ostrich Effect—Re­gard­less of in­come, the av­er­age Amer­i­can ends up pay­ing close to 40% in taxes yet con­sis­tently self-re­ports as pay­ing only 3%. In other words, we tend to ig­nore or deny ob­vi­ously nega­tive situ­a­tions when we feel we can’t change them.

  4. Con­for­mity Bias, Herd In­stinct, “Keep­ing Up with the Jone­ses”—Our mimick­ing be­hav­ior is so hard-wired that main­tain­ing au­ton­omy re­quires ac­tively guard­ing against the usual prac­tice of mind­lessly work­ing the same sorts of jobs and buy­ing the same sorts of prod­ucts as other peo­ple around us. At Less Wrong, we are not con­formists, which is prob­a­bly a good thing in this case. Amer­i­cans’ re­vealed prefer­ences in­di­cate that they mostly care about bor­ing things like pay­ing lots of taxes, hav­ing fat mort­gages, driv­ing 2 cars, and own­ing 3 tele­vi­sions.

  5. Com­mut­ing Para­dox—A re­cently un­cov­ered bias finds that peo­ple will con­sis­tently en­dure un­pleas­ant com­mutes even when the in­creased earn­ings don’t com­pen­sate for the in­creased costs. A per­son with a one-hour com­mute has to earn 40 per­cent more money just to be as satis­fied with life as some­one who walks to work. And no amount of money can erase the cog­ni­tive fa­tigue caused by com­mute re­lated stress. Koslowsky found that even a short com­mute or us­ing pub­lic trans­porta­tion is as­so­ci­ated with in­creased blood pres­sure, mus­cu­loskele­tal di­s­or­ders, in­creased hos­tility, late­ness, ab­sen­teeism, and ad­verse effects on cog­ni­tive perfor­mance.

So the liter­a­ture on bi­ases is tel­ling us that the ideal job would be some­thing that few Amer­i­cans are do­ing, has high pur­chas­ing power at the ex­pense of a high nom­i­nal salary, will be taxed less than a US-based job, avoids a com­mute, and min­i­mizes the costs that eat up a typ­i­cal Amer­i­can’s salary.


Wel­come to Australia

The USA is not the best place to earn money.2 My own ex­pe­rience sug­gests that at least Ja­pan, New Zealand, and Aus­tralia can all be bet­ter. This may be shock­ing, but young pro­fes­sion­als with ad­vanced de­grees can earn more dis­cre­tionary in­come as a re­cep­tion­ist or a bar­tender in the Aus­tralian out­back than as, say, a soft­ware en­g­ineer in the USA.

Now I’ll de­tail how to work abroad in Aus­tralia be­cause (1) I did it my­self (here’s my first pay­check), and be­cause (2) I’ve met hun­dreds of peo­ple work­ing less de­sir­able jobs in sev­eral other coun­tries so I have some ba­sis for recom­mend­ing Aus­tralia in par­tic­u­lar.

Quick facts:

  1. Aus­tralian dol­lars are cur­rently worth slightly more than US dol­lars.

  2. The min­i­mum wage in Aus­tralia is $15/​hr, with $18.75/​hr be­ing a more typ­i­cal start­ing salary for some­one with a Work and Holi­day Visa with no pre­vi­ous work ex­pe­rience.

  3. Em­ploy­ers are re­quired to pay 9% ex­tra be­yond your reg­u­lar wage into a per­sonal re­tire­ment ac­count, called su­per­an­nu­a­tion, which you can fully cash out af­ter leav­ing Aus­tralia, even if you aren’t re­tire­ment age.

  4. Tax with­hold­ings are fully re­fund­able to for­eign­ers af­ter leav­ing the coun­try (0% effec­tive tax rate) if you earn less than $6000 and re­port as a “res­i­dent” for tax pur­poses. If you earn be­tween $6000 and $37,000 and file as a res­i­dent, your tax rate is 15% (for ev­ery dol­lar earned over $6000). See the full tax struc­ture here.

  5. Hospi­tal­ity em­ploy­ers such as re­sorts and ho­tels in re­mote ar­eas like the Aus­tralian out­back are re­quired to provide heav­ily sub­si­dized room & board ($75/​week) and pay sup­ple­men­tal wages in the form of “dis­trict al­lowances” to all work­ers.

  6. For refer­ence, I was hired as a bar­tender in Aus­tralia on the spot with no re­sume, no ap­pli­ca­tion, and no in­ter­view af­ter openly ad­mit­ting I had no ser­vice ex­pe­rience and couldn’t op­er­ate a cash reg­ister.

So let’s com­pare and con­trast Aus­tralia with the US:

US Aus­tralia
Min­i­mum wage $7.25/​hr $15.00/​hr3
High pay­ing jobs Re­quire ad­vanced de­gree, hard to get, stress­ful Re­quire no qual­ifi­ca­tions, easy to get, lit­tle re­spon­si­bil­ity
In­come taxes 21.25% of in­come4 13% of in­come5
Hous­ing costs 37.1% of in­come6 5% of in­come7
Food costs 13.3% of in­come6 5% of in­come7
Trans­porta­tion costs 16.5% of in­come (need a car)6 4% of in­come (air­plane tick­ets, visas)8
Com­pul­sory re­tire­ment sav­ings

-7.65% of your in­come into So­cial Se­cu­rity
good luck get­ting that back

+9% ex­tra in­come paid by em­ployer on top of wages­
re­fund­able when you leave the coun­try!


Op­ti­mal Em­ploy­ment and Less Wrong

This may be of spe­cial in­ter­est to Less Wrong be­cause most non-ra­tio­nal­ists sim­ply can’t re­li­ably take ad­van­tage of this op­por­tu­nity. They will see it as “too good to be true” or “some sketchy ad­vice from the in­ter­net” and move on with their lives. You, on the other hand, can eval­u­ate the ev­i­dence and make a de­ci­sion. This kind of prob­lem, where you must as­sess prob­a­bil­ities and come to a sound con­clu­sion be­cause im­me­di­ate feed­back is un­available, is ex­actly the kind of prob­lem that ra­tio­nal­ity is good for.

Let’s com­pare the dis­cre­tionary in­come you’re likely to earn with a stress­ful $100,000/​yr salaried job in the USA to the dis­cre­tionary in­come you’re likely to earn with a laid-back $39,000/​yr job in Aus­tralia. Our time frame will be one year.

USA: In a $100,000/​yr po­si­tion, your top end tax braket is 28%, but af­ter tak­ing the “stan­dard de­duc­tion” and ac­count­ing for the tiered tax struc­ture, your effec­tive in­come tax rate is only 21.25%. In our tar­get age range of 25-34, you’re likely to spend 37.1% of your in­come on hous­ing (break­down: 23.3% on rent, 7% on util­ities, 6.8% on misc hous­ing ex­penses), 13.3% on food, 16.5% on trans­porta­tion, and 7.65% on so­cial se­cu­rity pay­roll taxes. For con­ve­nience sake, we’ll call the re­main­ing por­tion of your in­come − 4.2% - your dis­cre­tionary in­come. 4.2% of $100,000 is $4,200.

Aus­tralia: In a $39,000/​yr po­si­tion as a bar­tender or re­cep­tion­ist in the Aus­tralian out­back, you’ll pay 13% in taxes but im­me­di­ately gain back 9% by cash­ing in your em­ployer-pro­vided re­tire­ment benefits upon leav­ing the coun­try. Be­cause room and board is heav­ily sub­si­dized in the out­back, you’ll pay only 5% for hous­ing and 5% for three ex­cel­lent meals a day. You’ll be com­mut­ing on foot be­cause you’ll live by the ho­tel or re­sort that you work at so the only trans­porta­tion you’ll need is a cou­ple air­plane tick­ets and le­gal doc­u­ments, which will cost about 4% of the $39,000 yearly salary. That leaves you with a stager­ing 83% of your in­come as true dis­cre­tionary in­come, or $32,370!

So work­ing in Aus­tralia at a laid-back job with no re­spon­si­bil­ities will likely earn you sig­nifi­cantly more dis­cre­tionary in­come than work­ing at a hard-to-get, stress­ful, “high-pay­ing” US job. In ad­di­tion to the per­sonal en­joy­ment of trav­el­ing to Aus­tralia, work­ing at a re­sort in the out­back will provide you with a com­fortable liv­ing situ­a­tion where all your bills are paid for, all your hous­ing and meals are pro­vided for you, you have no com­mute and you can en­joy 83% of your $39k salary as dis­cre­tionary in­come.

On the other hand, a typ­i­cal year work­ing a stress­ful $100k/​yr job in the US, if you’re highly-qual­ified and for­tu­nate enough to land one, will mostly cre­ate value for the US gov­ern­ment, real es­tate own­ers via your rent pay­ments, oil pro­duc­ing na­tions when­ever you fill up your car to com­mute to work, and re­tailers such as WalMart who provide house­hold ne­ces­si­ties from over­seas sup­pli­ers. You definitely “cre­ate value” by earn­ing that $100k and then im­me­di­ately blow­ing it all back out into these gi­ant eco­nomic sec­tors, but are you re­ally ex­e­cut­ing your own val­ues, or just the val­ues of those around you? As­sum­ing you’re not a tax, rent, and car pay­ment en­thu­si­ast, this ar­range­ment is prob­a­bly sub-op­ti­mal. That’s why you need to learn...


How to Work in Australia

In six steps:

  1. Find an Aus­tralian hos­pi­tal­ity job (or wait un­til you ar­rive; see be­low).

  2. Make sure you have a pass­port.

  3. Ap­ply for a Work and Holi­day visa.9

  4. Fly to Aus­tralia to start work­ing and sav­ing.

  5. Ap­ply for an Aus­tralian tax file num­ber.

  6. Open a bank ac­count.

Though you may want to “play it safe,” most of the jobs available in the Aus­tralian out­back will not be listed on­line. My own recom­men­da­tion is to skip step 1 and don’t get a job lined up ahead of time. Fly to Alice Springs in May when the high sea­son for hos­pi­tal­ity jobs is start­ing to pick up, check into a hos­tel for a few nights, and look through the phys­i­cal job boards. The per­son at the front desk of any hos­tel will be able to tell you where they are. That’s what ev­ery­one I met work­ing in Aus­tralia ac­tu­ally did to land jobs.

Or, if this sounds too over­whelming, have some­one else do the plan­ning for you. The site Oz Work Visa was founded by a fel­low LWer (who went to Aus­tralia af­ter read­ing this post) to help other op­ti­mal philan­thropists and ra­tio­nal­ists have a smoother time plan­ning their work­ing holi­day abroad in Aus­tralia. I definitely recom­mend the ser­vices.

Conclusion

Of course, each per­son must as­sess the ex­pected util­ity of this op­por­tu­nity for them­selves. Maybe you have a child or sig­nifi­cant other you can’t leave be­hind. Maybe you live with your par­ents, so you aren’t spend­ing much on hous­ing or food in the US, and there­fore stay­ing in the US is the quick­est way to build up dis­cre­tionary in­come. Maybe the math above doesn’t work for your par­tic­u­lar situ­a­tion. The USA’s fi­nan­cial in­cen­tive sys­tem is ex­tremely com­plex and, in the words of Kotlikoff & Rap­son, “bizarre.”

I don’t mean to say that this op­por­tu­nity will be best for the av­er­age Less Wrong reader who is sin­gle and in his or her 20s. But I do want to pre­sent one par­tic­u­lar op­por­tu­nity that may offer more op­ti­mal em­ploy­ment than what­ever you’re cur­rently do­ing for a pay­check. I’d also like to sug­gest that in gen­eral, op­ti­mal em­ploy­ment might not be found in your home coun­try.

Here’s me en­joy­ing some op­ti­mal em­ploy­ment in Aus­tralia:

Me, working at an Australian bar

Com­mon Concerns

Q: This sounds too good to be true. How could there be this wage and cost of liv­ing im­bal­ance? Shouldn’t the effi­cient mar­ket con­spire to elimi­nate this huge pile of “free profit”?

A: The effi­cient mar­ket hy­poth­e­sis as­sumes that hu­mans col­lec­tively con­verge on ra­tio­nal be­liefs. But most hu­mans aren’t strate­gic enough to take ad­van­tage of an op­por­tu­nity like this. They’re on a tread­mill from high school to col­lege to a nom­i­nally “high-pay­ing” USA-based job + spouse + 1.5 chil­dren + dog. The thought of work­ing out­side their own coun­try or out­side of the field they got a de­gree in never se­ri­ously oc­curs to them, no mat­ter how smart they are. Also, many peo­ple cur­rently be­lieve that work­ing abroad is a bad idea sim­ply be­cause the best op­por­tu­ni­ties that ex­isted 5 years ago (teach­ing English, peace corps) ac­tu­ally were bad eco­nomic op­por­tu­ni­ties.

Q: So how come all my smart friends aren’t do­ing this?

A: Amer­i­cans couldn’t get these work visas un­til 2007. Since then, less than 8,000 Amer­i­cans have taken ad­van­tage of the pro­gram. Your odds of know­ing an Amer­i­can aged 18-30 who went to Aus­tralia and did this are very low. By com­par­i­son, over 170,000 Bri­tish cit­i­zens aged 18-30 went to Aus­tralia just in the last 5 years via a nearly iden­ti­cal visa pro­gram. Ba­si­cally, if you’re liv­ing in the UK, or lots of other coun­tries in Europe or Asia, the ev­i­dence is already beat­ing you up­side the head that work­ing in Aus­tralia is a great way to save money. You already know sev­eral peo­ple in real life who can stand in front of you and tell you how great it was for them. I pre­dict that work­ing in Aus­tralia af­ter col­lege will be a trendy op­tion for Amer­i­cans in a few more years, but un­til it’s com­pletely ob­vi­ous to ev­ery­one, you’ll ac­tu­ally have to look at the ev­i­dence and be ra­tio­nal enough to pro­cess it with­out im­me­di­ately re­ject­ing the idea just be­cause it sounds amaz­ing.

Q: Won’t work­ing in Aus­tralia pre­vent me from gain­ing ex­pe­rience in my nar­row pro­fes­sional sub-field, thus re­duc­ing my to­tal life­time earn­ing power?

A: This is al­most cer­tainly not the case for any­one un­der 30. Com­pa­nies pay pro­fes­sion­als more based on their abil­ities and their age as op­posed to their ac­tual years of ex­pe­rience. And, they pay more for older pro­fes­sion­als than young ones just start­ing out cause they know these peo­ple re­ally do have higher ex­penses and are less likely to quit. So tak­ing a year off in your 20s to work abroad is only ex­chang­ing a year in which you would have earned the low­est salary you’ll ever have dur­ing your ca­reer for a year of higher earn­ing power in Aus­tralia. You can always come back to your ca­reer in a year and pick up where you left off. Be­sides; who fol­lows a straight-up-the-lad­der ca­reer path any­more? Al­most no­body.

Q: What about Aus­tralian cul­ture? Will I like it over there?

A: Aus­tralia is a highly ed­u­cated, ro­bustly sec­u­lar, ex­tremely de­vel­oped coun­try. If you have any ques­tions about the de­sir­a­bil­ity of Aus­tralia, just ask Less Wrong! A dis­pro­por­tionate num­ber of Less Wrongers are Aus­tralian.10

Q: I’m re­ally bad at fol­low­ing in­struc­tions. What are the biggest mis­takes I could make?

A: Don’t make the mis­take of set­tling down to work in Syd­ney, Melbourne or any other ma­jor Aus­tralian city. Those places all have ex­cep­tion­ally high costs of liv­ing, fewer job op­por­tu­ni­ties, no hous­ing and meal benefits, and pre­dictably lower pay. Make sure you travel to a re­mote area of Aus­tralia like I sug­gest. Go to the out­back near Alice Springs or at least out­side Dar­win or Perth if you read up on it your­self and know what you’re do­ing. Also, I recom­mend go­ing to Aus­tralia in May when hiring is strongest. April can work too. June and July will work also. Just don’t go in Fe­bru­ary or March when peo­ple aren’t hiring yet. One last tip: it’s very ex­pen­sive to be a tourist in Aus­tralia (how do you think you’re be­ing paid so much?) so I recom­mend that if you want to com­bine this op­por­tu­nity with a va­ca­tion for your­self, fly to Bali or some­where else in South­east Asia where your money will go 10x fur­ther.

Q: It says the $295 Visa ap­pli­ca­tion fee is non-re­fund­able. What if I ap­ply for the Work and Holi­day Visa and then I don’t get it?

A: Did you read through the el­i­gi­bil­ity re­quire­ments to make sure you qual­ify? If you meet their re­quire­ments, you’ll get it. Aus­tralia rub­ber-stamps Amer­i­can Visa ap­pli­ca­tions. They’re work­ing hard to ad­mit as many of us as pos­si­ble since so few Amer­i­cans ap­ply to va­ca­tion or work in Aus­tralia and they want us to be bet­ter rep­re­sented. The ap­pli­ca­tion is painless and I was is­sued my visa in less than 24 hours.

Notes

1 Many thanks to luke­prog for his help in writ­ing this ar­ti­cle.

2 Note to in­ter­na­tional read­ers liv­ing out­side the US: Although I write much of this from the per­spec­tive of an Amer­i­can con­sid­er­ing the pos­si­bil­ity of work­ing abroad, you can eas­ily sub­sti­tute “the UK” or any other first-world na­tion wher­ever I say “Amer­ica” or “the US”.

3 Aus­tralian min­i­mum wage is $15/​hr AUD. Right now, the ex­change rate be­tween AUD and USD is ba­si­cally equal.

4 Ap­prox­i­mate, based on the third tax bracket in the year 2011. See the USA rates here, but note that these are nom­i­nal tax rates. The ac­tual tax rate is lower due to the stan­dard de­duc­tions.

5 An es­ti­mate, as­sum­ing you file as a res­i­dent for tax pur­poses and earn be­tween $6,000 and $37,000. You are taxed at 0% for the first $6,000 earned, and at 15% for your earn­ings be­tween $6,000 and $37,000. See here for the de­tails.

6 See the 25-34 year-old age bracket from the lat­est Con­sumer Ex­pen­di­ture Sur­vey.

7 Of course, this de­pends on how much you make, and is as­sum­ing you use the highly sub­si­dized room and board offered to you in the Aus­tralian out­back.

8 My real world costs of go­ing to/​from Aus­tralia:

$1166 round-trip ticket SFO—MEL (skyscan­ner.com)

$196 MEL—ASP (tigerair­ways.com)

$235 Work and Holi­day visa

This might look like a lot of money if you’re not cur­rently work­ing or if you’re a broke col­lege grad, but it only takes about 2 weeks on the job in Aus­tralia to earn back the cost of em­i­gra­tion, repa­tri­a­tion, and valid work pa­pers.

9 Aus­tralian “Work and Holi­day” visas are only available to those 18-30. If you’re al­most 31, you can still ap­ply for the visa now, have it is­sued be­fore you turn 31, and then travel to Aus­tralia af­ter you turn 31.

10 Based on traf­fic data for Less Wrong.