Voluntary Salary Reduction
Until recently I thought Julia and I were digging a bit into savings to donate more. With the tighter funding climate for effective altruism we thought it was worth spending down a bit, especially considering that our expenses should decrease significantly in 1.5y when our youngest starts kindergarten.
I was surprised, then, when I ran the numbers and realized that despite donating 50% of a reduced income, we were $9k (0.5%) [1] richer than when I left Google two years earlier.
This is a good problem to have! After thinking it over for the last month, however, I’ve decided to start earning less: I’ve asked for a voluntary salary reduction of $15k/​y (10%). [2] This is something I’ve been thinking about off and on since I started working at a non-profit: it’s much more efficient to reduce your salary than it is to make a donation. Additionally, since I’m asking others to fund our work I like the idea of putting my money (or what would be my money if I weren’t passing it up) where my mouth is.
Despite doing this myself, voluntary salary reduction isn’t something that I’d like to see become a norm:
I think it’s really valuable for people to have a choice about where to apply their money to making the world better.
The organization where you have a comparative advantage in applying your skills will often not be the one that can do the most with additional funds, even after considering the tax advantages.
I especially don’t think this is a good fit for junior employees and people without a lot of savings, where I’m concerned social pressure to take a reduction could keep people from making prudent financial decisions.
Still, I think this is a good choice for me, and I feel good about efficiently putting my money towards a better world.
[1] In current dollars. If you don’t adjust for inflation it’s $132k
more, but that’s not meaningful.
[2] I’m not counting this towards my 50% goal, just like I’m not counting the pay cut I took when I stopped earning to give.
Thanks for writing this! I also voluntarily reduced my salary for several years (and lived partly off my savings) and had been meaning to write about this for some time but never got around to it. It’s always been somewhat puzzling why this isn’t more common. While it probably shouldn’t become a norm for the reasons you outline, my sense is that more EAs should consider this option (though I may be underestimating how common it is already).
I agree with all the downsides you list but I could imagine there are also other upsides to voluntary salary reduction. For example, it can signal your commitment to both your organization and to taking altruistic ideas seriously—following the logic where it leads, even when that means doing unconventional things. This might inspire others.
I also worry that we might be biased to overestimate the downsides of voluntary salary reductions: Donating creates tangible satisfaction—the concrete act of giving, the tax receipt, the social recognition, etc. Taking a lower salary offers none of these psychological rewards and can even feel like a loss in status and recognition.
Why don’t you consider the reduction as part of of your donations? Unlike taking a direct-work job (where the counterfactual and non-monetary compensation questions are complicated and any estimate will involve a lot of guesswork)[1] your salary reduction is from a known very well-understood baseline.
I’m sympathetic overall to your desire for this not to become a norm in EA, due to the concerns you listed, but I would (and do) count it towards my donation target, and would generally advise others to do so.
There’s an argument in your case that your counterfactual salary is extremely clear. I would expect for most people taking a salary reduction, the answer is much harder. I’d estimate that half of people I’ve heard of leaving EtG jobs would have had a hard time being happy at that job any more, and many more people are like me where I haven’t worked in industry for 7 years and so I would have to guess, which makes it a bit of a weird norm question if a peer of mine gets to claim a 50% reduction, but I have no idea if I could have made double my (reduced) salary in industry in a very distant counterfactual world.
I do list this on my donations page, but I’m trying to be pretty conservative in what I count as my donations: only the actual money I actually donate. So I don’t count it towards my 50% and put it in grey italics like my employer donation matches, donations in exchange for work, the PayPal 1% match, and other counterfactual money moved that I don’t fully include.
I think it’s fine (and probably good) if others are less strict about this, though!