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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.
More issues...

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.

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David_AlthausJan 1520

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 benefits and can even feel like a loss in status and recognition.

NickLaingJan 174

I agree that we might overestimate the downsides, but those psychological and status benefits you mentioned are real benefits and can't be discounted I don't think.

JP Addison🔸Jan 1515

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.

Jeff Kaufman 🔸Jan 158

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!

LarksJan 2211

A possible comparison is to dollar-a-year men, successful business leaders who go to work for the government for basically zero.

MichaelDelloFeb 63

Thanks for writing about this! I've thought about this as well, but there are a couple of reasons I haven't done this yet. Primarily, I've been thinking more lately about making sure my time is appropriately valued. I'm still fairly early-mid career, and as much as it shouldn't matter, taking a salary reduction now probably means reduced earnings potential in the future. This obviously matters less if you don't plan on working for a non-highly impactful non-profit in the near future or if you're later in your career, but I think this is worth thinking about even if you're financially secure.

I think the sort of people who frequent this forum tend to be a bit too keen to work for not much because they think the work is so important, kind of like an 'impact discount', and I think historically effective non-profits have been a bit too keen to offer impact discount salaries. This seems to be less of an issue in the last 3 years in my experience, maybe because EA-aligned orgs are getting better funded.

I think taking impact discounts probably harm our impact in the longer term. It's not just about the money per se, but about the perception of value. Unfortunately, people tend to see your hourly rate as a reflection of how much value you provide. Young people should probably care about this a bit more, but granted it's a tough job market and it's probably a much lower priority than just getting a job.

It also, of course, depends on whether you think your current employer is the most effective place to be sending your counterfactual dollars. It's plausible that one might work at a highly impactful non-profit, but they think that another non-profit they could donate to is twice as effective (or whatever the ratio is based on their marginal tax rate, but it's probably not more than double).

David MichelsonJan 154

I suppose this is only tangential to your post, but seeing it reminded me of something I was just recently reflecting on. I wanted to look into whether anyone has written on here in support of reducing their cost of living so that they can sustain themselves on fewer work hours in order to volunteer more of their time. It seems like a variation on Earning to Give—in the sense that by lowering costs you make it easier to earn what you need so that you can give more of your time. I'm interested in reading some of the links you included because even though not directly tied to my own reflection they seem relevant in a way that I find stimulating.

david_reinsteinJan 152

I proposed something related to this, trying to get around some of the issues you mention above. Essentially, a way to have your employer re-purpose some of your salary towards an external charity.

Jeff Kaufman 🔸Jan 153

Fixed link: https://forum.effectivealtruism.org/posts/Whztt59kSTrnRwawu/proposed-donation-mechanism-for-people-doing-direct-work-usa

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