How Hourly Wages Influence Our Thinking About Time and Money

It wasn’t until late into grad school that I realized how living paycheck to paycheck in the days of my youth had shaped the financial behaviors of my adult life.

I grew up in a fairly typical working-class family — at least what was typical for small-town southeast America in the 1980s and 90s. My father, who firmly held it was his duty to provide financially for our family, worked long hours in rather physically demanding manual labor position to support us. Compared to other industrial companies and labor jobs in the area, his position paid a pretty competitive hourly wage. And while he brought home a decent paycheck each week, we had a large family, and his standard 40-hour pay was never quite enough to cover all of our bills and expenses.

To make up the deficit between his regular earnings and what we needed to get through each week, my father would work extra hours so he could bring home a bigger paycheck. And this was back before things like “overtime” hours were eliminated by many industrial corporations trying to save money on their labor costs. So, other than the limitations of his own physical capacities and the time available in the workweek, there was no cap on the number of hours he could pick up and (potentially) the amount of money he could earn each pay period.

Like most working class families, we thought of income as a direct exchange of labor for wages in hourly terms. The more hours my father could work in a week, the more money he would earn and the more we would have as a family. My father’s employer offered incentives for employees who worked overtime, with their rate of pay increasing to 1.5 times (“time-and-a-half”) the hourly wage between 40 and 60 hours, and 2 times (“double time”) the hourly wage over 60 hours. I remember weeks where my father proudly brought home 70 or 80-hour paychecks, and we would eagerly gather around the paystub to see how many hours he had gotten paid double his usual wage. These weeks we would revel in the reassurance that — at least for the next few days — we had enough money for bills, groceries, gas, and even a little extra for something special. Sometimes we would celebrate by going out to get pizza or ice cream as a family.

Now I think back and wonder how my father still had any time or energy for family after working so many grueling hours each week.

Roughly half the American workforce is in this position of being dependent on hourly wage jobs and similar paycheck-to-paycheck lifestyles. And like many working class families, their conception of work, personal finances, time, and resources are heavily influenced by a system that rewards them based on the number of hours they work each week — a system that cultivates and reinforces short-sighted financial mindsets and practices. In this article, I point out how the hourly wage system of compensation influences our thinking about time, work, and personal economics and explore an alternative way of thinking that can lead to more productive work practices and financial habits.

Life in the Short Term

My family’s dependency on hourly wages and weekly paychecks focused on life in the short term. We thought about economics and work in terms of small chunks of time, in terms of exchanges of hours of labor for compensation and in terms of week by week (rather than long term) financial commitments. And because of our financial obligations and habits, the earnings from my father’s paychecks were often exhausted before the next pay period ended. When I say we were living “paycheck to paycheck,” I mean we were living in a situation where my parents often ran out of money two or three days before each pay period ended. If we needed groceries or gas or some emergency necessities, we would have to wait until my father’s next paycheck arrived.

A system structured on hourly wages and weekly pay periods can trap people into unproductive and short-sighted financial practices and mindsets. Expenses are conceived in terms of how many hours you’d need to work to cover them. Plans are dependent on how many hours your employer schedules you for the week. And economic decisions are often limited to immediate and/ or urgent needs on a week-by-week basis. Compound this with the fact that many hourly wage positions do not pay people enough to cover all their expenses, and you can see how easy it might be to lose sight of long-term financial goals or, worse, fail to make long-term financial plans altogether.

The financial mindset cultivated by this system is a difficult one to shake. My father eventually landed a much better job with a salary based on a standard 40-hour workweek. And even though this position paid more than enough to cover our family’s expenses, we had lived under the hourly-wage, paycheck-to-paycheck cycle for so long that our financial practices and spending habits continued to operate on week-by-week terms.

I carried this short-sighted perception of personal economics well into my adult life. It wasn’t until one of my roommates asked me why I was buying such a small pack of toilet paper that I started to take note of how this mindset was influencing behaviors such as my spending habits. I would buy just enough groceries and household items (like toilet paper) to get through the week, instead of purchasing in bulk. I would fuel up my gas tank ten dollars at a time, instead of filling it up all the way. I would buy lower-quality, off-brand items to save a few dollars when I shopped. I did all of this because it seemed cheaper and allowed me to keep a little pocket money throughout the week.

Perhaps it was cheaper in the short term, but this myopic view of my economic situation often prevented me from seeing longer term gains and losses. My efforts to save a little cash on a weekly basis was costing me a lot of time, effort, and money in the long run. I had to make more frequent runs to the store to get groceries and gas. The lower-quality, off-brand items I purchased weren’t as durable or reliable as the more expensive branded items. And if I had done the math, I would have noticed that my frequent purchases of small quantity items actually added up to be more expensive than buying in bulk. As the saying goes, I was “penny-wise, but pound-foolish.”

A Subtle Shift in Perception

Years later when I entered my PhD program, I was selected to receive a graduate teaching assistantship with a modest monthly stipend. For the first time in my life, I was compensated on a monthly basis, rather than on an hourly or weekly basis like so many of my previous jobs. This arrangement forced me to budget my money across the entire month, instead of thinking week to week. I had to unlearn a lot of my spending habits and start thinking about economics across longer periods of time. To say the least, it was a difficult adjustment that took a while to finesse. (On more than one occasion, I ran out of groceries and gas money before the month ended.)

But even though I was thinking of spending on a monthly basis, I was still thinking of work cycles in terms of hours per week. On paper, the description of the assistantship position stated that it was about twenty hours of work per week for students. Graduate assistantships were capped full time at twenty hours because students were supposed to be devoting the majority of their time to their studies. Nevertheless, most weeks I found myself enthusiastically committing to more hours of work, partly because I enjoyed working in a field I loved and partly because I had trouble saying no to extra projects.

Initially, the modest amount of the stipend didn’t strike me because the assistantship was, after all, an opportunity for learning and professional development. But at one point, something (my own curiosity, perhaps?) led me to convert the stipend into an hourly rate and see how much my time was worth to the university. Upon dividing my monthly pay by eighty hours (the suggested twenty hours per week times four weeks per month), I was dumbfounded to find that my hourly rate was less than what I might make in the food service or retail industry. To say I was disappointed would be a vast understatement.

I couldn’t believe how economically undervalued I was to my department and university. I had a Master’s degree. I had several years of previous teaching experience. I had valuable real-world research experience that contributed to the quality of my teaching and the stature of my department. And I was working for a large, prestigious state university with more than enough funding to pay their graduate student workers a decent living wage. I was more than qualified for the position, but I was not being compensated at an hourly rate that accounted for my professional expertise and prior experience.

Soon after this realization, I started to think about how I might become more efficient and cut down on the number of hours I was giving to my department in exchange for this stipend. I realized there was no stipulation that I had to work twenty hours each week to maintain the assistantship. I just needed to get the work done. So why not get the work done in less time and devote my remaining time to other projects that would contribute to my growth in other ways?

In a way, this process was a revelation for me. For the first time in my professional life, I stopped thinking in terms of hourly wages and weekly pay periods and started thinking in terms of longer work cycles and projects. My responsibilities for the assistantship position, for example, were part of a project that needed to be completed in exchange for a set compensation each month. The amount of time I devoted to that project was dependent on me.

I was in control of my time.

Taking Control of Time And Money

Our most precious resource is our time. And the hourly wage system is dependent on trading our time for money. It rewards people based on the quantity of hours they devote to work, without necessarily accounting for other factors such as quality, efficiency, or competence. The formula is simple: the more hours you work, the more money you earn. Essentially, you’re “selling” your time to your employer.

Furthermore, this system places the same value on all labor hours without considering the personal tradeoffs being made by workers. You get paid the same rate no matter what sacrifices you’re making in your personal life to be at work. Whether you’re missing your son’s soccer game, your daughter’s dance recital, or your opportunity for self-care and downtime, the value of your missed time (according to your employer) is the same.

This hourly wage mindset can keep you trapped in a position where you are not really in control of your time. Instead, your time is dependent on external factors, such as how many hours of work your employer schedules you or how many hours you’d need to cover your expenses for the week.

It took me a long time to realize that successful self-employed people (freelancers, entrepreneurs) and people in higher positions do not think about income as an accumulation of hours. Instead, they think of compensation and work in terms of projects across longer periods. And while they might still operate within the boundaries of a standard (albeit flexible) 40-hour workweek, how much time they devote to each project and when they allocate that time is in their control. The allocation of their time and resources is dependent on personal decisions about goals, deadlines, and schedules.

Thinking of work and income in terms of projects, rather than hours of labor, shifts focus from accumulation and quantity of hours to efficiency and quality of work. You want to get the work done in as few hours as possible so you have more time for other projects (or for yourself and your family). And you want to schedule that work in a way that it complements, rather than conflicts with, the demands of your own personal life. It’s your choice whether you spend 80 hours or 100 hours on a project. It’s your choice when and how you want to work those 80 or 100 hours. You’ll get paid as long as the quality of the end result doesn’t suffer.

It’s taken a long time to pull myself out of the trappings of an hourly wage mindset and apply a project-based approach to my own professional life. And not every position I’ve worked since college has been the most conducive to thinking in terms of projects (some jobs were indeed hourly wage positions). But forcing myself to plan across longer periods of time in my professional life has, in turn, influenced the way I think about personal spending and other financial habits.

Now instead of reacting to external situations and focusing on short-term needs, I have a long-term vision with set goals and plans in place that control my spending and financial decisions. I budget across longer periods (no more 4-roll packs of toilet paper). I don’t purchase cheap, unreliable goods to save a few bucks in the short term. And I make plans for when I anticipate more or less income than I need (no more running out of money before the next paycheck comes).

It’s surprising how much the structure of your compensation can influence your thinking about time and personal economics. The hourly wage system, especially in combination with weekly pay periods, can cultivate bad habits that limit your thinking to immediate, week-by-week, short-term needs. But whether you’re working an hourly wage job, getting paid each week, or receiving a salary, if you shift your planning to longer periods of time, you can cultivate better financial habits that will be more productive and beneficial in the long run.