Thursday, May 13, 2010

No Reimbursement for Opportunity Costs

When a company flies you to another city for a job interview, it might offer to reimburse you for your travel expenses, your hotel, and your meals. But it's not going to pay you the daily wage you would have earned at your current job. Sure, you can just take a vacation day and earn your normal pay anyway, but that leaves you with one fewer vacation day. The prospective employer also won't reimburse you to offset the inconvenience of missing out on a night at home with your family and in your own bed.

An "all expenses paid" vacation similarly won't compensate you for the wages (or vacation days) you'll lose in order to go on the trip.

It's odd that corporations are willing to compensate you for expenditures but not for lost income and the cash equivalent of lost pleasure (your opportunity costs, or next-best alternatives). Maybe the former feels more real because money is changing hands. And most people don't dwell on this analysis, because an exciting job interview is well worth taking a day off and a "free" trip is well worth taking a week of vacation.

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