In this topic we will only talk about the financial considerations of making a career in the private or public sector.
In the last post we talked about a private sector job having a higher starting salary, perhaps in the $6000 range. First, we know that not everyone can get a job in the $6000 range right off the start. But for the sake of a fair comparison let us assume that, because there are indeed the common people who achieved that. Let us also assume that a public sector job is $3500 for new entries. I get that different countries use different currencies, and the figures may be off for some, but you get the gist. Do your own tweaking.
Let us break down the finances bit by bit.
Your time is important, if you use it wisely. Let us assume that a $6000 private sector job will make you work 10 hours a day, Monday to Friday. Let us also assume a standard work day of 8 hours for public sector, Monday to Friday. We will take 22 working days for a month.
We have the following:
Private sector hourly pay: 6000 / 22 / 10 = $27 per hour before tax
Public sector hourly pay: 3500 / 22 / 8 = $19 per hour before tax
From the above, we see that private sector wins.
Annual salary will include bonuses, which should also be taken into consideration. In the few countries that I know, the public sector pays out more bonuses compared to the private sector. Yes, there are awesome private companies that pay their employees like 6 months bonuses. But let us also be realistic and take the general trend. In the country where I am, private sector pays only the 13th month bonus and at most, 1 more month of bonus if you are lucky. Public sector however, has a minimum of 4 months bonus on the average year. Highest I received, 7 months bonus.
Private sector annual salary: 6000 x 12 + Bonus 6000 = $78000
Public sector annual salary: 3500 x 12 + Bonus 3500 x 4 = $56000
Hence it seems that the annual starting salary for the private sector is higher. That is certainly true. I have a friend who hopped from the semi-conductor industry to the public sector. 5 years into the public sector and he told me his current salary is still lower than his first year salary in the manufacturing industry.
Earning Power Throughout Whole Career
As you may already know now, private sector pays well at the start. But as you progress through the ranks, it is more expensive to hire you. Just because you have 20 years experience does not mean they are obligated to pay you $12000 per month. Your salary can pay 2 or even 3 fresh graduates who are younger and hungrier than you. At 40s, you may probably want to focus more on your family and living a good life. Even if you are still willing to climb, your energy level may not compare with the fresh graduate. As always, while there are exceptions, your earning power in the private sector will probably go like this with your peak at your 40s:
On the other hand, in the Government sector, your salary will only go up every year. Even when you are old and have lesser energy, the public sector will not fire you. As you already know by now, many of them are parasites in the system, collecting a salary grossly disproportionate to the work they do. My point is, at that age when you want to focus more on your family, you do not need to worry about being replaced by the younger generations. Your salary graph will look like this:
As a public sector worker, your highest salary is always in the last few years you work. Even if you end up getting condemned in a forsaken place with no more future of promotions in your 50s, your salary will still not be affected.
A very practical problem in the private sector. In times of financial crisis (one cycle usually 10 to 12 years), many companies go bust or even had to shrink their workforce. News of banks and many companies conducting layoffs is not something I need to explain more here. But in the public sector job, the worst you can get is a reduction of bonus or some cuts to your monthly salary. But your jobs are guaranteed. In times of need, having a stable job allows you to sleep in peace at night. You have a family to feed and you are able to provide.
Welfare is generally better in the public sector jobs. I do admit that certain private companies are very good in their welfare. But as usual, we talk about general cases. Are you a woman who plans to give birth? Fret not, unlike the private company who may find an excuse to fire you, Government organisations not only will allow you to go for your paid maternity leave in peace, you will still come back to find your job waiting for you. You may be passed for certain promotions, but you still have your job. This may not apply as much in the Western countries, but in Asian countries, many women in the private sector has much hesitation when it comes to giving birth. Harsh decisions are made and pregnant women being fired is not uncommon.
Certain countries do provide additional perks such as housing. For example, in China universities and in certain schools, teachers are granted accommodation, resolving one of our basic needs. With that resolved, you can rent out your own house for additional income, or to use the money for other needs.
Hospitalisation cover or medical subsidies is also a common welfare which I will not say more here.
What about work life balance? Wall Street and many other financial centres, including small companies around the world have demanding work schedule. Not every country is like France with their 37 hours work week. Japan, South Korea, China, Singapore are also known for their excessive over time. If work is kept at 8 hours a day, after work you will still have the time and energy to do other things, be it spending time with your family, or to work on a second side income.
By the time you reach this paragraph, you may think that I am pushing for a Government job. But that is not the case. The purpose of this article aims to let one make an informed decision. Do not just look at the gross salary when choosing a job. Look at the salary, the welfare, the stability, the career progression, the work hours required etc. Everything is of value to us. Time is our resource, money is our objective, youth is our asset, family is what we want to take care of. Think of everything as a whole, and not just focused on one aspect.
Private sector has its perks – good for people who are willing to work hard and work smart to climb the career ladder. My friend who joined the public service 5 years ago lament the fact that his current salary is still significantly lower than the year he graduated out from school. My friend in the private sector works for big name MNCs and is commanding a salary much higher than me. Should he come to the public sector, it will definitely not be worth it for him.
Understanding yourself, know your capabilities and your limits, and make the correct decision. Many times, it does not take a miracle for us to succeed. Often times, reality is boring and a series of normal but significant correct decisions can push us towards the success we want.