Do What You Love and the Money Will Follow...

...Or will It?

Vic Napier, MBA

October 2009

There is a career strategy to the effect of, “Do what you love and the money will follow”. The concept seems to resonate with people; several books have used that phrase as a title, and they sold quite well. The basic idea is that using ones passions to make a living results in joyful work, and joyful work means doing more work better than the competition – the people who hate their jobs.

I got curious about this recently at looked at what research has to say about how people make decisions that lead to a career that is financially rewarding. The first thing I found out is that most of the published studies look at why women make less money than men do. It turns out that the adage about women making “fifty nine cents on the dollar compared to men” is a myth. Gender differences in earnings are mostly a matter of career and lifestyle decisions, not stereotypical male oriented sexism. However, the same decisions women make that lead them to low paying jobs are also made by men. This is why we see men working in low paying jobs like bank tellers, store clerks, and classified state employees. The problem is not one of gender, but of decision-making. There are plenty of women who have well paying careers, just as there are plenty of men. The interesting thing for the rest of us is how they made the decisions that led to those well paying careers.

Basit Zafar (2009) is an economist who works for the Federal Reserve Bank of New York. He wondered how young people decided upon college majors. Why do 13% of female undergrads choose Education – a notably underpaid profession -- while only 4% of men do? On the other hand, 12% of men major in Engineering, but only 2% of women make the same financially rewarding choice. What is going on here? Innate differences in abilities of men and women? Lack of self-confidence on the part of women? Are women subtly turned away from lucrative occupations?

Zafar found that those reasons may or may not exist, and had little or no effect on choice of majors. What did? It turns out that young men put the expectation for future earnings very high on their list of preferred outcomes when deciding what to major in. As Zafar put it, “…females mostly care about non-pecuniary outcomes (gaining approval of parents and enjoying work at jobs), while males value pecuniary outcomes (social status of the jobs, likelihood of finding a job, and earnings profiles at jobs) more” (p. 28).

Zafars results show us that people with financially rewarding careers differ from others by including financial rewards when deciding on a career. Or maybe more to the point, not allowing other life goals to interfere with decisions about rewarding careers. Just how badly do you want a financially rewarding career? What are you willing to trade in exchange for financial security?

Paul Gabriel and Susanne Schmitz (2007), both economics professors, wondered why men tend to end up in blue-collar jobs, women populate clerical jobs, but there is a fairly even gender distribution in managerial, professional and sales jobs. They found that women who consciously anticipate having children tend to choose career paths that are easy to leave and come back to. In the parlance of academia, “…women who choose “female” occupations incur lower wage penalties for intermittent labor force participation than women employed in pre­dominantly ‘male’ occupations. Thus, the reluctance of women to choose blue-collar occupations may result from a rational assessment of the potential labor market losses from activities such as child rearing” (p. 22).
     
These results are not relevant just to women who want to have kids. The lesson of this research seems to be that people who give priority to their career choices tend to have better occupational outcomes. People who allow other goals to compromise their career choices do not tend to experience stellar careers. Young men who are dedicated to a sport or hobby to the extent that it compromises their career choices have the same disappointing outcome as women who put childbearing above career choice.

What about entrepreneurs? Aren’t they the model for “follow your dreams and the money will follow”? Not entirely. It turns out that simply focusing narrowly on passions is not enough to blaze a path to entrepreneurial success. Rebel Cole and Hamid Mehran, (2009) both from the New York Federal Reserve, wondered why female owned firms tend to enjoy less credit than male owned firms. They found that lack of credit was not due to gender as much as it was to differences in business and lifestyle decisions made by men and women. “[The] evidence suggests that observed gender differences in credit availability are attributable to other differences in male- and female-owned firms, such as the firm’s size and industry and the owner’s age, experience, and educational attainment” (p. 20).

According to Cole and Mehran business decisions made by women undercut their firms attractiveness as credit risks. Female owned businesses are more likely to be proprietorships, (the least formal business entity), they tend to be in low profit sectors like retail trade and business services instead of construction or wholesale trade, and female entrepreneurs are significantly less experienced and educated than their male counterparts.

Again, the lesson here is not one of gender differences or discrimination as much as it is about the hardnosed reality of career related decision-making. Entrepreneurial success is very dependent on things like knowing about accounting and finance, experience in marketing and human resources, and choosing a profitable business sector like insurance, finance, or healthcare management.

Simply making our passion our career it is not enough to ensure success. The skills that our passion brings to us come easily. It takes little effort to get quite good at something we enjoy doing. Unfortunately, passion alone is not a ticket to career success. In order to be successful we need to get good at things we may not enjoy doing. We also have become skilled at the drudgery of well paying careers. Training and experience in things that most people do not like is what will set us apart from most people. And most people are not in financially rewarding careers.  

Vic Napier

 

 

References

 

Cole, R. A., & Mehran, H. (2009). Gender and the availability of credit to privately held firms: Evidence from the surveys of small business finances. New York: Federal Reserve Bank of New York. Retreived from http://www.newyorkfed.org/research/staff_reports/sr383.pdf

 

Gabriel, P., & Schmitz, S. (2007). Gender differences in occupational distributions among workers. Monthly Labor Review Online, Bureau of Labor Statistics, 130(7 & 8), 5. Retrieved from http://www.bls.gov/opub/mlr/2007/06/art2full.pdf

 

Zafar, B. (2009). College Major Choice and the Gender Gap Federal Reserve Bank of New York Staff Reports(364 ). Retrieved from http://www.newyorkfed.org/research/staff_reports/sr364.html