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There are two types of job security (continued)

2 October 2020

In a previous article, I talked about the fact there are two types of job security: one that relates to your specific role, and another that relates to your ability to find work.

In this article, I’m going to dive into this in a little more detail.

The impact of losing a job can be significant – financially and emotionally

When you think about “retirement”, it’s easy to equate this with “voluntary retirement”. However, many people retire involuntarily. Sometimes this is for health reasons. Sometimes it’s because you’ve lost your job and can’t return to the workforce in a meaningful way.

From a purely financial perspective, this can have a big impact on your financial trajectory.

It can also have a big emotional impact. There is research indicating that unemployment is one experience that can have long-lasting changes in subjective well-being (~happiness).

In other words, unemployment can overwhelm our natural “psychological immune system”, which usually works very well. I suspect that the impact on happiness is linked to whether you can find a role quickly, which in turn is linked by the second form of job security.

This is a massive risk. In light of this, it’s worth proactively managing.

Sometimes, playing it “safe” can be risky

Everything involves risk. Investing too safely can be risky. The biggest health risks we take usually aren’t swashbuckling acts, but acts of omission – like being physically inactive, or not eating enough fruit and veges.

Working in the same role, for the same organisation, for an extended period of time, may seem safe. But how well-positioned will you be if something happens to the organisation, and your role?

When it comes to investing, it can be valuable to step back and take a big-picture view. Sure, day-to-day volatility can seem risky. But if you’re investing with a decades-long time horizon, the real risk isn’t what happens to the NZX50 or Dow Jones Index on any given day. The real risk relates to the slow erosion of purchasing power you get from investing too “safely”.

When it comes to your career, the riskiest thing can be to take no “risks”.

Investing in your career – by taking career risks, and accepting that it might not work out as well as you hope, and might involve opportunity costs – can be the best type of investment you make. Even if it doesn’t generate an enormous financial return (although it can), it can help manage risk.

This view of job security explains why medical specialists often drive flashy cars

Most medical specialists have a strong sense of job security. They have unique and valuable skills. After the amount of studying that they’ve gone through, they’re also not the type to want to retire as early as possible.

If you’re in this position, it makes sense to spend more money on discretionary items like late-model European cars, compared to if you are in a high-earning role but feel that your ability to continue generating the same level of income is more tenuous.

Having expertise in multiple fields can be valuable

I’ll make a disclaimer: this is a case where research is me-search. 

I am fairly sensitive to job insecurity. People close to me have been out of the workforce for extended periods of time. In my twenties I was made redundant twice when the businesses I worked for shut up shop. Thankfully, in both situations I ended up better off for the experience. On reflection, however, these experiences left scars. They've almost certainly shaped some of the professional decisions I’ve made to date.

In one sense, this has been why I’ve focused my professional energies in multiple different domains. I’ve worked in banks (lending). I’ve worked in law (financial services, and personal client work – estate planning and trusts). I do financial planning.

I don’t point these things out to boast. In fact, you could argue that this suggests that I’m a dilettante and that I’d be generating a much better income in a role with more social cachet if I’d stuck in a single lane. (And I wouldn’t dispute you.s) But I’m also a real-life example. One of the driving forces behind my decisions has been to protect myself to ensure that I have skills and knowledge in a broad range of areas, in case something happens and I need to find a role.

Maybe it’s the pessimist, or the stoic, in me, that spends far too much time thinking about worst-case scenarios.

However, a happy side effect is that this range of experience is unique. It provides protection, but it also provides strength. The shield can also be a weapon.

Add to this: my business is an example of small-scale entrepreneurship with low overheads. Forget about the potential upside. From my perspective, it’s simply less risky to have lots of bosses (clients who pay you for specific services) rather than a single boss who is your sole or primary source of income (your employer). Yes, your income might not be reliable, and it can go down. But if you operate the right type of business, it’s unlikely to go to $0.

The counterargument...

 


Tags

job security, planning, risk


About the author 

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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