Written by Travis Kemper, PT, DPT
What is Opportunity Cost?
Opportunity cost is an important economic term that most of us rarely think about. An opportunity cost is quite simply a lost benefit from choosing one option instead of another.
Opportunity Cost and Travel Therapy
Why is this important and what does it have to do with travel therapy? We’ve seen a number of travelers post about a potential job opportunity that they were passing on due to the pay being too low for them by $100 or $200 per week. They say if the pay was higher they would take the position because everything else sounded great!
So let’s analyze the opportunity cost of passing on a position without a replacement position readily available:
- John is a new grad traveler and receives an offer of $1500 per week that starts 10/1. John turns down the position, stating that his minimum acceptable pay is $1650 per week because he wants to pay down his loans as fast as possible. Good news, John finds a position paying $1650 per week that starts just 2 weeks later on 10/15, and he takes this position.
- Sally also is traveling with the goal of paying down her loans quickly. Sally takes the position for $1500 per week and starts 10/1.
Who makes out better financially?
- Sally makes $1500 x 13 weeks= $19,500 net pay, 13 weeks after 10/1
- John took 2 weeks off waiting for that bigger paycheck. 13 weeks after 13/1, John earns $1650 X 11= $18,150.
The opportunity cost for John is $19,500 – $18,150 = $1,350 in lost income, due to waiting for the higher paying position.
The moral of the story is that higher pay isn’t always higher pay if you have to wait to start. This is a very simplistic example, but as you can see, continually passing on “low pay” will hurt you financially in the long term if you take extra, unplanned time off.
We recommend you take the right job instead. Pay is important, but sometimes the highest paying positions can also be the least desirable positions.
If you have questions about a travel therapy position, pay packages, or need help in your travel therapy journey, please shoot us a message and we would be happy to help!