Grab Yourself Some Free Lunch: A Pareto Optimal Combination of Workdays and Salary

Imagine you could negotiate your workweek with your boss—deciding not just your salary but also how many days you work. Sounds great, right? Surprisingly, there’s a game-theoretic opportunity hidden here, one where both you and your boss could end up better off without costing either party anything extra. This is known as finding a Pareto optimal combination of workdays and salary.

What’s the Catch?

Let’s assume your boss wants you to work as much as possible for as little pay as possible. You, on the other hand, would love to work fewer days but still get a fair salary. Currently, you have a contract with a fixed number of workdays and salary. But is it the best possible deal for both of you? Probably not!

The secret lies in differing preferences. You and your boss value workdays and salary differently due to diminishing returns in utility. Maybe you'd be willing to take a slight pay cut to get an extra day off, while your boss values your extra workday less than you value that day of freedom. This is where a Pareto improvement—an adjustment that benefits one party without making the other worse off—can come into play.

A Win-Win Scenario

Here’s how it works: you propose a new combination of workdays and salary that your boss is indifferent about. Your boss won’t mind the change as long as the value of your work minus the salary stays the same. You, however, can choose a combination that brings you greater personal satisfaction (more time off, or a different balance of work and life).

Since you derive more value from extra free time than your boss loses in work output, the new contract is better for you without costing your boss anything extra.

Finding the Sweet Spot

By negotiating to reflect both parties’ preferences, you can tweak your contract to match a point where no further improvement is possible without making one side worse off. This point is the Pareto optimal outcome: a balanced, efficient deal where both you and your boss are happy. So, don’t settle for a rigid work-salary structure. Explore those trade-offs and find the combination that makes work feel just a little more rewarding!