My Freakonomics – Save Your Budget with Better Wages


I just completed reading Freakonomics. It’s been a while since I couldn’t put down a business book. I purchased this book on Saturday night and started reading it on Sunday. I finished it a few minutes ago. I admit that it even took up some of my mornings, making me late for work. At the core of this book is the unique perspective that Steven D. Levitt takes when he analyzes situations.

What I lack in intelligence, spelling and grammar – I am incredibly tenacious at trying to look at a problem from every perspective before recommending a solution. More times than not, someone else actually unlatches the right solution as I pry for more and more information. From a young age, my father taught me that it’s fun to look at everything as a puzzle instead of work. To a fault sometimes, it’s how I approach my work as a Software Product Manager. ‘Conventional Wisdom’ seems to be the internal wisdom of our company. For the most part, folks ‘think’ they know what the clients want and try to develop the right solution. The team that we’ve put in place now is questioning that approach and really attacking the issues by talking to all stakeholders, from sales to support, from clients to our boardroom. This approach leads us to solutions that are a competitive advantage and meet our clients hunger for features. Every day is a problem and work towards a solution. It’s a great job!

My greatest personal ‘Freakonomics’ occurred when I worked for a newspaper back East. I’m not in anyway on par with someone as brilliant as Mr. Levitt; however, we did a similar analysis and came up with a solution which stymied the conventional wisdom of the company. At the time, we had over 300 part-time people without benefits and most at minimum wage or just above. Our turnover was horrible. Each and every employee had to be trained by another employee and it took a few weeks to get to a productive level. We scoured over data and identified that (no surprise) that there was a correlation of longevity to pay. The challenge was finding the ‘sweet spot’… paying folks a fair wage where they felt respected, while ensuring that budgets weren’t blown.

Through much analysis, we identified that if we spent $100k that we could recoup $200k in additional salary costs for overtime, turnover, training, etc. So… we could spend $100k and save another $100k… and make a whole bunch of folks happy! We designed a tiered system of wage increases that both lifted our starting pay as well as compensated every worker in the department. There were a handful of employees that had maxxed out their range and did not receive more – but we felt that they were payed fairly.

The results were much more than we had predicted. We wound up saving approximately $250k by the end of the year. The fact was that the investment in wages had a domino effect that we had not predicted. Overtime went down due to increased productivity, we saved a ton of administrative costs and time because managers spent less time hiring and training and more time managing, and the overall moral of the workforce increased substantially. Production continued to increase while our human costs were reduced. Outside our team, everyone was scratching their heads.

It was one of my proudest achievements because I was able to help both the company and the employees. Some of the employees actually cheered the management team after the changes went into effect. For a short period, I was the Rock Star of Analysts! I’ve had a few other big wins in my career, but none brought the happiness that this one did.

Oh… and speaking of pay, have you guys checked out my site, Payraise Calculator? This was actually my first javascript fun… many moons ago.


  1. 1
  2. 2

    Its amazing how one can take a most useful and insightful book and yet apply it to their own life in a rambling manner
    reminds me of an intro economics course that i took one summer
    There was one middle aged women who took the course to impress herself with own alleged intelligence
    No matter what the subject was she had to all relate the topic to her life and how well she and her family were doing in their financial and material lives

    • 3

      Hi Bill,

      Interesting perspective. I wasn’t trying to reinforce my ‘intelligence’ with a book. Anyone who knows me knows that I’m a regular guy. I hope you stick around and read a few more posts before you make such a short-sighted statement.

      The book’s mission is to get people to think outside conventional logic. My example above was simply an example to reinforce unconventional thinking. Most companies don’t believe you can save money by paying people more – it’s pretty ballsy and my job was on the line for it.

      I’m proud of what my team achieved when we did this and I wanted to share it with my readers.

      And – yes – I do admit to rambling.

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.