The relationship between employer and employee has always been of keen interest to me ever since I joined the work force on a full-time basis. Why? Because at the time I had just finished college in 1990 and the economy went into recession. “Downsizing” became a new household word and I struggled to land a post-college “real job” in an industry that was hard hit at the time.
While hopping from one low wage job to another, I became much more aware of the employer/employee dynamic that I had not fully understood until then (which is something they never teach you about in school). I observed the power imbalance between the two sides and how US state and federal law greatly favors employers. I also observed how most employees fail to advance their own interests by quitting for a better job and/or not bettering themselves, thus staying stuck in their crap low-wage low-quality jobs.
In some ways, the employer/employee relationship bears some similarity to a game of poker. During the hiring process, both sides know exactly what cards they’re holding, but are never completely sure about the other side’s hand. When an job applicant is totally reliant upon his/her employer and in a weak financial position, the employer will ALWAYS have a stronger hand. Any employee lower than C-level is, regardless of title or seniority, just one “reorganization” or “rightsizing” away from being let go should management deem the position to be redundant or unnecessary.
But when you’re an employee with additional sources of income (be that from dividends, freelance work, rental properties, day trading, etc.) then the game gets a LOT more interesting. With multiple streams of income or a large liquid asset to draw from, you have an ace up your sleeve that gives you greater leverage and puts you in a far better position than those living paycheck to paycheck and walking a financial tightrope with no safety net.
A great example of just how financial strength can give more options and stiffen one’s spine is found in the blog article The Power of FU Money. Being in a financial position to not fear the consequences of losing one’s job is REAL empowerment and not the fake “empowerment” that employers pay lip service to in order to make employees feel good. If more employees could learn how to be on the path to financial independence and have a financial ace up their sleeve, then they would be less fearful and have greater confidence and strength.
Another example is Retire Before Dad, who was unemployed for a short time. Did RBD panic because the paychecks stopped rolling in? Nope. Having a strong financial position due to a side business and strong investment portfolio meant that RBD had few short-term worries. When your job is 100% of your income and have little or no savings, being laid off or fired is catastrophic. But when you’re financially strong like RBD, being jobless is merely a minor speed bump on the road to a better tomorrow.
Just a quick side note: Employees aren’t the only ones who can benefit from a passive stream of income. Freelancers or small business owners benefit from having a source of passive income in two major ways. First, it helps to smooth out the frequent “feast and famine” income swings that’s common to being a solopreneur. Second, by not being totally dependent on their work for income, one has a competitive edge by being able to undercut competitors’ rates and one can be more willing to turn down unsuitable work.
The beauty of having other income streams is that you don’t need to reach the point of having massive FU money or cross the “finish line” of financial independence to begin enjoying the benefits of being in a better position and having more options in life. As one’s FU money or FI income stream grows, the disparity of power between employee and employer will narrow and shift in the employee’s favor. Take a minute and let that idea sink in.
However, just as in poker, you do need to play the game smart in the workplace. Don’t show your hand, keep a good poker face, and don’t let anybody know you’re in a strong financial position. If you don’t, then you may just find yourself on the short list during the next company restructuring or have reduced annual pay raises.
Having a significant financial ace up your sleeve not only gives you greater confidence on the job, it also serves as a safety net when you are laid off or facing financial adversity (for example, being forced to take a prolonged unpaid leave of absence due to health issues). With a second or third source of income, one is much better prepared. A situation that would induce panic and stress in anybody else would merely elicit a yawn of non-concern as you know the extra income stream(s) will help mitigate the situation.
During a job interview and the subject of compensation inevitably comes up, you can negotiate from a position that’s stronger than what your potential employer believes you to be in. With the power to walk away from an unsatisfactory job offer, you can be more selective because you’re not as desperate or needy as somebody in a more dire financial situation.
With one or two alternate income streams, an employee can have an edge in the game. How strong is your hand?