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NUMBERS: Opportunity cost as a proxy for empowerment : Protec… : Emergency Medicine News

Figure:

opportunity cost, employee power, BATNA

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I used a computerized survey of nearly 500 emergency physicians in my last two articles (http://bit.ly/EMN-numbERs) to examine general opportunity costs – the cost of pursuing one option versus your next best alternative – and related them to pursuing an education in the stock market. But what about the opportunity costs of objectively assessing employee power and subsequent disempowerment, a crucial concept for emergency physicians today?

Power dynamics

Employment can be viewed as a negotiation. Workers want to sell their labor at the highest price and employers want to buy that labor at a discount. If a work contract is concluded, a common price is found and the negotiation is successful. But negotiation is also dynamic: changing circumstances may necessitate a series of renegotiations even if an agreement has been reached.

The two parties in most negotiations have different opportunity costs that make success more or less critical for each party. An employer unable to employ a specific essential worker may have quite high opportunity costs, but the opportunity costs to the employer may be low if the worker is easily replaceable. The employee sees the flip side, benefiting from increased personal demand and suffering from oversupply.

Ending the negotiation (by quitting or being fired) is the most powerful weapon for either party, but it can only be used once. The perceived comparative threat of termination is what really matters in deciding the advantage and terms of the negotiation. This is why I measured the perception of power, centered on the employee side.

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Measuring employee power

An employee’s opportunity cost of successfully negotiating with their employer can be thought of as the difference in return between the current option and the next best alternative, or BATNA (best alternative to a negotiated agreement). The better the BATNA, the higher the opportunity costs of a successful trade. Opportunity costs are therefore a good indicator of employee power.

Assuming the desire for a job, a doctor’s BATNA is another job, but finding that job takes time, which equates to a loss of income. The marginal utility of each dollar also depends heavily on how many other dollars you have. Bill Gates uses a $20 bill less than I do, which means lost time and income must factor into an individual’s net worth to reflect opportunity costs in terms of actual utility.

The most frequently reported net worth in the survey was $0. Many of them were probably real, but several were probably wrong or misleading. I used the minimum reported net worth as zero for power calculations to differentiate between respondents with a net worth of $0. I used this formula to calculate opportunity costs: adjusted net worth/salary x time to find equivalent job = opportunity cost. The calculated opportunity cost ranged from 0 to 157,575.8 with a mean of 829.59 and a median of 49.85.

why it matters

This measure, heavily extrapolated from self-reports and assumptions, appears to be linked to individual perceptions of power. I was able to calculate a measure of employee power for 274 respondents, but the results were highly variable and none of the differences in the responses met the criteria for statistical significance.

Still, some clear trends emerged in the data. Lower median opportunity costs (calculated) appear to be related to lower perceptions of one’s ability to effect change locally and within the specialty of emergency medicine as a whole. (See graphics.)

My hypothesis is simple using opportunity cost as an indicator of empowerment: the people most likely to be harmed by a set of circumstances are also the least likely to have the power to change those circumstances.

This means that there is a risk that those most likely to lose are also those least likely to be able to speak for themselves. We have an obligation to identify and understand the most marginalized among us and to act in their interest.

Time and effort must be devoted to this cause. The consolidation of power and resources is a self-perpetuating cycle that will lead to a worse outcome for all of us.

Dr. Belangeris secretary of the Locum Tenens chapter of the American College of Emergency Physicians and an emergency physician in McKinney, TX. Read his past articles onhttp://bit.ly/EMN-numbERs.