Working for Free: A Cost-Benefit Analysis

You’re a new college graduate, you just got laid off, you’re in college, or maybe you just want new skills. It doesn’t really matter who you are. Working for free may be a good option for you.

For me, I am working for free part-time. I volunteer at a Seattle nonprofit, Sustainable Seattle. But just because I’m a volunteer doesn’t mean I’m a slave, gaining nothing from the experience. I have been given the opportunity to build a program within the organization from the ground up. I don’t know a lot of people, let alone recent college grads that get this chance to have so much responsibility. In a lot of ways I feel lucky to be working for free. For me there are numerous benefits, which I will go into further.

But working for free has downsides. There are costs too. For an informed decision to be made as to whether working for free is a good option for you, the benefits as well as the costs/negatives need to be in mind.

What is Cost-Benefit Analysis and Why The Hell Should I Care?

To help make informed decisions many economists use Cost-Benefit Analysis. CBA is a very common tool used by economists to determine whether something has positive net benefits. If a project, or in our case a particular decision has positive net benefits we can move forward with our analysis. Assuming (big assumption at times, be careful!) ALL costs and benefits were examined and there were negative net benefits, the project can most likely be scrapped.

As you might have noticed CBA is a more refined version of how all of us make decisions everyday. What I recommend is to try some of the methods I use in this post and apply them to a particularly big decision. In this situation I’m comparing the costs and benefits of working for free and examining different scenarios of working for free.

Let the analysis begin!

Benefit: Building Skill Set

Working for free, in a nonprofit volunteering position for instance, is a good option if you want to learn something new. If you are a writer, there are plenty of nonprofits that would be glad to let you be a grant writer. This not only benefits the organization, but allows you to learn the skill of grant writing without the added pressure of a paid position. Once you have gained enough experience you can leverage what you’ve learned into a paying job that requires knowledge of grant writing.

As a college student, the nonprofit world can be a wonderful resource. This is because not only do nonprofits usually have little money, you probably have little skills. You learn, they get things done. I suggest starting off small with a local organization. Call or email them to see what their needs are and have a conversation about how you may be able to help. If the organization you spot doesn’t have a volunteer or internship section, ignore that. THEY NEED YOUR HELP. And the easier you can make it on them by being independent and useful the more you will benefit from the experience.

Benefit: Build Experience

Experience is tough to get. Especially the kind you want to put on a resume. Everyone knows the paradox of experience (economists love a good paradox): you can’t get a job without experience, and you can’t get experience without a job. If this explains your situation working for free is probably a good option.

Penelope Trunk as written about this before. She wrote a column every week for two years before for she got a nationally syndicated column. She also worked for free doing online marketing project. These two experiences built her resume up, and gave her the necessary experience to get paid in the future.

Charlie Hoehn’s ebook “Recession-Proof Graduate” is all about working for free. Charlie’s premise is that any college graduate can be “recession-proof” by doing projects for free. (I’ll try to summarize his method, but I highly suggest downloading it, for free). He suggests approaching a company that’s in an industry you want to break in to. Offer to do Project X for them. Let them know that they do not need to train you, just give feedback through email. Tell them that if they like your results you would like to discuss future projects. But be warned, you do not want to get in a situation where you are doing endless work for free. Set up the expectations that you will be getting paid to do more. Since the company’s expectations will be so low, you have the advantage of producing great work, which they won’t have expected. Use this situation to leverage into paying gigs.

Benefit: Meet New People and Network Effects

Working for free is a great way to meet new people. Everyone you meet will tell you that networking is the best way to find a good job. Thus people are your greatest resource in your career. Knowing more people increases your visibility, and increasing your visibility increases your chances of finding an employer.

College students, this is especially important for you. When you get out of college you will have little professional contacts relative to someone who has been in the workforce for even a few years. So besides getting to know your professors (which is super important), working for free can help you meet professionals in your field. These professional contacts can be used in several ways that can help you. One way is for recommendation letters. Paying internships usually require them, they are important. These relationships can provide life-time mentors. They can also be a source of knowledge and way to build greater understanding of how to do something. They have the experience you are trying to get. Take advantage of their knowledge.

Cost: No Pay

This is a big one. And more a lot of people will be enough to turn down a non-paying job. And I can’t blame anyone here. We all have situations that make it impossible or very very hard to work for free, even part-time or less than part-time. No one is blaming you for not working for free.

But, if you are trying to switch to a new industry or are down on your current job and want to try something new, you should really think about how important money is to you. In economics we like to talk about trade-offs. I’ve written about the possible trade-off between money and loving your job before. If you hate your job but love the money, that’s a trade-off. And a long-term life-long trade-off. If you are willing to work for free doing something new that excites you that’s a trade-off. And a relatively short-term trade-off compared to the previous scenario. You see, working for free is not a long-term solution. Nobody can work for free all the time. The purpose of working for free is to build skills, experience and contacts that will lead to a job that not only pays, but is enjoyable. The whole reason for working for free is to be in a career that you enjoy.

Think about how important money is to you.

Benefit/Cost: Motivation

Motivation in this case is both a benefit and cost. What it essentially comes down to is this: YOU ARE NOT GETTING PAID, thus whatever you are doing for free needs to inspire you or give you some sort of satisfaction. The money that you get paid in a normal job is no longer there. Money might have been enough to compensate for a crappy work situation before. But when working for free you must create your own motivation. Whether it is from the people you work with, the organizations direction, or the work itself. Internal motivation is key to your success from working for free. Find your motivation. If you can’t, you can look elsewhere for you dream job or dream industry. If you can still be passionate about something and not get paid, you are probably in the right place.

Cost: Time Constraints

Time. Nobody ever has any it seems like these days. From the burned out college student to the parent putting that college student through school, we all are pressed for time.

Everybody’s situation is different, which is why I don’t like to make broad generalizations. What I suggest though is to look at your situation, your daily activities, your work and your relationships. Are there areas that are wasting your time? Situations where you could be more efficient, to create more time? If so, cut them out and reform the way you do things to “make more time.” Maybe you could cut back on the video games. Or go out less on the weekends. Working for free is a tool to change your career circumstances. If this is important to you, then find the time.

These are the costs and benefits in my eye, but I know that everyone has a different situation. Review your life and determine whether working for free is a good fit for you.