Every life is sacred right? Well you might not be surprised that a lot of folk have spend significant time trying to work out just how much a life is actually worth in cold hard cash.
While estimates do vary, according to the Department of Finance if you are a healthy person, in your prime, your life is worth around $3.5 million dollars.
A yearly value is calculated by allowing for 40 years of life lost and a utility discount of 3 per cent or some $151,000 per year.
The last official Australian figure I could find was for 2008, so there may have been some creep over the last five year. Indeed the figure varies quite markedly depending on what organisation you reference and in what country. For instance in the US the E.P.A. puts the lifetime value at $8,000,000 while the Department of Transportation works to $6,000,000.
Having an income driven view is used by policy makers to estimate the value of reducing the risk of death. This is said to be useful in quantifying changes in workplace safety, pollution levels, or even the cost benefit of subsidising drugs under Pharmaceutical Benefits Scheme.
On the other side of the coin, a study by the Australian Institute of Criminology found that between 1989 and 2002 the average payment for a “hit” was only $12,700. Considering an automatic pistol on the black market can set you back around $8,000** this does not leave a lot of change after “costs”.
So clearly different “organisations” place widely differing values upon a life.
If we follow the economic orthodoxy, which uses income to value life, it is certainly an interesting task when comparing two quite varied careers.
Equities analyst / institutional dealer Lifetime remuneration estimate
|
Career stage |
Average income |
Years in role |
Total for career stage |
Description |
|
1 |
$125,000 |
3 |
$375,000 |
$125k pa average TComp*** for the first 3 years out of uni, say from 21 to 23 (usually as chartered accountant or in an industry somewhere) |
|
2 |
$175,000 |
3 |
$525,000 |
$175k pa average TComp for the next 3 years, say from 24 to 26 |
|
3 |
$200,000 |
3 |
$600,000 |
$200k pa average TComp for the next 3 years, say from 27 to 29 |
|
4 |
$250,000 |
5 |
$1,250,000 |
$250k pa average TComp for the next 5 years, say from 30 to 34 |
|
5 |
$350,000 |
5 |
$1,750,000 |
$350k pa average TComp for the next 5 years, say from 35 to 39 |
|
6 |
$500,000 |
25 |
$12,500,000 |
$500k pa average TComp for the next 25 years, say from 40 to 64 |
|
Total |
|
44 |
$17,000,000 |
|
Teacher lifetime remuneration estimates
|
Career stage |
Average income |
Years in role |
Total for career stage |
Description |
|
1 |
$57,000 |
3 |
$171,000 |
$57k pa average 'Graduate' for the first 3 years out of uni, say from 21 to 23 |
|
2 |
$66,000 |
10 |
$660,000 |
$66k pa average 'Accomplished' for the next 10 years, say from 24 to 33 |
|
3 |
$75,000 |
20 |
$1,500,000 |
$75k pa average 'Expert' for the next 20 years, say from 34 to 53 |
|
4 |
$90,000 |
12 |
$1,080,000 |
$90k pa average 'Leading' for the next 12 years, say from 54 to 65 |
|
Total |
|
45 |
$3,441,000 |
|
Estimates kindly supplied by the financial research and placement firm Executive Group International.
Based on these estimates, our society places the value of a fairly successful teacher at $3,441,000, which is actually less than the national average. In some contrast, it places a value of some $17,000,000 on a competent but not exceptional equities analyst or institutional dealer.
For economists, every dollar spent, on items such as health and safety is a dollar not spent on other items. So their general valuation principle is based on what individuals are willing to pay to either avoid or gain intangibles such as safety or something more specific as a service or product.
By this measure society certainly places a very high value against those working in within high end finance.
How this might stack up against you own personal viewpoint is an interesting question. I’d love to hear your feedback. Or even your best estimate about what your lifetime income might add up too.
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*Best Practice Regulation Guidance Note, Value of a statistical life 2008.
** Daily Telegraph Gun Runners of Sydney revealed 6th Dec 2010.
*** TComp = toal compensation, such as cash bonuses and shares allocated.