A Handy Trick for Converting Salaries & Wages

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Converting hourly wages to annual salary equivalents.

Because I work a lot with studies that analyze wages and salaries, I often find myself converting hourly wages to an annual salary equivalent (or the reverse – converting an annual salary into its equivalent hourly wage), and I frequently use a simple trick that you might find useful yourself. I use “2” as either the multiplier or divisor.

Here’s an example: If someone says, “They are paying me an annual salary of $42,000” almost immediately, for reference sake, I divide that $42,000 by 2 and then knock off the three “0’s.” So, a salary  of $42,000 converts to roughly $21 or in the real world slightly less. I actually round down about $1,000 to get more accurate estimates.

Here’s the reverse scenario: Someone says they are willing to pay an hourly wage of $16 per hour. In that case, I multiply that $16 by 2 and then add three zeros yielding an answer of $32,000. In this scenario you have to round up slightly by an additional $1,000, because the actual answer is $33,280, but that’s close enough in most cases. It’s not a parlor trick but a handy conversion tool. Once you get the knack of it, especially the slight rounding up or down it can be pretty helpful.

So, a $1 per hour raise converts into approximately $2,000 more per year. Someone being paid $18,000 a year is getting paid approximately  slightly less than $9 per hour, or $8.65.

The reason behind “Factor of 2” is that there are 2080 hours in a normal work year (52 weeks X 40 hours per week) and that 2080 is close enough to 2,000 to provide us with a multiplier or divisor of two. Try it!

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