Time Discounting in Relation to Career Preferences

The present study used a longitudinal design to test aspects of Kirby and Herrnstein’s (1995) theory of time discounting. Specifically, the prediction that preferences reverse due to changes in delay was tested in a longitudinal study of career-path selections made by employees in a Hong Kong real estate consultancy. Over a three-year period, 16 of 23 subjects reversed their career preference from a future senior managerial position to a lesser management role available earlier. Organizational and cultural factors which may have influenced these preference changes are discussed and areas of future research suggested. The study provides supporting evidence from the career selection perspective that preferences are not necessarily invariant across time. Time Discounting in Relation to Career Preferences 3 Time Discounting in Relation to Career Preferences When deciding on a suitable career path, employees are often faced with the problem of dealing with delayed rewards, some of which involve making tradeoffs between outcomes occurring at different times. The decision to outlay time in training, study, and work experience in order to fill a senior position at a later date can mean foregoing earlier promotion to less senior positions. Moreover, the choice between short-term and long-term values can create on an ongoing conflict, frequently leading to a change in preference at a later date. The present study examined the application of time discounting theory to help account for career choices made by employees in a firm where there was a clear choice between long-term and short-term goals. Time discounting (also called delay discounting) refers to the devaluing of positive or negative outcomes as a result of delay (Hesketh 1997). Early versions of time discounting theory proposed that where two goods are separated by a fixed time, they are discounted by a constant fraction per unit of time (e.g., Koopmans, 1960; Fishburn & Rubinstein, 1982). The ratio of the values of both rewards is constant across delays, so the relative preference between those goods is unaffected by how far in the future they may be. In essence, the preference is always for the shorter term reward. Kirby and Herrnstein (1995), however, argued that delay discount rates do not remain constant. Instead, they proposed that the choice between two outcomes with differing delays reverses as a function of the distance between the time the choice has to be made and the extent of the delay. When today both the smaller, earlier reward and the larger later reward are far off in the future, the latter is preferred over the former. In other words, at this point people express a preference for the longer term goal. However, as time passes and the two alternatives become nearer to the present, the preference reverses to the more immediate goal, crossing over at point C in Kirby and Herrnstein’s (1995) illustration of what has been termed the hyperbolic discounting model (See Figure 1).