Using The Economic Concept of Marginal Utility To Examine Gen Z Workplace Preferences



In economics, there is a concept called “diminishing marginal utility," which essentially states that the more of an identical item you have, the less utility you will gain from it after you accumulate more of that thing. When explored through the right lens, the concept of marginal utility becomes a powerful economic tool when explaining Gen Z workplace preferences.


In conventional economics, marginal utility is used as a means to quantify consumer preferences as well as "happiness". For example, if your "consumer basket" consists of 4 hamburgers (let's say you've consumed four Big Macs already), the pleasure you receive from gorging on an additional Big Mac decreases. The same logic is applied to income. If a school teacher earning $30,000 a year is all of a sudden awarded a $50,000 raise (totally hypothetical situation), she will experience a large increase in utility (or happiness). On the other side of the coin, if a CEO who receives and income of $10,000,000 per year is granted another 50 thousand dollars, making his total income $10,050,000, his relative level of utility (or happiness) will stay the same, more or less.

Before I go on to talk about Gen Z, an important outcome of the concept of diminishing marginal utility is the fact that consumers prefer diversity in preferences. This a fundamental economic law. In other words, even though you love Big Macs, you would also love to have access to hot dogs just as much so that you can trade off between preferences based on your mood and constraints. This makes the consumer better off: you end up happier at the end of the day.

So taking all of this knowledge into account, lets look at how marginal utility applies to the Gen Z workplace. First and foremost, Gen Z cares more about the ability to innovate in a workplace setting over getting a raise. In economics speak, this means that Gen Z receives more utility from innovation than from an extra $5/hour raise for a repetitive job. By convention of the concept of marginal utility, this economic logic is perfectly sound. Moreover, Gen Z does not want to participate in monotonous tasks. Gen Z desires access to continuous learning/reskilling opportunities, dynamic collaboration with colleagues, and the ability to pioneer as intrapraneurs within the company setting. When you take the preferences of workplace variation of tasks combined with greater happiness from innovation, it is clear that Gen Z experiences positive utility in the workplace only for this given scenario. Furthermore, Gen Z experiences negative or diminishing marginal utility when the focus is money over impact.

And thus, with pure economics and a powerful yet simple concept, we have deduced that the key to winning Gen Z employees over is to offer opportunities to innovate and learn continuously within the enterprise setting. You can only be a pioneer with the right resources––let's make sure we enable Gen Z to make that innovation happen. Thank you, marginal utility!

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