Loyalty Tax
See what staying loyal costs you, and what job-hopping that gap into an index fund is actually worth.
All figures are in today's money: every rate on this page is real, i.e. above inflation. Why?
Your Salary
Above inflation: a 3% raise at 2% inflation is 1%
Job-Hopping
Investment
Marginal income tax plus social contributions on each extra unit of salary. Only the net raise can be invested.
| Metric | P10 | P50 | P90 |
|---|---|---|---|
| Invested Surplus (15 yrs) after-tax pay gap invested at the Market Return | €158,590 | €216,614 | €311,570 |
| Loyalty Tax (gross) cumulative salary difference, no tax | – | €266,098 | – |
| Yr 15 Salary Gap mercenary minus loyalist salary | – | €36,283 | – |
| Salary Multiplier mercenary ÷ loyalist final salary | – | 1.52× | – |
Jaws of Wealth
- Loyalist: Loyalist salary path (left axis).
- Mercenary: Mercenary salary path with job hops (left axis).
- Jaws gap: Shaded gap between the Loyalist and Mercenary salary lines (left axis): the widening "jaws" the chart is named for.
- Invested surplus: Pay-gap surplus invested at the Market Return (right axis), median path, with a shaded P10–P90 fan.
Every 4 years the Mercenary negotiates a 15% market-rate bump on top of the same internal raises the Loyalist gets. "Loyalty Tax (gross)" is the cumulative salary difference over 15 years before tax; "Invested Surplus" is what investing that monthly difference grows to after 35% tax and contributions. Dots on the amber line mark each job hop.
Mercenary salary
S_m(y) = 60,000 · (1+r)^y · (1+b)^floor(y/4)
- S_0: starting salary (both paths start here)
- r: annual internal raise, as a fraction = internalRaise/100
- b: salary bump per hop, as a fraction = hopBump/100
- f: years between hops
- y: years elapsed
Loyalist salary
S_l(y) = 60,000 · (1+r)^y
- S_0: starting salary (both paths start here)
- r: annual internal raise, as a fraction = internalRaise/100
- y: years elapsed
Monthly surplus, after tax
- S_m: mercenary salary in year y (see above)
- S_l: loyalist salary in year y (see above)
- t: marginal tax + contributions on the extra pay, as a fraction = marginalTaxRate/100
- m: signed: negative when the hop is a pay cut, so the pot tracks the loyalist’s lead
Invested surplus
- P: invested surplus pot at year y
- m: monthly surplus contributed during year y (see above)
- i: monthly market rate = (1 + marketReturn/100)^(1/12) − 1 (the i → 0 case pays m(y)·12 instead)
How the scenarios work: the dashed green line assumes a smooth 5%/yr market, but reality is bumpy. The fan instead models that pot as compounding at a lognormal return with median 5%/yr and volatility σ = 15% (set in the header). Only the invested pot is randomised; the salaries and the monthly gap you invest stay fixed regardless of market outcome. Figures marked P50 come from the smooth median-return path.
Assumptions behind every figure: how this site models the market →
Every model leaves things out. Here is what this one does not see:
- No job-hop friction is modelled. Real job changes carry a gap between roles, relocation costs, ramp-up time at reduced productivity, recruiter fees, or a search that simply doesn't land. The model assumes every hop lands cleanly and on schedule, at exactly the modelled bump.
- No difference in job security or severance between the two paths. Loyalty sometimes buys greater protection (harder to lay off long-tenured staff, better severance), while a mercenary's shorter tenure can mean first-out-the-door in a downturn. So the mercenary's lead here is overstated for anyone whose tenure actually buys real protection.
- The hop schedule and bump size are fixed and deterministic (a bump every N years, always the same size), with no chance a hop fails, no scarcity of openings in a downturn, and no correlation between internal raises and market conditions.
- No benefits differences between employers. A mercenary can lose employer-matched retirement contributions, unvested equity, or seniority-based perks when switching, none of which ever enters the invested-surplus figure.