More often than not people feel that they are being underpaid for their work. They usually compare their income with their peers, some of whom belong to a different industry altogether, which results in them being unhappy with their work. In these situations, it is often required to assess the actual wage that we deserve or the wage that our job profile commands. To determine this, we need to know the factors which will, in turn, decide the optimum pay for our work profile.
• Law of Labour
• Requirement of specialized skills
• The unpleasantness of a job
• The demand for services that the job fulﬁlls
Law of Labour
When there are a lot of people willing and able to do a job, that job generally doesn’t pay well.
Obviously, if there are a lot of eligible and apt candidates for the same position, the company has more options. The candidate would be more likely to accept a low-pay offer just so that he can make sure he gets the job. Had he asked for a higher pay, the company could have simply considered some other candidate instead of paying more.
The specialized skills that the job requires
The more specialized skills (relevant to the job) a candidate possesses, the higher the wages he can command.
If the candidate has some specialized skills which may be required for the job profile, he is most likely to perform better. Hence, would be profitable for the company instead of training another individual who does not have those specialized skills.
Moreover, If the job requires specialized skills, lesser amount of people would possess those skills. Since the Ratio of supply (Number of eligible and apt candidates) to Demand (Number of Job positions) decreases, the company has to pay more to ensure that the candidate doesn’t join a rival company. These specialized skills may be Experience, Education etc.
The unpleasantness of a job
Higher the unpleasantness of a job, the higher are the wages.
Since, the employee/candidate is more likely to go for a job profile which is pleasant, the company has to balance that desire of leaving the company by offering an incentive for job unpleasantness.
The demand for services that the job fulﬁlls.
Higher the demand, higher are the wages
If the demand for the services fulfilled by the job is high, the company is more likely to increase output to match this demand. This would require more employees. They would want to retain maximum employees and lure new employees to meet shortages. This would, in turn, increase the wage.
e.g.- Now to evaluate these factors for real life situations, Consider a fresh engineering graduate who just passed out of his Engg. College. (in India)
There are more than 4 lakhs graduate engineers who will be entering the job market this year (2011) (up from 2.4 lakhs engineers in 2006 ). Out of these, at least 60-70% can be called eligible for job (according to college scores). In this scenario, how could you expect to get a high-pay if you are getting in a company which will treat all trainees as equal and will impart 6 months or 1 year training to orient and model them for their kind of work?
Talking about the specialized skills, if you a core engineer – Electrical, Mechanical, Civil, Electronics – these skills would probably be the software you know and experience of working on some project. For most of the core engineers, the specialized skills are almost similar hence wages are almost similar. In CS-IT sector, these skills may be the various courses or certifications that you have acquired and the programming languages that you know. Comparatively, acquiring these skills is easier and cheaper for CS-IT industry than Core Industry. Yet, only the most interested individuals take advantage of this. This results is some CS-IT engineers getting much higher pay compared to their peers in the same industry.
Comparing unpleasantness of the job with the wage that the company usually pays, the postings in production or departments where there are less changes in operation are considered boring, hence employees are given slightly higher wages. Whereas, since most of the engineers want to do R&D type of work, the company pays them less in the beginning (because candidate is more inclined to get that job profile as compared to the pay) and pays them more later on (since, the employees have then acquired specialized skills and vital trade secrets). In addition to that, offshore postings and postings in extreme climates may also be unpleasant which results in higher wages to compensate this job unpleasantness. e.g. Oil Companies usually pay a lot more than Automobile companies.
At the time of recession, the demand for services had gone down, which resulted in reduced need of employees. The companies had to balance their expenditures by either laying off workers or reducing their wages. To get job security, most employees were ready to work for reduced wages. Hence, the fresh recruits (if any) got reduced wages too.
Similarly, assessing the affect of these factors on your job profile can help you determine the wage your profile should command. More than looking at the wage your job profile can command, employees should try and assess the ways in which they can increase their value. These can be acquiring specialized skills, like learning new software, joining courses, etc etc. If the employee is successful in obtaining the essential skills which his job requires, he is more likely to perform better and hence, get paid better.
But, it is happiness that all of us are actually looking for. And that does not necessarily mean to be paid more. Be content. Stay Happy.
Inspiration: Freakonomics, Chapter 3
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Why are you paid less??? | A Simple Analysis http://wp.me/pinhe-fU
— Prakhar (@genobz) June 9, 2011
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