The relationship between work content and wages is complex and has been studied by economists, sociologists, and other scholars for decades. If you search for wage disparity on Google, you will find that there are about 5 prominent wage disparity discussions in recent news articles.?
- Gender Pay Gap: Women consistently earn less than men for the same work, a disparity often attributed to factors like societal biases, discrimination, and unequal opportunities. Specific countries and regions have more pronounced gender pay gaps, such as the United States and some Middle Eastern nations.
- Racial Pay Gap: People of color often earn less than their white counterparts for similar jobs. This gap is attributed to systemic discrimination, historical inequities, and limited access to education and opportunities. Similar racial pay gaps exist in many other nations, particularly those with a history of slavery, colonialism, or racial segregation.
- Age-Based Pay Gap: In some cases, older workers may face pay discrimination, either due to ageist stereotypes or concerns about their productivity. Younger workers, especially entry-level employees, may earn lower wages compared to more experienced colleagues.???
- Geographic Pay Gap: Wages are often higher in urban areas compared to rural regions, due to factors like higher cost of living, greater job opportunities, and industry concentration. Wages can vary significantly between different regions within a country, influenced by economic development, industry specialization, and local labor market conditions.???
- Industry-Based Pay Gap: Certain industries, such as technology, finance, and healthcare, tend to offer higher wages than others, such as retail, hospitality, and service industries. Unionized workers often have higher wages and better benefits compared to non-unionized workers.???
However, if we step out of the macro picture and break it down at a more macro level, we do observe certain key correlations.
- Skill Level and Experience: Jobs that require higher levels of skill, education, or experience typically command higher wages. On every promotion, the job content may not change - only the years of experience change. People with more time in the role would have accumulated more annual increments to get paid higher than someone with a lesser number of annual increments. In parallel, justifying education and skill levels, an engineer gets paid more than a? foreman, an architect gets paid more than a draftsman the same way a VP gets paid more than a Manager.??
- Responsibility and Complexity: The more complex and responsible a job is, the higher the pay is likely to be. Pilots earn significantly more than bus or locomotive drivers though the job description is similar - to transport people and goods from one place to another. An F1 driver will earn significantly more than an Uber driver though both just need to drive.
- Industry-Location combo: Wages can vary significantly between different regions, even for the same job. Cost of living, economic conditions, and local labor markets can influence pay rates. For example, individuals working in high-cost cities like New York or San Francisco may receive higher salaries to compensate for the higher cost of living. Certain firms in India pay more in Mumbai and Delhi as compared to Kolkata. For example, tech jobs in Silicon Valley often pay higher than similar jobs in other regions.???
- Company Size and Profitability: Larger, more profitable companies may be able to afford higher wages for their employees. Some companies may offer higher wages or generous benefits packages to attract and retain top talent, even if the job content is relatively straightforward. This can create a competitive environment where companies must offer competitive compensation to remain competitive in the job market. Typically FAANG (Facebook, Amazon, Apple, Netflix, Google) pay better than market salaries at entry level to attract the best talent. The Big 4 pay their employees higher than local consulting firms. Funded startups pay more than unfunded ones.?
- Pedigree: Select colleges, owing to the brand equity their past alumni have created in the market tend to draw higher wages. The typical Ivy Leaguer or an IIT / IIM alumnus typically earns more than his or her counterpart from a non-pedigreed or not so pedigreed organization. They also tend to start their careers at different levels in the hierarchy.?
But this is generic stuff right? We were still not happy with what we discovered. We wanted to zero in on conclusive personal traits that enable people to break free from these usual patterns. So we looked at career/wage graphs of people and industries we knew of since we started our careers and started to list down our observations. We were pretty surprised with the results.?
- Personal Negotiation Skills: Individuals with strong negotiation skills may be able to secure higher wages than others with similar qualifications and experience. People who are confident and assertive in salary negotiations may be able to secure higher wages than their peers, even if their job responsibilities are similar. This can create a self-perpetuating cycle, where those with higher starting salaries are more likely to negotiate for even higher raises in the future.
- Adaptation to Industry Demand: In industries with high demand and a shortage of skilled workers, wages may be driven up regardless of the specific job content. For example, in the tech sector, where there is a constant demand for software engineers and data scientists, companies may be willing to pay premium salaries to attract and retain top talent. This can lead to significant wage disparities between industries, even for jobs of similar complexity. That is why the career pundits keep telling you to upskill yourselves with the latest trends in the market so you never get left out in the race.
- Government Regulations: Minimum wage laws, overtime regulations, and collective bargaining agreements can influence wages, sometimes leading to disparities between jobs of similar complexity. For example, employers in the Philippines are required to pay their employees a 13th month pay around Christmas. Change in minimum wages will affect earnings of a large section of workers in a company.
- Company Culture and Benefits: Individual Circumstances: Personal factors such as age, gender, race, and disability can sometimes lead to wage disparities, even when controlling for job content. Systemic biases and discrimination can prevent certain groups from receiving equal pay for equal work.
- Non-Monetary Compensation: In some cases, employees may accept lower wages in exchange for other benefits, such as flexible work arrangements, opportunities for professional development, or a positive work environment. I personally have done the best work of my life at the lowest paying assignment of my career.?
What are your observations? Why don’t you add to the list?
