Why are candidates underpaid?

If you’ve recently learned that others in your industry are earning a lot more than you are, your reaction might be indignation … followed swiftly by a resigned shrug. In an era when some employers will insist on verifying a candidate’s salary history to the point of demanding W-2s, how can you ever hope to catch up? Before you despair of ever being paid what you’re worth, you need to figure out why your current salary is sitting in the bottom percentiles.

Here are a few possibilities to consider:

1. Your job title is wrong.

Get a copy of your job description, and compare it against the description for your job title in the Career Research Center. Do they match up, for the most part, or is there a gap?

Job titles and descriptions can be a mismatch for many reasons. One is an evolving role. This happens when you start at a company with one job, but gradually acquire responsibilities until you’re really performing at a higher level, without higher level compensation. In this situation, your compensation might seem fine for your title, but you’re doing more than you’re paid for doing.

The other possibility is that your company is title-happy. This is sometimes a problem at startups, where every department head is a Czar and every consultant is a Guru, despite being paid at normal-title levels (or below, depending on the company’s cash-flow situation).

It might seem like a great thing for your resume to have that shiny title, but when it comes time to get a new job, you’ll have trouble explaining exactly what it was you were doing … and why you should be paid well for what you’ll be doing at your new employer.

Both these issues come down to the same thing: when your job title doesn’t fit, you’re always comparing apples to oranges when if you use it figure out compensation. The best practice is to compare your job against others based on your duties, not what it says on your business card.

And whatever you do, don’t lie about your title when you’re interviewing. You’re just one background check away from losing a job offer based on the discrepancy between what you claimed and what HR will tell the hiring manager.

Instead, Dawn Rasmussen at Careerealism suggests explaining your job on a resume by offering a title equivalent. Her example:

Actual Job Title of Record (Title equivalent), Month/Year – Month/Year

Example: Business Development Director (Vice President equivalent), 6/2003–7/2009

2. You’re listening to word-of-mouth, instead of looking at the data.

One PayScale study found that only 45% of respondents who described themselves as underpaid earned less than market rates. In other words, many who feel underpaid probably aren’t.

How does this happen? In part, it’s because you’re going by anecdotes instead of data.

This isn’t to say that your friends and co-workers are being deliberately dishonest about their earnings in an attempt to make you feel like you’re not measuring up. The issue is that when people talk about pay, they don’t present the whole picture, including the skills and experience they bring to their role, their company’s financial picture and compensation strategy, and so on.

In addition, a few isolated stories do not a trend make. That’s why it’s better to judge salary using a tool like PayScale’s Salary Survey, which gives a compensation range based on hundreds of thousands of anonymous survey responses. Anonymity equals no reason to stretch the truth, and the sheer volume of responses means that outliers who make unusually high or low salaries can’t distort the picture.

3. You’re the victim of the salary history Catch-22.

If you’ve compared apples to apples, and you’re still coming up short, it’s entirely possible that you’re being underpaid. The question is, how did this happen to you and what can you do about it?

One strong possibility, especially if you’re female or not someone who feels comfortable negotiating, is that you started off your career with a low salary, or at least a lower salary than you might have scored, if you’d been able to ask for more. Since raises are generally calculated as a percentage of current earnings, your future pay pegged to that first low salary.

But the impact of not negotiating early on doesn’t stop there. Because many companies ask for (or even insist) on salary history during the interview process, your low pay might follow you throughout your career.

So what’s an underpaid job seeker to do?

First of all, try not to give a salary history – but if the employer insists, don’t fudge facts. As invasive as tactics like insisting on W-2s can feel, it’s probably in your best interests to go along.

“If it were me and if I was seriously interested in the position, I would provide the employer with the W-2s,” says Alison Doyle, About.com’s Job Search Expert and Founder and CEO of Career Tool Belt. “I wouldn’t want the company to get the impression I was trying to hide my salary history if I was seriously interested in the job. Also, the company may be able to obtain the information anyway as part of a background check.”

Doyle notes that job seekers aren’t obligated to give tax information to prospective employers, “though not giving it will most likely knock you out of contention for the position.”

Rather than fibbing or digging in your heels and refusing to share information, a better approach is to try to restructure negotiations around job duties, not salary history. If you can show that your achievements were worth more than you were paid, you might be able to score a fare wage for your next job.