Have you ever wondered why your salary is what it is? At first glance you would probably say it is based on what you signed up for when you joined your company and on the salary increases you received since then. Perhaps this was based on the state of the economy, your company’s profitability or hopefully your performance. But let us dig a little deeper.

Are other potential employers knocking at your door to offer you a better salary? Do you feel well paid for what you know and do? Do you feel you are unlucky and deserve to be paid a lot more, and hope someday you will! Chances are you fall somewhere in between feeling well paid and not. Most people would like to earn more, but accept that they are probably paid close to the salary market for their set of skills, and for the effort you put in. After all, at least you have a job.

It could be worse.

In reality your salary is more a result of the supply and demand for your type of skills in your area, rather than a result of your actions. When demand exceeds supply for your skill type, you can demand a high salary, expect higher salary increases and consider better offers from other employers. On the other hand when supply exceeds demand, such as during a recession, or when an industry or skill set is in decline, it becomes tough to negotiate a better salary, in fact you would consider yourself lucky just to have a job.

Factors that pull salaries down through a decrease in demand / increase in supply for specific skills in a geographic area include:

• New technologies that produce products more cheaply, more efficiently, and with less people.
• Lower demand for products resulting in lower production volumes and, as a result, less jobs (i.e. economic recession).
• Skills that have become redundant due to technology changes.

Factors that push salaries up through an increase in demand / decrease in supply of specific skills in a geographic area include:

• Increased demand for products resulting in higher production volumes and, as a result, more jobs (i.e. economic boom).
• Skills that have become required due to technology changes but are not available in sufficient numbers

There are of course other factors pulling and pushing salary levels, there are just too many to cover. The world is not a simple model of supply and demand.
The cost of living is often used to motivate salary increases. High inflation drives higher salaries which in turn drives higher inflation. Central Banks focus a great deal on this aspect. On the other hand, deflation and recession, may lead to pressure to decrease salaries, as we have seen in some countries in recent years.

Trade unions aim to look after their member’s interests by negotiating salary and benefits on their behalf. While trade unions have the best intentions in negotiating “rates” with large employers, this can be counter productive to it’s members at times by not only preventing employers from pushing salaries down but also by preventing (or perhaps more accurately “discouraging”) employers from pushing salaries up.

So what is the moral of the story? If you want to earn a high salary:

• Work in a place where the economy is strong and growing
• Get skills that will be in demand, now and in the future
• Work in a place where inflation is low and stable
• Work in a profession or industry that is free of trade unions and wage regulation
• Choose an employer who practices performance based pay
• Choose an employer who offers you developmental and promotion opportunities

This is a guest post. About the author:

Steven is Chief Instigator at Xpatulator.com a website that provides cost of living index information and calculates what you need to earn to compensate for cost of living, hardship, and exchange rate differences. The complete cost of living rank for all 300 locations for all 13 baskets is available here

Related posts:

1. On Salary Transparency
2. Ask Brian- What To Do When Asked For Salary History Or Salary Requirements
3. Indeed Offer’s Job Search By Salary

Counter-intuitive time, people!

I am the sort of guy that tends to believe you should never be afraid to ask for a raise. (The proviso of course being that you shouldn’t ask too much or too often or expect things that are outlandish.)

But even when times are tough for your company? That’s when a raise should be the last thing on your mind, right?

No, and here’s why:

1) Asking for a raise can be a good way to tell you where you stand.

If times are tough, and my most valued employee comes to me and says they’re unhappy with their situation, this is a double crisis for me as a manager. After all, if times are tough, the last person I want to piss off or lose is the most valued member of my team… my number one producer.

As a manager, I need my best employees to be happy and productive because they are the work-horses I’m depending on to turn these bad times around. If I lose them, the bad times will only get worse.

So if you ask for a raise and the boss bends over backwards to try to placate you, then not only is your job safe, you know your boss is depending on you. You’re a key part of their survival strategy.

On the other hand, if they laugh in your face or say something like, you’re lucky to even have the salary you currently have, then you know where you stand also: not on solid ground. But hey, that’s information too. You can begin to assess your options.

2) Even if they can’t give you a raise, they might find other ways to keep you happy.

After all, even if your boss can’t get you a raise right now, you’ve made them aware that you’re a bit unhappy or at least a bit hungry. They might start to think of other ways to reward you. They might even start to think of other forms of non-monetary compensation.

Maybe they’ll be more lenient when you ask for some extra time off. Maybe they’ll keep an eye out for an opening on that project or new position you’ve wanted. You might even find yourself singled out for extra or individual praise, raising your profile in the office.

This is my most important point about asking for a raise even if you know the boss will say no: you’ve put them on notice. If they really like you and value you, you’ve made them aware that they need to take steps to keep you happy. Even if more money is not forthcoming, you have at least put yourself on their radar to pay better attention to your needs. Making the boss aware of your feelings might pay dividends down the road in ways you can’t anticipate but are just as valuable as a raise.

3) You never know, they might say yes.

If they say no, and there are no hard feelings for having asked, then you’re out nothing.

But they might say yes. And any time you wasted being afraid to ask was just the lost opportunity to make more money sooner.

Again, put yourself in the position I described in point number 1. You’re the superstar. The best producer. If the company is going to ride out these hard times, they’re going to do so riding on your back and your productivity.

If you find yourself in that situation, then you really are more valuable to your employer. And maybe you should be compensated for that.

Related posts:

1. The Economy Sucks- Why You Should Ask For A Raise
2. Asking For A Raise?
3. Ask Brian – When Should I Ask For Another Raise?

The New York Times had an article today on salary transparency that has gotten a fair bit of attention in the blogosphere. The thesis of the article is that in this internet age, knowing what your co-workers make will become commonplace. The move toward an open workplace, the article posits, might be inevitable.

Openness about company ledgers “will become the norm,” Ms. Fenton predicts, “even if people come to it reluctantly. If people are paid what they are worth, there is no reason for people to feel uncomfortable about sharing salary information.”

Color me not so sure.

I certainly acknowledge that there are plenty more ways to get an idea of what you should be paid. Salary.com has always been one such tool. But Salary’s next-generation competitors like PayScale, GlassDoor and SalaryScout, are taking things even further. It’s now possible to find out what a specific position probably (or used to; or most likely) pays based on anonymous feedback.

But I don’t think you’ll ever see true and complete salary transparency. Not because, as the article suggests, middle class mores make salary disclosure taboo. No, the thing that the article doesn’t mention is the real reason why salaries are kept secret.

As my friend Matt pointed out, it’s in the best interest of management to keep salaries under wraps. If every worker knows what every other worker makes, then they will demand at the very least strict and complete equality in pay. But if no one really knows for sure… if the salary waters are a bit murky… then management can get away with paying some people way less than they otherwise would have to.

In short, it’s in management’s best interest to keep salaries secret so that they can keep labor costs down. Your boss might pay Bob 10k more than he pays you for the exact same job. It’s not your bosses fault. If, for whatever reason, you agreed to work for less, then hey: it’s a free market!

Sorry if I sound a bit Marxist in my analysis, but I think that’s the overriding reason for the tradition we have of keeping salaries on the down low. It’s a fact of business life, and the article kind of misses it in my estimation.

But that leads me to one of my favorite all-time bits of advice for anyone in the workforce:

In short:

Do whatever you can (legally and ethically of course) to find out what your co-workers make. If you ever have the opportunity to honestly learn about others’ salaries, don’t pass that opportunity by. Take it!

There is no more valuable bit of information that you can attain. Knowing how you stack up salary-wise tells you exactly how you’re valued by your boss.

And if you find you’re undervalued, do whatever you can to learn why and try to rectify the situation.

Related posts:

1. Why Your Salary Is What It Is
2. Indeed Offer’s Job Search By Salary
3. Ask Brian- What To Do When Asked For Salary History Or Salary Requirements