Salary Blues

You have heard people say “to earn more you have to work more” or “you get paid for what you do” and “you have to justify your salary by working as much as you are paid for”. But this was never true and this will never be true. Salary is seldom or never influenced by the amount of work you do. Had this been the case a rickshaw puller would be the person earning the highest amount of money as he is working the hardest, but a CEO sitting in the boardroom company earns the highest, the only work he might be doing may be signing a few documents and attending meetings and playing golf. Does this say hard work is not rewarded, no not exactly but qualities like hard work and other virtues come into play only when the fight is between two people having the same set of attributes. Here law of demand and supply play a bigger role than any other factor. Suppose(hypothetical situation) the number of people who can offer to work as physical laborers decreases, will this lead to increase in their salary? Yes it will provided no alternatives like machine are available. Will to increase to the level of a manager's salary, may be no because the increased salary will tempt many educated people to work as laborers.

Look at a more practical case which happened in India, think of India pre-liberalization (pre 90s). Earning a salary of thirty thousand rupees per month would be a dream for managers with engineering degrees under their belt. But now simple science graduates with a computer science as a subject are earning this amount as a starting salary. Effect of IIT becoming a international brand has little or no effect on increasing the salary of engineering grads. All the credit goes to the US companies which post 9/11 in a bid to reduce their cost came to India and opened sweat shops.

This leads to the very old but very apt definition of salary which is “Salary is the amount paid to a employee which is marginally higher than the amount he would get in a competing company so that he does not leave the job”. Salary like other goods is the amount you pay if the demand rises, like we pay more for grapes than for bananas even though bananas are more nutritious than grapes, and likewise more for branded goods which mirrors the way IIM graduates are paid more than normal MBAs.

Therefore its wiser to develop a skill which is more in demand but less in supply to get the highest in salary package and in future if you are asked to justify the salary you are quoting in a interview tell the interviewer “don't think about money if you want to get the best”