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Eureka: An economic definition of salaries
by Joseph Gatt
2018-04-27 08:03:35
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Up until now economic literature says that salaries are regulated by laws of supply and demand. If a skill set is in high demand but low supply, salaries will be high. If a skill set is high in supply and low in demand, you will get a low salary.

But, the truth is, here are the factors that may determine your salary:

Skill set

Indeed, if you have a skill set that is in high demand you could be in luck and get a decent paycheck. The problem though is that skills do become obsolete for several reasons which include:

salary1_400a) technology change: you master an old technology which is no longer in use.

b) changes in the supply scale: you master a skill or a skill set which used to be in demand, now there is a high supply of people with the same skill set.

c)      age and physical factors: you master a skill set that involves physical activity and are no longer physically fit to do the job.

d)      loss of the skill set: maybe you had the skills but either through substance abusive, lack of keeping up with new skills, physical accidents or psycholigic factors you no longer have the skill set.

Company you work for

The company you joined could be wealthy and offer higher wages for the same skills and tasks that are done at other companies. Or company policy could be to offer higher or lower wages. Some companies offer lower wages for better working conditions, while other companies offer higher wages for worse working conditions. Some companies offer higher wages and better working conditions, while others offer lower wages and lower working conditions. What is my definition of working conditions?

A company with good working conditions is a company that offers:

a) emotional stability: no one wants emotional abuse

b) personal stability: no one wants there job to affect their personal lifestyles

c)      organizational stability: including good working conditions with colleagues, clear company regulations, an atmosphere of honesty and good supervisor-subordinate relationships

d) good conditions to get the tasks done: you want safe, optimal tools to be able to get your tasks done easily and with as little pain as possible.

-Good paperwork: in some cases skills are hard to assess so some companies demand paperwork to prove that you have the skills to be able to perform the tasks. So having good paperwork, such as having studied and graduated from good universities, having passed a number of standardized tests, having gained certifications or internships at certain places could get you a higher salary. But then there are four possible scenarios that can emerge:

a) good skills on paper and good performance at work: that is the papers you have are a clear indication that you can perform the tasks and you do them well and satisfy the company.

b) bad skills on paper but good performance at work: that is your skills could be undervalued. You don't have skills on paper, but you are able to perform them. And yet the guy with the papers gets better pay for less performance.

c)      good skills on paper but bad performance at work: some people graduated from the right schools have all the right certificates, yet seem to perform poorly at work. At times they are unable to perform the tasks they were trained for.

d)      no skills on paper and bad performance at work: at times you don't have the training or the skills on paper, nor are you able to perform the tasks.

-Experience: There are four types of companies when it comes to taking work experience into account:

a) Both external and internal experience is taken into account: that is the years you spent working outside the company get you a better salary, and your salary increases as you progress within the company.

b) only internal experience taken into account: this company does not offer you a better salary for experience accrued outside the company, but gives raises as your experience progresses within their company.

c)      Only external experience taken into account: when you get into this company, they take your outside experience into account, but there are no planned raises for experience gained within the company.

d)      neither internal nor external experience taken into account: that is, you don't get a better salary for experience outside the company nor do you get a better salary while you gain experience within the company.

-Negotiation: some companies allow no salary negotiation while others allow salary negotiation. There are several methods when negotiating salaries that I categorize into three categories:

a) The emotional method of salary negotiation; voices are raised, tones are used, exclamation points are made, silences are deafening and in some cases threats are made.

b) The factual method of salary negotiation; facts are enumerated and put on the table, the negotiator lists a number of facts as to why he should get a higher salary.

c)      The narrative method of salary negotiation; the negotiator tells stories as to why he or she should get a higher salary, tell the stories behind their skills, their experience, why and how they can help the company.

-Luck factors: parachute appointments and code appointments: an often overlooked factor in salaries is the lucky factor, as a lot of appointments are parachute appointments or code appointmens. A parachute appointment would be appointing your best friend to be at a high position even when they don't have the skills or experience to hold that position. A parachute appointment can also be appointing your best friend's son or cousin, or someone who went to Harvard but clearly does not have the skills to perform a job. Code appointments would be complicated to explain, but that would, for example, be searching around Facebook for people called Donald Trump, Teresa May, Steve Jobs or Johnny Cashcow, and giving them a job with pay when they clearly don't have the skills, experience or other factors contributing to them being able to perform the tasks.

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