Am I underpaid at my job?

If you ever thought you are not getting paid enough, you are right. I have been in positions controlling salaries and costs for many years. It was one of the worst parts of my job because I always could see how low most pay scales were compared to how people worked.  People would sacrifice their lives for average wages, including myself. On the other hand, some people, people right out of school had unrealistic expectations regarding pay. However, most people with experience and a work ethic were not getting paid enough.  Take a second and ask yourself “Am I underpaid?”.

Salaries and wages compared

The guy who fixes my heating walks out after a half hour of work and says, it is not much just 80 bucks. Meanwhile the someone helps me with some programing C# charges a fraction of that. Have you ever calculated your salary as if it was an hourly wage? If you have not, I recommend you do. Why? By getting a better idea what you are really getting paid per hour you make a more realistic assessment of what they are paying you.

Wages are hourly or weekly earnings, while salaries more often calculated on a monthly basis. You earn a salary on 160 hours of work a month. In contrast, wages earners are compensated on every hour. The difference between a consultant and a wage earners simply is consultants or freelancers are a white collar worker paid by hour, but with less steady work, but the idea is the same.

Everyone knows salaries are better, right? You make more money. My reply is not always. Why? Because companies have a tendency to bleed you white, to get make sure their marginal product exceeds their marginal cost of employing you. I will give you a hint. It always does.

If you earn a salary you make less than you think?

The reason is with wages you earn overtime. With salaried positions, in my experience, if you work nights and weekends, the company buys you dinner or from time to time gives you a compensation day. But your company will not pay you are worth. At the end of the year you get a 2.5% increase in salary.

The bar has been raised – And you have to jump over it or you are out. Why do you work so many hours? The reason you work more hours is the bar in corporate America has been raised. It is a game of musical chair, use any analogy you want, but the US workplace is much more competitive than anywhere I have been or lived. People in America work like crazy. If you do not work above and beyond the call of duty than you will eventually lose your job.

Some people say that a salary is the biggest scam there is. I would not go that far, but a company will always pay you less than you are really worth. It is simple economics, a firm pays you until your marginal cost is equal to your marginal benefit. However, most people do not know what they are really worth, usually from a lack of confidence.

Therefore, start with what you get paid. To determine if your salaried position is better than a wage or consulting position do a calculation.

Calculate your hourly rate

If you make 50,000 dollars a year. And you are working 55 hours a week. That means you earn $962 gross salary a week or about $17.5 an hour. In my book that is not that bad. I am a big believer in paying the bills.

Further, with a job you get stability. But the wage rate of $17.5 dollars an hour for a professional with a college degree is only fair in my opinion. Think about how hard you work, and the level of intelligence you apply to your job. Think how seriously you take your job and want to do well. Think about the time spent commuting. Also consider the deductions that you need to take out from taxes to medical coverage, to retirement. Your net wage in hand wage might be only $9 dollars after 401k, medical and taxes. I always allocated 19.5% for my 401k. Maybe more for most people. Maybe $15 dollars an hour is what most salaried professionals make on a net basis. It is not good or bad, it is just reality.

Strip away notions of titles and impressions and see how much they pay you per hour.

Your pay comes down to what is your time worth to you. I even have an idea of opportunity cost in this equation. My free time is valuable too.

Therefore, when comparing wage earners to a salary position, do a realistic calculation of your time and earnings. Things like prestige or title should not matter. Salaries count most if the company has you working normal hours, try to get a sense of this before going in. I think this excercise of calculating your hourly wage is useful when answering the question if you are underpaid.