Am I underpaid?

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 programming 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 of 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 of 160 hours of work a month. In contrast, wages earners are compensated on every hour. The difference between a consultant and wage earners simply is consultants or freelancers are a white-collar worker paid by the 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 then 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 does 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 exercise of calculating your hourly wage is useful when answering the question if you are underpaid.

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3 responses to “Am I underpaid?”

  1. Mark Biernat

    I do not have any profound takeaway from this post other than to make you more aware of your time and your pay. You can do this by calculating your hourly rate and comparing it with wage earners. This strips away the illusion of titles. If you do not have a life passion do not get to worried about it. Most people do not. Simply ask yourself the question are you really getting paid what you deserve. I believe you are not getting paid what you are worth. What to do, what to do? First do not panic. You have a job. But in the long-term and I mean real long terms start thinking of ways to work for yourself if possible. If it is not in your nature or in your destiny, try to find ways to leverage your skills

  2. Jason Griffin

    It’s important for people to really grasp how much they make an hour, and this article does a good job of pointing this out. For individuals who are asking if they are underpaid, however, I believe that there are two questions they should be asking that are more important.
    Does the economic conditions/market support my hypothesis?
    What am I personally going to do about my pay level?

    1. Mark Biernat

      Good point Jason. I believe the last question, what am I personally going to do about my situation is the most relevant for people who feel they are underpaid. I have seen too many overpaid individuals to care too much about what is fair, as much as what the market will support.

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