Posts Tagged ‘pay’

In 2012 I wrote about the economic advantages I had experienced by moving companies. Although it is, of course, an extremely limited data set, I had witnessed a consistent and pronounced difference between increases in my income when I stayed with the same company and moved to a different one.

Some of this could perhaps be explained by the concept of reference points, as discussed by Daniel Kahneman in his book Thinking, Fast and Slow.

One of the issues with gaining a large salary increase with your current employer is that your current salary forms a reference point. Say you are a graduate and took a £18,000 a year job. It is now a year or two after and your skills are now worth £28,000. All of that seems reasonable in the software industry.

The problem is that to your current employer, they would have to accept a £10,000 increase in costs – a 56% increase! So they probably make you a far more modest offer of £23,000. This then also becomes a reference point. When you ask for £28,000 that is not only £10,000 more than they pay you now, but £5,000 more than they had mentally prepared themselves for. They are left feeling like they are losing £5-10,000 a year.

In comparison, a different company can come at this from a neutral perspective. They look at what someone with your experience is worth and price you accordingly. This could result in a wider range of offers. Some high, but some even lower. However, this is of no consequence as obviously you will cherry-pick the high offers and pursue those.

Last month, I wrote about how I had increased my income significantly by switching jobs.

This isn’t always the case though. Indeed, Business Insider recently published an article suggesting that people who hop from job to job to climb the corporate ladder actually earn less money.

In their figures, people who stayed in the same job for five years experienced pay increases of around 8% on average, compared to 5% for those who changed jobs regularly. This may be unrepresentative of the wider market as it was a survey of those in Silicon Valley, though this should actually make it more comparable to my figures.

As I discussed recently, we’re all basically rats trapped in a system where we have to sell our time, and our bodies, for the resources we need to keep us alive. So it makes sense we try and play the system as best as we can.

I won’t claim to be a researcher in the psychology of employment, but here are some suggestions from my anecdotal experience (you know, anecdote, the singular of data 😉 ).

Move to a different company

As I wrote about recently, in the years where I moved jobs, I managed to obtain pay increases of at least double what I managed to obtain when I didn’t. While this is more pronounced in the IT industry, it seems to apply across the whole job market.

Work in IT

Even through the global recession, I never struggled to get a job, or achieve large pay rises year in, year out. The financial crisis simply never touched the IT industry, and as a recruiting manager at the time, I can tell you that neither love nor money could bring in enough software developers. It certainly isn’t going away anytime soon, so why not switch careers?

Work in IT, especially if you’re a woman

The sad reality of society today is that it still does not provide equal opportunities. This is especially true in IT where being a woman is an absolutely enormous advantage. Employers will discriminate against men – I’ve sat in meetings where better candidates have been passed up in favour of female candidates. Why not use this to your advantage?

Be very arrogant

I once went for a £70,000 a year job with a well known mobile phone operator based in the UK. A lot of people suggest you shouldn’t be arrogant, so I toned my arrogance down for the interview. I didn’t get the job.

Two months later, I went for an even higher paid job and this time I toned my arrogance up (as unbelievable as that might be). I got it.

The lesson is that employers want to have confidence that you can do the job and they will select a candidate who shows that, over a candidate who doesn’t, even if they get caught bullshitting once or twice. Don’t lie, it’s OK to say “I don’t know”, but don’t be afraid to really push how great you are and how much you know – even if they catch you out, you’ve still put across the right attitude, and once in the job, you’ll be able to show them you’re worth the money anyway.

Tackle an interviewer’s concerns head on

When it comes to your turn to ask questions in the interview, just ask the interviewer “do you have any reservations about employing me?” I end every interview with that question now. If they do, you can try and answer their concerns there and then. If not, you’ve put it into their mind that they literally have no reason not to offer you the job.

Hold out for more money

I’ve never been offered a job, only for it to fall through on pay negotiations. Once and employer has decided they want you, they won’t quibble over an extra thousand or two a year to get your signature on the dotted line. Try to have a couple of things lined up at the same time so you can legitimately say “I’m considering some other offers.” That will scare them into thinking they will lose you, and they’ll cough up the extra cash.

Tell your employer you’re going to leave

A good friend of mine who worked for a certain other mobile phone operator based in the UK, decided that he was fed up with his job and announced to the world that he was looking for a new challenge. His employer soon found out and decided that he was worth keeping, so offered to train him up in a whole different part of the company, and bump him up a few pay grades too! If your company likes you, they’ll do what they can to make you stay – if not, then they were probably going to get rid of you at some point anyway, so you have nothing to lose.

To be clear, you shouldn’t quit your job. Well, maybe you should. In any case, read on…

We’re all trapped like rats in a capitalist system, right? None of us enjoys going to work. Sure, many of us are in jobs that we describe as liking, and in many ways, I do like my job, but that is a subjective term.

What we mean when we say we like our job is that we’re content with it – as jobs go, we’ve got one we want to be in, with the alternative being in a job that we don’t want to be in. But ultimately, we’re not doing jobs for fun, or voluntarily, we’re doing it because we live in a society where we are forced to work to live.

Unfortunately, it’s very difficult to break out of said system so the best most of us can hope for it just to play the game as best we can. The better you play the game, the more money you earn and the better job you can get – better probably meaning less work, because it’s an inverse pyramid – those Crew Members at £4.30 an hour (and that is what they are paid if they’re under 18!) are doing a lot tougher work that us sat in our offices in salaried jobs. Meanwhile, Richard Branson starts each day with a swim around his private island – more money equals less work.

So how do we play the game better?

The best tip I can give you is to leave the company you are currently with.

It almost never pays to stay with the same company. Even if they’re giving you good promotions and good pay rises, you can almost certainly get even more by going elsewhere, to a different company.

Why? Because the current company has you and thinks you will probably stay with them because it’s a hassle to switch jobs. Another company doesn’t have you, and is hiring, so it clearly in need of extra resource and knows it will have to pay to go out there and get it.

Don’t just take this statement is automatically true, though. I’m not claiming to be an expert on the subject. But I got the inspiration for this blog post when doing analysis on my pay rises over the years. Here are the results:

The results are striking – the years when I stayed with the same company, I achieved pay increases of 19 and 21 percent, while the years I moved to a different company, I achieved 58, 39 and 124 percent.

Those aren’t small, insignificant differences – we’re talking double the pay increase, at least, by moving company. Clearly, it pays to go elsewhere.

Recently, Nicola said this…

Wow doctors are selfish or stupid. The rising life expectancy and massive deficit means they need to work longer and get a reduction in pension.
£68,000 on top of probably huge savings isn’t too shabby, but they’re striking!

I really rather wish she hadn’t, because it lead to a huge amount of comments, some of which were nonsense and as such, I am now unable to sleep because people are wrong on the internet and I can’t just let that be.

I don’t really have a problem with the strikes. They’re not putting people at much risk and they have a right to strike if they want to. But I don’t think they should expect a great deal of public sympathy for their cause.

While Nicola quoted £68,000. The BBC News article I read put the figure at £58,000. But that is still a huge amount of money. To retire on! That is more money than I earn while I’m still working. That is more money than my mum earns having spent twenty years tirelessly working as a teacher at an inner city school – surely an equally noble profession?

Ashwin chipped in…

Seriously though, speak to other Doctors and Medical students, and find out just how hard and long (that’s what she said!) a Doctor works and then you’ll appreciate our perspective much more.

But I probably won’t. Why? Because we don’t live in a society where hard work equals more money. You want to know about hard work? Go to my friend Eric who works 60 hours at week scrubbing floors at McDonald’s for a pitance. I’m sure a lot of doctors do more hours than that. But with the average GP earning a six figure salary, do they do ten times more hours than that? Of course not, because that is more hours than exist.

Paul I think you’re grossly confusing Doctors with Footballers. Also, this may be news to you, but Doctors do have loans and mortgages to pay off!

Which is probably true, as doctors are probably the only people who can afford to get on the property ladder these days. The rest of us have to rent.

Moz adds some good points…

I think the difficulty in debates like this is the gross inequality that people see between salaries across the various sectors. At the end of the day there are people in each sector who work just as hard as each other and do very difficult jobs, but receive vastly different salaries/pensions. In the private sector (e.g. bankers) you get people earning obscene salaries doing non-specialist jobs that don’t even benefit society that much. In the health sector you have people also earning obscene salaries, but at least doing a highly-skilled job that greatly benefits society (I wouldn’t include dentists in this – how they demand the salaries they receive is beyond me). Whereas in academia you have people earning very little to do a very difficult highly-skilled job. As an academic, I don’t moan about not being paid enough (well not much at least). But tbh I would love to see other people who have easier jobs than me earning less than I do. Its selfish but it would make me feel a lot better and more valued. Overall I think there should be a salary/pension cap that applies to everyone including doctors. Afterall no one person can be *that* much value to society.

But this just reinforces the point that you’re not paid in proportion to how much work you do, it’s how much value you are to society. In Moz’s case, that isn’t that much value. Not because Moz doesn’t do important stuff, he does. But because it would be fairly easy to replace him, because lots of people would like an academic research drop, which drives wages down.

But the important point here is that we live in a free market economy where you enjoy a choice of careers. If you don’t think you’re getting a fair deal, go do something else. If people vote with their feet, the government will be forced to offer higher wages. But actually almost nobody does, because people are actually still quite happy with the sweet deal they get as a doctor, so the government can cut their pensions.

No they are different points. How about going to a cornershop and buy a packet of sweets worth 50p and offer 45p. It’s only 5p difference. But you’ll probably be told to bugger off. Principles at stake

No, there isn’t a principle here. If everyone turned round and said “I’m only paying 45p” any half intelligent businessman would drop their prices. Similarly, if they were constantly selling out at 50p, they would put their prices up to 55p. That is how supply and demand works.

If doctors aren’t happy with their pay they need to vote with their feet – don’t work for the NHS (you can practice privately in the UK), go work in a different country (you have the right to work in any other EU country and as a doctor will get a visa for almost any other country too) or change career entirely (why not become a banker, for example).

In the IT industry we offer some really high wages (though not as high as doctors, I might add) because you simply can’t get the staff. They’re like gold dust, there just aren’t enough of them. That drives up wages. We can get the doctors (say what you want about the shortage, we still have a world class healthcare system and the government is so confident in our ability to retain them it’s even slashing pensions), but if there is some point where we can’t, we will have to start offering more money and benefits.

Strikers always make out they are the victim. But you’re never a victim in the free market unless you choose to be.

A proposal by the government to introduce regional variation in public sector pay has been greatly discussed in recent times. The idea is that because the cost of living is more expensive in one place and less expensive in others, pay should variety to reflect that.

Having listened to the arguments on Question Time last Thursday, one of the suggestions was that, taking teachers as an example, the areas which have higher pay would then become magnets for the best teachers and other areas would be left with lower standards.

This completely misses the argument that the cost of living is different and therefore the pay would simply reflect this – in actual fact, it is the lack of regional variation should cause such a problem – if you get paid the same but your cost of living is cheaper, your effective pay is currently higher in the North East than it is in London.

However, I don’t support regional pay variation for that reason.

I’m going to use London as an example here, but in reality London could be replaced by any other big city. Indeed, London is perhaps not the best example given a divide in pay already exists in the form of London weighting. But given its relative size to other places in the UK, I’m going to proceed none the less.

Whether you truly believe there is a strong North South divide or not, it is hard to deny that as a country, we are very London centric. Not to the extent of other countries (Helsinki in Finland for example), but the best jobs, the biggest companies, museums, theaters, events, etc, etc are almost always bigger and better in London.

It then becomes self propelled – the big cities become more attractive places to live as they grow and grow, adding more exciting attractions, therefore attracting more people, and the cycle goes on.

London in itself is attractive enough to bring in talent in the public sector, and therefore we don’t need to offer people a pay packet which is effectively equivalent to those in other areas. To maintain a balance between the biggest cities and the rest of the country, we actually want to pay people more for not living in these places, which are attractive enough already.