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How You Should Compare Salaries

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You just found out that Bob in the next cube, who does basically the same job function that you do, is making 20% more than you. Bob isn’t that much better at his job and the idea that he makes 20% more really bothers you. Does that sound familiar? If not, how about this scenario?

A friend you used to work with just left to work at another company and is being paid 20% more to do the same job. He isn’t that much better at his new job, is pretty much your equal, but by virtue of leaving he is being compensated 20% more. Does that sound familiar? More importantly, does that bother you?

If it does, don’t feel bad. You’re not alone and what you feel is perfectly natural. However, as you probably recognize, it’s not a healthy feeling nor is it a happy one. The reason you feel jealous of, rather than happy for, your friend is rooted in how you, and I, were raised. As human beings, especially competitive Americans, we have constantly competed against one another throughout our entire lives, starting in school with grades. You wanted to be the best at what you did, have the highest grades or the fastest run. You constantly competed to see who was better at this or that and it was healthy then because it drove you to succeed. It was great then and it pushed you, but now that way of thinking is no longer is accurate. It’s become a very poor motivator because it brings out negative feelings rather than positive ones.

Salary Is Not A Good Measure of “Success”

Money is not a measure of either “success” or happiness. I think any discussion of salaries really needs address that first. Think of all the movie stars or athletes with loads of money and see if they’re actually happy. If you pin your entire life and your happiness on money, what happens if you get it? You lose your drive, you lose your desire to improve, and you end up like lottery winners who now need something to do and turn towards the bad things in life. Money itself is a poor indicator to begin with.

Secondly, since money is not a proxy for success, it’s also wrong to use your salary as a means of comparing success. The best example is that of a women in the workplace. While working, she might be tempted to compare her salary with someone else and use that as a means of measuring success. What happens if she had a child? At the very least, near the end of the pregnancy, she’ll have to stop working and potentially take unpaid leave. Does that make her less “success” than someone who is still drawing a paycheck?I say no and she would likely agree (I think everyone would agree). In reality, being a mother may make her feel more successful than she felt when she was being paid a salary. In that simple example you can see how money isn’t truly an accurate measure of success anymore. There are simply so many other things out there other than money that make us happy.

Another reason salary is an inaccurate measure of success is because there are simply too many variables in the equation now. Back in school, you might have compared test scores or grades with your classmates who took the same tests and received the same education. The differences in grades could be attributed to personal factors such as your intelligence and your preparation. In the real world, you’re competing with folks with different educations, different skillsets, and different career paths. Bob in the next cube could have skills you simply aren’t aware of and that’s why he’s getting paid more, you don’t know and so comparing salaries in bad.

How You Should Compare Salaries

You shouldn’t be comparing yourself to anyone else other than yourself. That’s the secret to being happy and why I don’t really care what other people earn. When I found out a friend of mine was getting a huge pay increase to move to a totally different industry, I was happy for him. I mean this guy’s salary, with bonuses, will likely be double my current salary. Double is a lot. He’s a hard worker, a smart guy, and a great guy to be around; you can’t help but feel happy that he’s made a quick move up in his career. But it’s very easy to see his salary and be jealous or resentful. Why don’t I feel that way? The reason is because I feel successful because I’ve exceeded my own expectations, set a year ago. I’ve achieved the goals I’ve set for myself thus far that’s what drives me. That’s what you should drive you, not money.

Don’t compete with Bob, compete with yourself from a year ago, from five years ago. Are you where planned to be a year ago? If so, excellent! Start setting your sights higher and your goals larger and get going. If not, re-evaluate and start working hard. Comparing yourself to you a year ago is far more accurate than comparing yourself to Bob and you should be comparing not just salary for the other things in the life that make you happy.

Do you golf? What’s better, making another 3% in your salary or actually shaving a few strokes off your game? Do you run a business? Would you rather earn another sale or hear of a story about how your business helped someone do something they had wished to do all their life? Life is so rich, rewarding, and fulfilling that to judge it on the basis of income would be such a waste.

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20 Responses to “How You Should Compare Salaries”

  1. Patrick says:

    I agree with you, Jim. By no means am I the wealthiest person out there, but I am happy where I am now, especially when I think about the personal and professional growth I have achieved over the last few years.

    In fact, my post today has a similar theme – I wrote that “Money is not a competition.” That is the one piece of financial advice I try to live by.

  2. saladdin says:

    Ok. I’ll risk it.

    Salary is a measure of success. Maybe it is not the MOST important factor but it is a factor.

    I think the same for the old “Money can not buy happiness” line. Then why do people’s dream normally involve retiring early so they can travel or see the world or whatever makes them happy? This happiness that everyone is striving for (I would even call it security) is derived from accumulating money.

    Most will not admit it, but we do compare ourselves to others all the time. I read blog after blog with people quoting their net worth and 401k contributions, even bordering on boasting. When a buddy buys something new we do ask “What rate did you get?” or “How much did you give?” We sit around the water coller talking about Bob and his new Lexus or John’s 5435235 square foot house. And don’t get me started on raise time, “What percent did you get?”

    My opinion, if you laid done 3% or 3 strokes off your golf game. The majority of people would take the 3%. Hell, most of us would fire up Excel and start inputting numbers, “3% compounded at 8% for 30 years….”

    Success defined by money or salary is in our blood. It’s what our parents told us when we were 12 “Go to college and get a good job, make good money so you don’t end up like me working your whole life.”

    There are exceptions and you may be one of them. But in my opinion, you are in the minority.

    I enjoy your writing.

    saladdin

  3. TheZenDollar says:

    I have mixed feelings about this post. On the one hand I agree that you shouldn’t feel jealous or resentful of your friend Bob, but instead celebrate his successes. On the other hand, I don’t think there is any reason not to be competitive and keep challenging yourself or just plain want more money.

    With that said, Salary is just a number. It isn’t success. Success is defined differently for each person. To each his own I always say. Compete with Bob,but celebrate his success. Most importantly keep doing what you do that makes you happy. If salary was the measure of one’s success, I’d suggest that individual reassess their priorities.

  4. Patrick says:

    Saladdin,

    I think salary can be used as a benchmark or a measurement of some fashion, but to me, it does not equal success, nor is it a good measure of success. In my opinion, success should be measured by many factors.

    If 2 people both earn $100,000 per year, you could say both are successful. What if we change things? Just for fun, say one person is 26, earns $100,000, own his house outright, and lives in a small town in west TX where living is inexpensive. The other person is 65, earns $100,000, lives in NY City, and will owe on his apartment for the next 25 years. Now who would you say is more successful? Most people would answer the 26 year old.

    For the same equation, let’s assume the 26 year old has no family, hates his job and life, and has never been happy. The 65 year old has a loving wife, kids, and grandkids that make his life complete. Now most people would say the 65 year old is more successful.

    There are too many factors involved to look at salary in a bubble. I like Jim’s point that you should compare salary against yourself. Even then you should be careful. Just because I set a goal to increase my salary 15% by next year doesn’t mean I am not successful if I do not reach that goal. I may have moved into a new industry, changed jobs to a better work environment or shorter commute, gotten better benefits, etc.

    It is important to set goals and try to achieve them, but life is too complicated to deem oneself unsuccessful because you do not meet your goals. The best you can do is set realistic goals and work toward them, while remembering the purpose behind the goal in the first place. It doesn’t do any good to reach your goals if you aren’t able to enjoy your successes once you get there.

  5. saladdin says:

    Patrick,
    I agree that money by itself does not equal success, but it sure does seem to be most peoples goal. So there must be something to it…

    Also, if the guy next to me is doing the same job and has an equal skill set making 20% more then me it is human nature to think “What the hell?” and not “Good for Bob.”

    I’ll just say again, I have seen a lot of posts (not necessarily here) with people concerned with their paychecks and how to make more to say that money is not an important factor in defining success.

    I’ll just say, that it is a factor in defining it for me.

    This is just my opinion guys.

    saladdin

  6. mapgirl says:

    Someone making more for the same job only proves one thing: THEY ARE BETTER THAN YOU AT NEGOTIATING A SALARY.

    That is all.

    Salary is some measure of success because it’s a quick and dirty metric for comparision, but I know some losers who make a lot of money just because they work in high-paying fields. I won’t even get into what defines success, that’s like asking people what is love. It’s different for everybody.

    Back to my statement though. I used to make more than one of my girlfriends at work because I knew what kind of salary to ask for (i.e. demand?) during the employment process. My friend was referring me to her new employer and we talked about her offer to move to the new company in the first place, so I had prior knowledge about what they were paying, which she did not when she entered her negotiation. (Isn’t the market mostly about information arbitrage anyway?)

    I had more complete information. I also know how to sell myself through proper valuation and negotiation. I am simply more assertive than my friend is. We both know it. I asserted myself to go to school at night and get more valuable skills while I was at that job. I also asserted myself to make my job and my salary my highest priority, which my friend doesn’t do because she would rather be a mom. (Which is fine with me and with her, and not a stab to instigate a mommy-war so don’t even start.)

    In the end, I found out that I, too, wasn’t making as much as the next person because they were better than me at selling themselves, or the tide of the company’s fortunes had changed and they felt they could pay more when the next person came along. It’s not a pissing contest with your co-workers because if you think that way, you’ll be chasing jobs by the dollars they pay versus the quality of work or life balance they can offer you.

    I totally agree that the competition is with one’s self. I had set a goal of making $60K my goal at my last job. I told my friend that I was going to be ruthless in my pursuit of it and that I hoped I could achieve it in 3 years. I managed it 2 years later by going to night school and hopping jobs. It was easier than I thought and I didn’t bother looking around me for competition because going to class 2x a week for 6 months was enough!

  7. Minimum Wagec says:

    Where I work, the entire pay range is 20 cents.

  8. Anon says:

    What I find interesting is that the people who are always interested in “what you make” tends to also be the people who management see as only interested in money and not in doing a good job.

    Its hard to give someone a raise who you know spends their time asking for more money compared to the person who spends that extra time doing a damn good job at their work.

  9. plonkee says:

    One of the things that I’ve discovered about other people’s salaries, is that they make a lot more money than I think they do if they are higher up the chain. Which I read as, I could earn a lot more money than I am now someday. But I’m not exactly the assertive job hopping type it’ll take me a long time to earn a really good income, but if the work is fun and I can manage on what I make, who cares?

  10. Tim says:

    I think the issue is more of getting paid for what you are worth. If a person is doing essentially the same job, and you are tolerating working for less, then what does that say about you? If you are content with your position and how much you make, so be it.

    in the end, you define “success”.

  11. the baglady says:

    Great article. I think I would be very unhappy if I constantly compared my salary with others who do the same job. I know that for my profession I am getting paid below the median, however, my fiance reminded me that 40 to 50 year olds also have the same title as me but they would be paid more just because they are older. I don’t think it’s necessarily fair, but I am happy that in my age group I am being paid a lot. I think the idea of comparing yourself to the past is a great way to measure your growth because there is really no end to comparing yourself to others.

  12. Minimum Wage says:

    Where I work, nobody asks for more money because we know we won’t get it. Superior performance won’t get you a raise and poor performance won’t get you a cut.

  13. MoneyNing says:

    Minimum Wage: That’s a sad thing to say! You should look into alternatives because you deserve a better working place! Find a place that allows you to be positive with your future!

  14. Michael says:

    Minimum Wage is there to protect those that cannot get a better job than a “starting” job. No one, unless their parents own a business, gets a management job when they’re 16 years old. Heck, the owners could pay them only $5 if they could. Minimum Wage when you’re 20+? You seriously need to reconsider, unless you’re already wealthy and like to be bossed around all day.

    I think the true measure of success is your net worth. A guy making $100K per year could easily blow every sent and have nothing, still be living pay to pay. However, someone making 50-60K per year could easily be contributing to their 401k and making post-tax investments. Yes, it must be nice to be the MC Hammer of today, however, what is he doing now? In 35 years, with all of the savings, the person making 40-60k all his/her life will be much better off. Vacationing when you’re retires? Seeing the world? Now that’s success!

  15. Minimum Wage says:

    I live in an area where college-educated twentysomethings have been moving in for years. Large surplus of cheap educated labor. Where I work we usually have three or four college graduates earning minimum wage.

  16. jim says:

    Where do you work?

  17. Minimum Wage says:

    I work for an employer who owns several convenience stores. There are two “managers” for the stores who work day shifts and also are emergency contacts evenings and weekends. The “managers” are responsible for covering shifts when a scheduled employee doesn’t show up (i.e. the managers get unwanted overtime, as they are salaried). One of them argues he’s NOT a manager (but merely a glorified store babysitter) because he does not have the power to hire and fire.

    • Secret says:

      Classify an employee is driven by law. Exempt and non-exempt is driven by the job that they do. Circular E on irs.gov will describe all the details.

  18. MoneyNing says:

    Minimum Wage: Do you have other options? Surely there are some other choices if you look hard enough? You need to surround yourself with positive thinking people!

  19. A Shark says:

    Sorry, I have to disagree with this blog. While I am happy for Bob for getting more money, my resentment would be for my employer. I found out that an individual at my level who started after me makes 8% more than me. This other worker spends less time working and more time socializing. He even brings in work from his other job and works on it in the Office when he should be working. I know I could get paid much more if I left this job; however, my skill set is specialized and I do not want to leave the area in which I live. I thank you for this opportunity to vent.


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