It’s hard to imagine living off of 12.75 an hour or 10.68 an hour when you are a full-time employee with a family and mortgage to support. There are lots of people who do this day-in and day-out trying to keep up with paying the bills. Using the Consumer Pricing Index Inflation Calculator one could easily see what their pay rate should be worth today from a period in the past. The whole challenge with using a pricing calculator like that is is that it doesn’t take into account the industry in which it is pricing. Wages for the technology section have gone way up while certain industries have actually fallen back. Kind of makes you wonder why anyone would stay in a job where they are earning LESS in the long run.
The issue with wages has nothing to do with what the economy is doing, it has everything to do with the industry you are working in. If wages were tied to the market effects, wages would act just like the stock market, causing everyone to not know if they were getting a higher pay check next time or a lower one. Employers pay salaries because it controls fluctuations in the market and industry. If you are told you will be paid $45K a year ($865/wk) then you know what to expect every week and can budget your life around that. This also helps employers control their expenses because it allows them to know if they need to let people go or if they can afford to hire more people.
Employers offer raises only in part for those that deserve the extra money because that employee has shown to provide a higher return in the long run. This is why employers do not hand our raises all the time. On average though, if employers were required to match employee income with livable wages then there would be a lot of companies that would have to decide on one option out of three; 1) go out of business, 2) reduce number of employees, or 3) increase or decrease salaries. For companies that do not provide a livable wage many of them would have to cut their staff in order to pay a wage that helps an employee meet their needs; for a company that exceeds a livable wage (i.e. tech industry, engineering, etc), they have the option of reducing employees’ salaries (if companies only had to provide a base salary) but who wants to work for less, well as it turns out a lot of people don’t mind that.
Effects of Inflation
It turns out that a lot of people who expect raises every year of 1% to 2% are not actually getting a raise, since the yearly consumer price inflation rate is 2.1%. So that means your raise is just meant to match the rising rates of the economy and nothing else. For those that only get a 1% raise, this means you are actually earning less money and that your ok with that. This means that in a two year period you are earning half of what you could have been earning had you gone with another employer. The more time you put in with a company the less money you make in the long run.
This is why many people now use sites like salary.com, and the calculator mentioned earlier, to figure out what their market rate is but what they fail to account for is that their skills limit what their market value is. If you are a creative VP for one company that works in food, your wage would only match those in the same industry and field. You could not match someone who is VP of Creative Marketing in a tech firm. You might think this is common sense but you would be surprised to know how many people actually try that scam.
In order to earn more over a period of time one must find a new job with a higher rate. In a recent article on the NYTimes, author Justin Wolfers, stated that the high quit-rate currently happening right now shows signs of a healthy economy. People do this when they know there are more jobs on the market making it safer to quit their job.
Quit to Earn More
If a co-worker leaves chances are you might have a shot at getting a raise. The idea is that you would be taking on more work and employers would be quick to recognize your efforts. The false understanding with that is an employer’s only concern is to save money and boost profits. The only way an employee stands a chance at a raise is if that co-worker who quit was in the same tier level as you and the work load increased on your part because of the quitting. In either case you would still need to bring up the issue with your manager to let them know you want the raise. In all cases, it might be that they already have someone to fill the slot or that quarter coming up prevents them from offering any raises. Remember, they will try every excuse not to give you one.
This is why many people are taking to the idea that if you want to earn more you have to find a new job, while currently employed, that pays more. The challenge with this is that you might not be able to use your manager for a letter of reference unless you inform them, after asking for a raise, that you will be looking for a job and that it would be nice if they can offer one in return.
You also want to make sure that the industry you currently work in is one that is a safe industry to quit in and that you will find a healthy number of jobs available. In order to do this you can search the Bureau of Labor Statistics under Economic Releases on Job Openings and Labor Turnover. Here you will find Tables 4 and 10 that show what the quit rate is for certain industries. Once you have done your homework then you can be sure that you will have an easy time finding a new job that pays more.
It is also important to understand that if you plan to transition over to a new industry you need to have skills that are current and marketable. Just because you have a college degree or masters doesn’t mean you are as valuable as you think are you so you need to keep that in mind. Barbara Ehrenreich proved that in her book, Bait and Switch: The (Futile) Pursuit of the American Dream. The surprising thing is that plenty of people have college degrees, it’s what you know and the skills you have that really set you apart in industries where college degrees are as common as candy. If you plan to work in D.C. know that majority of the people there all have higher education degrees so thinking that one college degree will set you apart shows how much you don’t understand what it means to have a college education, there is a lot more to it.
The Middle Class Troubles
The inspiration for this article came about after reading the latest article from the NYTimes about how manufacturing job wages are sliding back. People who work in manufacturing jobs are earning less than what their counterparts earned ten, twenty, and even thirty years ago. When you look at people who are already half way through life it is important to understand that what you earn is very much tied to the value you provide. Knowing that you only earn 13.76 an hour imparts on your psyche the value you provide to your company and the economy and it hurts when you find out that a new employee coming in, makes twice or three times as much because of a fancy degree they have. It used to be that people worked their way up the ladder of a company, now it really is all based on what you know and how skilled you are in using that, that lands you a place within a company.
The only way someone in manufacturing can earn any more is if they took on another job on the weekend, but as for many, the chance of earning weekend work means time and a half, so they don’t want to risk taking up that time. Their idea is that they want to make themselves fully available to their employer in hopes that they will notice and offer them a promotion or raise or both. The other side to this is that for many who have been doing the same kind of work for twenty or thirty years, the idea of having to quit their steady job is too scary to think about and it’s even scarier when you live paycheck to paycheck like so many Americans’ do every week.
Get A Free Education
For many of the articles I’ve read it’s easy to talk about all this hardship that people are going through but what bothers me is that they provide no real solution at the end, except, quit your job and find a better rate. As we have learned from what Steve Jobs did in the tech industry, you might not be lucky with that option when companies you are competing with know not to hire you if all you are trying to do is earn a higher wage without actually putting in the hard work. Steve Jobs colluded with other companies to ensure that tech employees didn’t try that in the Silicon Valley and to prevent wage wars from happening.
The solution I provide is to get a free education online and improve your skills while you can. The following options down below are all free. I will provide a fair warning that the rate of success for online education is very low because it requires true self-discipline when it comes to doing the homework and the readings. There are no classes you have to physically be in, no one to tell you when to turn in homework and no one around to remind you to study. With that said, use apps to remind you when you need to read and study. Sign up for all of them and as long as you do at least one hour each day for each one signed up, you will make progress faster than you imagined.
For more information about how to get a free education online read my previous article and this one.
Falling Wages at Factories Squeeze the Middle Class
Want a Raise? Quit your Job
Uneven Wage Gains Restrain Economy
Employees who stay in companies longer than 2 years get paid less than 50%
A higher quit rate among Employees
Co-worker Quit? Maybe you will get a raise
Consumer Price Index Inflation Calculator