Your friendship makes me rich, not your pay packet
Comparing pay packets with your friends might be a risky business as behavioural economists tell us results can affect how happy we are. For people in low paid professions, this could be particularly unhelpful. As we saw in the eZonomics poll How much do you need to earn a year to be "rich"?, there is a theory that people tend to only consider themselves rich if they earn more than people around them.
Author Dan Ariely writes in his book Predictably Irrational about a comment that a man's satisfaction with his salary "depends on whether he makes more than his wife's sister's husband". And in his The 7 Habits of Highly Ineffective People blog post, Ariely says this focus on others' earnings rather than how much we need to earn to be satisfied means happiness "depends less on us, and more on the people around us".
Compare earnings with your work colleagues instead
A more productive comparison is to look to people in your workplace and in similar jobs elsewhere. It is reasonable to expect to be paid the same or a similar wage for doing the same or a similar job. Comparing "like" with "like" can give a guide as to if you're underpaid or if you've managed to negotiate well or land a job with a generous employer.
Personal finance website LearnVest gives five steps to follow when trying to find out if you are underpaid:
- Talk to a mentor: See if they can give you a clue to expected earnings
- Look at other openings within your company: If a similar job is advertised, see if your pay is in the same range
- Check salary comparison websites: Do the research online and bring it with you to pay negotiations
- Be tactful around co-workers: Treat pay comparison talks in the office carefully and be mindful of any official rules or non-disclosure agreements
- Know when it is ok to talk about salaries at work.
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