Self-Worth and Your Income

The Truth Behind Your Self-Worth and Your Income

Recently I read an article on the taboo of comparing salaries.

Depending on your cultural background and beliefs, you may or may not compare your salaries with your family and friends openly. However, most of us are interested to know how much we earn relative to our peers.

Why is this so? The reason is simple – we are interested to know if we are valuable.

Before you start crying foul, hear me out. Obviously, you know that your self-worth is not dependent on your income. How much you earn has nothing to do with your value as a person.

But in reality, how often is this applied? I’m afraid it’s not very often. At least accordingly to my observations, it’s not so.

The fact that people compare their material assets is a good indication: the car that you drive, the brands that you wear and the kind of houses that you live in. All these material assets are proves of your earning capabilities. The more expensive these assets are, the better one feels about themselves.

So intrinsically, we have knowingly (or unknowingly) associated our self-worth with our income.

THE DAMAGE OF ASSOCIATING YOUR SELF-WORTH WITH YOUR INCOME

I have an ex-colleague, Mandy (not her real name), who worked in HR. Given her privileged position, she had access to personal information unavailable to others, including salary.

Now, Mandy has two bad habits:

  • She likes to compare her salary with others’.
  • She likes to talk about it.

Sometimes, she would tell me how little a particular colleagues was earning. Although she didn’t share the exact figures, it was obvious that she was very happy about being “more valuable” than that particular colleague.

Other times, she would complain to me how much more another colleague was earning. Again, it was obvious that she was very upset about how someone else was more valued than she was.

Over time, Mandy grew bitter about how others were earning more than she did. Her attentions were focus on how little she earned and how under-valued she was. As such, she started to push responsibilities and refused to do more than she was paid for. She would only do what she was paid for.

It became a vicious cycle – the more under-valued she felt, the lesser she contributed and the more opportunities she missed.

As you can probably guess, Mandy was passed over for a few promotions. In the end, she left the company.

Mandy didn’t realize that her self-worth is not dependent on her income.

THE BUSINESS REALITY BEHIND HOW MUCH YOU EARN

In my work, I am involved in many hiring and budgeting discussions. The reality is this – value is only one of the many considerations in hiring or promotion decisions:

Value – obviously, how much a person earns is dependent on the value of the work that he/she is doing. It’s related to one’s capability, knowledge, experiences. This is the reason why people link income to self-worth – how good you are.

However, as you will see, there are many other considerations.

Budget – There is always a hiring/staffing budget. A closed-minded employer’s goal is to hire the best person at the lowest salary possible. This is to ensure he minimize his cost and maximize his profits. From this perspective, the value of a person becomes a secondary consideration.

Market Rate – different jobs have different market rates. During the dot com boom, IT workers enjoyed a much higher income than most non-IT workers. Does this mean that an IT worker is really more valuable than a non-IT worker?

Market rates are usually driven by greater supply and demand forces. Something that is scarce and in demand will have more people willing to pay a higher price for it. My observation is that these market forces are not always rational or logical, and often, it has little to do with true value.

Having said that, to prevent hiring difficulty or risk of overpaying, employers will usually try to peg your salary against the market rate – despite the irrationality of it.

Urgency – If an employer needs someone to fill a position quickly, he is more inclined and open to salary negotiations. Otherwise, he may just pass over the demanding candidate and wait for the next one. After all, he can afford to wait for a “cheaper deal”.

This is simply a timing issue. If you chance upon such opportunity, then you have more room for negotiations. However, don’t count on that to happen all the time.

Ease of Replacement – If an employer can easily find someone else to do what you are doing, then he is less open to salary negotiations. Even if he negotiates, he will not be willing to compromise very much.

The implication for us is to increase the value we create. In so doing, you make yourself more painful to replace, and increase your bargaining power.

MY TAKEAWAY

Whether you are employed or self-employed, no remuneration system is 100% fair. It can never be.

It is a necessary evil that we need to live with for the world to function as we know it.

Learn how this imperfect system works; know that your income is not directly related to your self-worth as a person. There are many other considerations and forces involved. Don’t take it personal by comparing income – it probably has nothing to do with your true value.

At the same time, continuously increase the value of your work. Learn how to work the imperfect system in your favor and maximize your income, so that you don’t get exploited by ill-meaning employers.

It’s a fine balance, and each of us has to constantly work at it. It’s not easy but it’s worth it.

Lawrence Cheok writes about living a balanced life and provides tips to improve your career, relationships and money at A Long Long Road. Other than writing, Lawrence does business development and project management in his day job.

  • http://www.varsityblah.com/about Eugene (Editor, Varsity Blah)

    Very interesting article! I just graduated with an honors degree and finance and have always found the topic of behavioral economics quite fascinating.

    Basically, this is all because individuals are more concerned about relative wealth than absolute wealth. This has been shown in studies time and time again. I read an article a few days ago and in it, the writer quoted a CEO who said, “I don’t care how much I earn, as long as I’m on the Forbes list.”

    A book I highly recommend for more information on the subject is Why Smart People Make Big Money Mistakes (www.amazon.com/dp/0684859386/?tag=varsblah-20)

  • http://www.changeyourtree.com Kevin @ Change Your Tree

    Your value as a whole person may not be represented by your income, but your value in the marketplace certainly is.

    A lot of people keep themselves down (and then ultimately get legislation passed to hurt the rest of us) by continually thinking, “I’m worth more than this wage, I’m worth more than this wage, etc.”

    But, if you’re living in a Capitalist society, you’re not worth more than that wage. If you were worth more, they’d pay you more.

    So….

    You’re either not worth it, or you need to prove you are to them or to someone else.

    When we’re talking about wages, I think it’s dangerous to allow people to feel like their low wage has nothing do with their value. It does.

  • http://www.mysuperchargedlife.com Jeff@My Super-Charged Life

    Comparing wages with others is dangerous as your example points out. It is easy to fall into the trap of feeling undervalued. However, the best plan regardless of your pay is to always strive for excellence in everything you do. If you are working for a good company and you constantly produce excellent results, then you can expect that your compensation will go up. That is the beauty of America! I believe that it is still possible to get ahead and to even get wealthy if you apply your skills in the right manner with the right attitude.

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  • http://www.pickthebrain.com John

    I agree that it is dangerous to associate self worth with income. Although providing value leads to the creation of wealth, there are many jobs worth doing that don’t pay incredibly well.

    Although it’s hard, the best thing is to avoid comparisons with those around you. Instead of trying to surpass others, shoot for personal bests.

  • http://www.etavitom.com Etavitom

    Thanks for the very interesting post!

  • http://lawrencecheok.com Lawrence Cheok | A Long Long Road

    @Eugene Yes, I have heard of this concept about relative wealth. I think that’s a fundamental flaw in perception about self-worth. Many people’s sense of self-worth is dependent how better off they are compared to others, and not something intrinsic. Well, they’ll just end up always trying to win… and lead a life with pressure of losing.

    @Kevin it certainly does. One’s wage does take value into consideration – but selling skills, convincing others how valuable you are, has a bigger part to play than we think. In that case, the true value because secondary.

    @Jeff I like your idea. Why makes things so complicated. Just focus on excellence, and hopefully things will work out well. I personally take this approach, but I know of many who will disagree ;)

    @John again I agree. Just focus on doing well ourselves. Ultimately, what we truly can control is our own actions.

    @Etavitom you’re welcome.

  • ada

    i think u r right

  • http://www.thesimplewealth.com Yi Hui@ The Simple Wealth

    Most people identify themselves with their income, and they automatically think that high income equals high wealth. But it is just not true.

  • http://lawrencecheok.com Lawrence Cheok | A Long Long Road

    @Yi Hui: Agree with you. If you look at some of the rich and famous people, and the trouble they’re getting themselves into. Obviously underlying some of those are a lack in sense of self-worth.

  • http://www.wisdomgettingloaded.com/interview.htm tracy Ho

    Great article, inspired me ,

    Tracy Ho
    wisdomgettingloaded

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  • http://www.2knowmyself.com farouk

    its not your observations alone, i have noticed this too:)

  • http://www.tcphotodesign.com Tim

    I have struggled with this for many years. It’s the voices in my head after visiting with family or just out in a social environment. It goes like this, so how is Tom and Kim? Oh their great! They just bought this big, beautiful home in a gated community, and Tom just got a promotion and Kim drives a beautiful new Jag. Or maybe, Jim and Debbie, there doing great, just got back from Maui and look terrific with their tans and they are having a dinner party with their friends to enjoy their new infinity swimming pool.
    Their so successful and happy. Have you seen Dave, he looks great; he’s been going to a new gym and looks better than ever! Come on, no one can tell me this doesn’t happen.

    So there you have it, success and how our society dictates success and happiness is around material things, money, power, position, status in life.
    No one can tell me any different. I’ve experienced it from the other side, the non successful side.

    Many times success begets success, but how do you achieve the first step?

    • schmulie

      you have the wrong friends–i never hear conversations like this. these folks you refer to seem rather shallow.

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