Many people suffer some form of financial insecurity. Whether it be from credit cards, rent or unexpected emergencies, it is pretty difficult for many people to raise the funds necessary to make a living. You are often told that if you want to make a living, you should go get a job or that you should go to college, do a 4-year profession, become skilled in a subject, and then get a job. That sounds reasonable, but the problem with that statement is that most people live paycheck to paycheck and cannot afford nor have the intellect necessary to do the advice given. For this reason, they begin to question whether or not it is or was the right decision to go to trade school, university, the military, or a tertiary educational program. For that reason, it is important to go over why you get payed less!
Employee vs Employer
Are you an employee or an employer? This is the question that I ask for anyone that asks why they are getting payed less. If you are an employee, you are most likely getting paid via a wage or salary to make a living. If that is the case, then that is one of many reasons why you are getting paid less. In contrast with an employer, that makes income from sales or entrepreneurship, you set your income to a fixed standard. If you have your income on a fixed standard then you will not make as much income than an employer who makes most of their money on sales.
You have most likely heard that you shouldn’t start a business because it is more risky and that you should stick to a job. But the problem with that statement is that by having a job at a business you are actually in a more unstable position than starting and having a business in the 1st place. If you mess up as an employee, you may hurt the business a little bit, but the business will still go on. If you mess up as an employer, you not only hurt the business on a massive level, but you also hurt your employees and would have to fire your employees. For that reason alone, employers have to take on more risk and therefore will acquire more income than employees.
Another thing to understand is that, simply having a consistent income does not mean you have stable income! You can make minimum wage to make 5 thousand dollars every 2 weeks and still have unstable income because your expenses can override your income level. Where as if you become an entrepreneur and do a business, you can make, let’s say, a million dollars a month and then make 200k the next month and still not have your standard of living come close to it. The problem that most employees don’t understand about their income insecurity is that, they don’t make enough for their expenses to not catch up to them. If I make 1.5 mil gross with 500k net income along with 70k worth of expenses, then I still have 440k left, in contrast to making 100k gross with 80k net income along with 70k worth of expenses, I only have 10k left to spend on. In all, you need to take this into consideration when you are an employee.
Negotiation
Negotiating is apart of life. You negotiate with your friends, family, associates and any other human being. When it comes to getting a job, a raise, or creating a business, it matters as well. The reason why you don’t get paid as much is because your negotiating skills are not strong enough. You do not understand how much the market place pays for your job. You don’t understand that your job has a ceiling in which you can only make so much money. It is possible you may not even know that your job can be replaceable in many cases. When you negotiate, you need to understand that you are not simply negotiating in a vacuum, such as negotiating between you and the employer, you are negotiating in the market place in the sense that there are multiple market forces that can give you advantages or disadvantages in what you ask.
Ex. Working as a fast-food worker is seen as expendable because there are various individuals that can take your spot, many among them being teenagers. Fast-food employers know this so they use that as a factor to try and put downward pressure on wages in order to maximize on profits for themselves. Even if you have over a decade of fast-food experience, you would still be unable to negotiate for a higher wage because the market place deems that your skillset isn’t worthwhile. Now let’s contrast that with John the entrepreneur.
John the entrepreneur did a startup and raised over a billion dollars for his startup in order to have success. He was doing well for the first 9 years, however after the 10th year, the business started to decline in sales. Eventually, after some years of decline, the business shutdown and he fired tens of thousands of employees. Sad, I know. Later on in his life, John would try to do another startup and he would eventually be in competition with a fresh faced graduate, named James, from Stanford, who is summa cum laude in Computer Science and is working on their 1st start up. While in competition, John beats James and gets funding for his project. Now you may ask, what does this have to do with negotiations? Simple. Since, John had a track record of creating a billion-dollar company, its possible that he can do it again so many people who are willing to invest will look at john and see success in their future if they invest into him. Although James has a stellar academic record, he doesn’t necessarily have an industrial record and it is for that reason, many would be hesitant to invest into him. John can negotiate from his industry experience, James cannot. For that reason, negotiation can be the prime factor on whether you have success or not in making more money.
Market Place
Another reason why you get paid less is because the market place dictates that as an employee making their living from labor, you will ALWAYS be paid less. Let me explain. There are always more people willing to work a job, then there are people willing to start and scale a business. It doesn’t matter if you are a lawyer, sanitation worker, engineer, truck driver, medical doctor, or phlebotomist, if you have to depend on an agreed upon wage or salary, you will always be paid less than someone who goes on their own and build their own business enterprise. If you look into the people who build their own business, they most of the time start with little to no money. They have to build up their own business with their CREATIVITITY and have success. This is in contrast to you being an employee who already has the network, sales, marketing, infrastructure, and tasks given to them to accomplish.
When you are in the process of building your own enterprise, you do not have those variables given to you, however it is up to you to build and create those variables to give yourself success. You have the levers of control if you start your own business, meaning that if you fail, then you failed because you did not adequately provide products and services to sustain your business. If you are an employee, you can do as great as you can on the job, but you can still be let-go as well as have your pay cut because of the overall performance of the business.
Physical Labor vs Mental Labor
If you have to get paid using your physical labor, then you won’t get as paid than someone using their mental labor. Think about the people who get paid the most and the people who get paid the least. Most people who get plenty of income are people who are typecasted as white collar in contrast to people who don’t get as much income are typecasted as blue-collar. The person laying the bricks of the house, does not get paid as much as the person who the business deals for the house to get paid. The person that works fast food does not get paid as much as the person that operates the fast food franchise.
When you do physical work, you can only do so much at a time as well as scale. You can not cut multiple peoples’ hair. However, you can always sell hair products and services to multiple barbers that cut hair. You see the difference? The physical act of cutting hair is not going to net you as much income as the mental act of selling hair cutting products to barbers. If you want to make more money, you have to get more creative in what you do.
In all, you need to take an active entrepreneurial approach to your economics instead of a passive employment approach to your economic situation.
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