Why how much you make depends on the occupation, the company, and the location.
In this episode you’ll learn:
- Why some occupations pay more than others.
- Why the same occupation pays different amounts in different countries.
- Why the same occupation pays different amounts at different companies within the same city.
Show Notes
Yields and Land Use in Agriculture by Max Roser and Hannah Ritchie
Fraser Institute – Economic Freedom
Index of Economic Freedom – The Heritage Foundation
Why some jobs pay more than others: The key role of job titles – Ioana Marinescu and Ronald Wolthoff
Slower Productivity and Higher Inequality: Are They Related? – Jason Furman and Peter Orszag
The Formula – The Universal Laws of Success by Albert-László Barabási
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Episode Summary
The topics of income inequality, employability, and job markets across the world are often contributing factors in the ongoing conversation of how much you make in certain industries. On this episode of Money For the Rest of Us, David uses a personal interaction he’s had while traveling abroad to explore the idea of how much workers are paid in different areas.
Why do certain occupations pay more than others?
It’s a fact that certain occupations traditionally pay more than others. Doctors earn more than janitors, and lawyers are paid more than teachers. But why is this? David outlines two major reasons behind this wage difference: supply and demand for workers and scalability/perceived value. He explains, “Professions where there is a reduced supply of workers because there are high barriers of entry, they’re going to have fewer workers. If there is a demand for that particular service, then all things being equal, the pay for that particular occupation will be more.” He also says that a positions scalability and perceived value are contributing factors to wage differences.
Wages for the same occupation pay differently from country to country – here’s why
Even within the same industry and occupation, wages vary from country to country. This is because of a country’s ability to be productive in its industries. On this episode, you’ll hear why, “The ability to produce, how much output is produced per worker and income per worker is a function of that output per worker.” How much a worker is paid is also dependent on the level of economic freedom its citizens have. For the full explanation behind why countries that are economically free have higher levels of economic growth and therefore higher wages, be sure to give this episode your full attention.
Even jobs in the same city can have varying wages, but it’s not for the reason you think
When examining wage differences the same job in the same city, it’s important to recognize that the differences are often tied to the company, not the job or the location. More profitable companies tend to share the profits among its employees more than less profitable companies. David quotes Jason Furman and Peter Orszag in their recent paper by saying “Within labor income, the rise in inequality is largely between the average workers at different firms or establishments rather than between workers within firms.”
You can do a few things to protect your own ability to be employed with respectable wages
David explains that when it comes to employability, one doesn’t have to be extremely better than a competitor in order to be employable at a decent wage. He quotes Albert-Laszlo Barabasi in his book “The Formula: The Universal Laws to Success,” by saying “When you look at the different performance of one elite athlete to another, they win by just a little bit. Even a non-elite athlete or any particular skill, the performance that’s produced isn’t that dramatically different, especially compared to the success. Success scales because you have the network effect.” He continues by explaining that if you build a network, are unique in what you do, people will always want to hire you and pay you decent wages.
Episode Chronology
- [0:12] A bit of background on today’s question for Money For the Rest of Us
- [2:28] Why do certain occupations pay more than others?
- [11:36] Wages vary from county to country – here’s why
- [20:09] Even jobs in the same city pay different wages, and there’s a good reason behind it
- [25:52] You can do a few things to protect your own employability with respectable wages
Related Episodes
142: Why Are Some Countries Wealthier Than Others?
300: Ray Dalio and the Changing World Order
343: Why the Productivity Slowdown Could Lead to Lower Living Standards
