Financial Reflections

Working on contract has presented me with a wide variety of opportunities.  I’ve been privileged to work for some of the largest companies in the world, and even work for a start up or two.  I’ve noticed themes that have run though all my employers, from the world-wide corporations, to the fledgling companies.  My observations have formed the rules I live by in the workplace as a contractor.  I call the The Contractor Rules.  I’m presenting them here, because I think they apply to everyone in the workplace, salaried, contractor or whatever.  And as many people have pointed out, one’s job income is often the key tool in building their net worth.  Here’s the first rule:

Rule One: You don’t decide how much you make, at least not directly. 

One continuing theme I’ve seen in every workplace has been the age old battle over wages.  Employees want to be paid more money, and employers want to pay less.

This has even gripped some of my contracting coworkers, causing them to make serious career mistakes.  One of them went so far as to try an end-around on the contracting company representing him to contact the employer directly.  The employer became frustrated and decided to hire someone else.  Both sides lost because the contractor didn’t understand the first rule.

The fact is, you don’t decide how much money you make.  That’s the harsh reality of life.  But your boss doesn’t decide how much you make, either.  The truth is, the market decides how much you make.  Nothing else.  Sure, your boss can decide to give you a raise if you work hard, but you’re usually stuck in a pay bracket based on your job description.  It’s the classic supply and demand curve for your skills that makes you the big (or small) bucks.

People pay higher dollars for everyone from sales people to software people because they can’t find anyone who can do the job for less.  Yes, they cringe when they put the salaries of skilled people in the budget, but they smile when they see results.  It’s no use to hire a $20,000/year sales rep that can’t close a deal.

If the results are there, the bosses will notice.  One headhunter I worked with said it like this: Executives don’t brag about the $15/hour person they landed to answer phones, no matter how good the person is at taking calls.  They do brag about the $400/hr guru they landed.

The good news is that you don’t directly decide what you make, but you can change the way the market looks at you.  So what can you do to change the market’s mind?  The fact is, most people have power over what their skills and job title are, at least in the long run.  Education can be an investment in the future.  That’s more than just a cliche.  One of my relatives was sick of his job as an RN.  Instead of complaining, he went back to school and became a nurse anesthetist.  It was over two years of hard effort, but he now make three times what he used to.  The market favors his new skill set much more.

And for those who are stuck in a position, sometimes a job (or even a career) change might be in order.  I’ve seen salaried personnel move up the ladder by finding jobs that give them vertical moves, or at least the potential for a move when they feel they’ve stalled.  A vice president at the first company I worked for gathered all the young staff together to try and talk us into staying.  There was a rash of recent hires leaving after just one to five years on the job.  She had a tough crowd to sell to.  She was obviously smart and hard working, but we all knew that she worked her way to vice president partly by making smart job changes.

Only you can decide what the right course of action is in your situation.  But I’ve seen so many people grumble about low wages without understanding the underlying forces that chose how much they make, that I thought writing this might help.  In the mean time, I’ll keep working on my skills. 

This article is part of a series.  Parts two and three are now available.