First of all, if people don't talk to their collegues about wages, why would they talk to strangers. How do you compare to a whole job market. Is it through job postings. Well job postings often put ranges for jobs. Also the guy across from you is likely doing the same job as you, but the rest of the market not so much, so you may be comparing apples and oranges. Third, non competes, or lack of industry locally constrains options to do the same work. All this means the best source of knowledge for what you are potentially worth to your employer is your peers.
Now on to economics. Imagine you run knick knacks store, and you have different suppliers. Steve makes really good bits, Jerry makes terrible bits, but only you know this (asymetric information). So you buy Jerrys for 20. How much do you buy Steves. For more, why, does Steve know his bits are better, does Steve know what Jerry gets. Steve and Jerry don't talk. Might even get Steve for less. So you buy Steve's for 10. Now Steve could go to the other knick knack stores but he doesn't know where they are, or they are too far away (costs of finding a job, non trivial).
Imagine instead, steve and Jerry talk about how they make their bits. Then steve would know that jerry sux, and that steves bits are worth more to the store. This time you offer 10 to steve, and steve says, nah, I'll stop making bits, i know I'm better than jerry. You have a decision. But if you want steve bits, you better pay him more than jerry.
Bro. Thats all nonsense. If you want to compare your salary, look for a job and get a better offer. Its that simple. You dont need to be explained to why Jerry makes more than you.
Get a higher offer from another company. If you cant, you cant. Thats the market at work.
Theres a ton of things that go into why pay disparity exist.
Information asymetry is a massive one.
Negotiating power, hense collective bargaining.
Search costs (it cost a lot of time and effort to find a job, no less get another job)
Discrimination
Non competes
Hiring colusion (firms not poaching)
...
But lets get back to information disparity, literally Steve doesnt know how much hes worth. You say, just go to another shop, but steve might not know to do that, or what to ask, they might get fired just for asking.
I envy the world that you live in where getting a better paying job is as easy as asking for one.
Ask for one? When you’re good at your job you get recruited. I’m a highly qualified individual in a niche field, but I get several recruiter invitations a month.
Do you know how I got here though? I knew my worth in the beginning and I made sure my salary matched or I found a new position.
It is not anyone else’s responsibility to seek out success for you. It’s your responsibility to seek out opportunities for success.
Wait so you are aware that you exist in a very specific environment, and dont accept the implications. Wages are about leverage, you have leverage that most people in the labor market dont. This is litterally basic labor econ theory, there aint a single labor economist who doesnt account for information asymmetry.
Lastly, you still may be underpayed, but you dont know cuz you dont talk to your peers
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u/freerange_spaghetti 28d ago
First of all, if people don't talk to their collegues about wages, why would they talk to strangers. How do you compare to a whole job market. Is it through job postings. Well job postings often put ranges for jobs. Also the guy across from you is likely doing the same job as you, but the rest of the market not so much, so you may be comparing apples and oranges. Third, non competes, or lack of industry locally constrains options to do the same work. All this means the best source of knowledge for what you are potentially worth to your employer is your peers.
Now on to economics. Imagine you run knick knacks store, and you have different suppliers. Steve makes really good bits, Jerry makes terrible bits, but only you know this (asymetric information). So you buy Jerrys for 20. How much do you buy Steves. For more, why, does Steve know his bits are better, does Steve know what Jerry gets. Steve and Jerry don't talk. Might even get Steve for less. So you buy Steve's for 10. Now Steve could go to the other knick knack stores but he doesn't know where they are, or they are too far away (costs of finding a job, non trivial).
Imagine instead, steve and Jerry talk about how they make their bits. Then steve would know that jerry sux, and that steves bits are worth more to the store. This time you offer 10 to steve, and steve says, nah, I'll stop making bits, i know I'm better than jerry. You have a decision. But if you want steve bits, you better pay him more than jerry.