Pricing
When you buy a product, you have a budget in mind.
When others "buy" you, how much should they pay you?
Why should anyone pay you more?
If you can innovate consistently, then you can always maintain premium pricing.
Otherwise, your product will lose value and you will become a commodity.
When the first iPhone was launched in 2007, it was priced at US$499 for the 4GB model and US$599 for the 8GB model, both requiring a 2-year contract.
Fast forward to iPhone 14, launched in 2022, the 128GB model is priced at US$799. The most advanced iPhone 14 Pro Max with 1TB of memory is priced at US$1,599. Both with no contracts.
The iPhone 14 is the 16th generation of the iPhone series, which means Apple develops one new generation of iPhone every year! It has consistently maintained its lead as the most advanced and expensive smartphone in the market.
Are you able to innovate yourself like an iPhone? If you can innovate consistently, then you can always maintain premium pricing. Otherwise, your product will lose value and you will become a commodity.
Without going into all the latest features of the iPhone, let’s look at how professionals are priced in the job market.
A Brief History of Salary
Based on archaeological findings, the workers in Mesopotamia received daily beer rations for their work. The beer is represented by an upright jar with a pointed base.
The deal is simple – the more you work, the more beer you get. A very simple equation. I’m just not sure that the workers can remain productive over many consecutive days.
The employer is the government of Mesopotamia, which includes the ancient civilizations of Sumer, Assyria, and Babylonia. The location is in modern-day Iraq. The cuneiform that shows the daily beer rations is dated back to 3100 BCE, which means that the society is fairly advanced and well organized. It has a large workforce that provides labor and it has sufficient food to establish large settlements.
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Salt in the Bible
In the Holy Bible, the word “salt” first appeared in the book of Genesis, where the phrase “Salt Sea” is mentioned (Genesis 14:3). Later, Lot’s wife was turned into “a pillar of salt” (Genesis 19:26). In Exodus 30:35, the Lord was giving instructions to Moses to “make an incense blended as by the perfumer, seasoned with salt, pure and holy.”
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Salt is an important part of work and worship in ancient civilizations. Therefore, salt production was strictly controlled by the monarchy or ruling elite.
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Worth One’s Salt
When the idiom, worth one’s salt, is used, it is referring to someone who is competent, whether it is a doctor or an accountant. The idiom goes all the way back to the Roman Empire.
The Latin word for salt is sal. Salt was a valuable commodity in Roman times and is referred to as “white gold”. Salt is in high demand as it is used in preserving food like meat and fish. Think about prosciutto (ham or salted meat) and baccalà (salted cod).
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Being a valuable commodity, soldiers in the Roman army were sometimes paid with salt instead of money. Their monthly allowance was called salarium.
The Latin word sal became the French word solde, meaning pay, which is the origin of the word, soldier. The French word for salary, salaire, comes from sal as well.
That is the origin of the English word salary.
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Source: Salt: A World History, Mark Kurlansky, 2003
Scarcity
If your skill, knowledge, experience, and network are in high demand and low supply, you can always ask for a higher price.
Seniority
In your society, does your profession value experience? Can you ask for more as you accumulate years?
Last Drawn Salary
The salary market is transparent. Not revealing your salary does not make it easier to discuss your next salary.
Scarcity
Diamonds have an artificially high price because they are perceived as scarce and precious. The marketers have done a fantastic job to convince consumers that “diamonds are a girl’s best friend” and “diamonds are forever”.
Certain professions in our world are valued higher than others.
In general, doctors and lawyers are paid higher than teachers and accountants. Salespeople usually have higher salaries compared to engineers and technicians. IT engineers and technicians are typically better remunerated than healthcare workers.
The general comparison above might be true in many countries, but it may be different in some countries or cities.
Salary is not a true reflection of skills and competence. Instead, it is based on what is valued by the society and availability of talents (or the lack of availability, i.e. scarcity).
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For example, many companies are experiencing the need for digital transformations without staff to create the necessary upgrades. The shift has created a scarcity of the required skills. If you have the right IT skills, you can command a premium in the market today.
Due to the nature of IT work, even if your country may not pay you good local salaries, you can always offer your skills to companies in developed countries. You may not need to relocate yourself to enjoy good salaries.
Besides, salaries are also influenced by the country’s social policy, income tax and pension scheme.
Seniority
In the traditional way of increasing salaries, the older you get, the higher your salary. In Asian countries like Japan, the seniority-based system is still very prevalent.
In contrast, most Western countries have adopted a performance-based salary system. Yet, a professional in his 40s is likely to earn more than someone in her 20s or 30s, if they are in the same job.
Experience and track record are valued in many jobs. But it is not a given.
In many professional sports, the peak earning period is typically in the 20s. There are some superstars who can continue performing at a high level in their 30s. There are limited sports players who can perform at the peak level in their 40s and beyond. Golf is probably an outlier.
On the other hand, music artists can perform into their 70s. The Rolling Stones is a legendary example. Mick Jagger, the lead singer of The Rolling Stones, and Keith Richards, the lead guitarist, are both 80 years old in 2023. Their career spanned six decades!
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Does the value of your profession increase as you grow older and work longer?
Last drawn salary
As a headhunter, one of the standard questions that I ask every jobhunter is what is the last drawn salary. Most of the time, candidates are quite transparent and are willing to share details.
But there are occasions when candidates are quite secretive about their salaries. I usually respect their need for privacy, but it makes my job more difficult. I try to get a ballpark figure, especially on their expectations.
My clients do not like surprises. It is often a dealbreaker if the expected salary exceeds their budget. I have not yet worked on a case that the client has an unlimited budget.
In recent years, I have met candidates who believe that sharing their last-drawn salaries will limit their potential in getting higher salaries. I have read articles that propose jobs should have standard salaries. Therefore, people start to assume that the last drawn salary should not be the basis of discussing the next salary.
I don’t buy into this argument. While I understand that there are candidates who may be treated unfairly due to their lower salaries, not sharing your current salary is not going to make the hiring process easier.
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The exception is that your skills and capabilities are extremely rare. In that case, based on the scarcity principle, you can ask for any amount of money and you may get it. What you are getting today is irrelevant. But how often does that happen?
I believe that the salary markets in most countries are fairly transparent. It is possible that your salary can get adjusted quickly if there is a big discrepancy between what you are getting today vs. what companies are willing to pay. This is especially true in fast-growing emerging countries.
China gives a good example where salaries have increased very quickly in the last two decades. At the senior executive level, salaries are already among the highest in Asia. In some situations, due to the shortage of talent, salaries are higher than in developed countries.
Vietnam is experiencing a breakneck growth in recent years. Therefore, salaries are climbing very quickly as well. But once growth slows down, salary growth will taper down as well.