5 Misunderstandings About Alt-Ac Salaries

A discussion about compensation.

May 3, 2015
What determines how much you make?  When negotiating salary in a new job, or a raise (yeah right) in an existing alt-ac gig, how should you figure out how much to ask for? 
We never really talk much about salaries in our alt-ac world. Money is largely a taboo. Talking about pay makes us uncomfortable. The result of not talking about money openly is, however, that many of us are really confused about compensation. My hope is that I can start a discussion about jobs and salaries, and that we can share with each other our questions and insights when it comes to our paychecks.
In this discussion I’m going to stick to alternative-academic (alt-ac) jobs. Mostly because the faculty labor market is distorted by both tenure on one end, and the oversupply on PhDs on the other. In short, the laws of supply and demand govern faculty wages less than alt-ac wages - although I’m happy to have that conversation.
When it comes to understanding the dynamics of alt-ac compensation, I’m convinced that most of us get it wrong. Here are 5 things about alt-ac salaries that cause us to get confused:
Misunderstanding 1 - Your Alt-Ac Salary Should Be Based On How Good You Are At Your Job:
We are all the stars of our own narratives, and we all think that we are better at our jobs than most everyone else. Really, is there anyone who thinks - “I’m actually only average at my job.” Just as everyone thinks that they are better at (insert the activity - driving, teaching, parenting, negotiating) than the average, all of us believe in our bones that we are better than the average person at our chosen professions.  
The first reality check is that all of us can’t be better than average at our jobs. The second reality check is, even if we are better than average at our work, the quality of our work performance does not determine our salary. We can be great at our jobs and still earn much less money than we think we deserve.  Why?  Because the only thing that determines how much money you can earn is how much money someone is willing to pay you. Your salary is based on your value in the market for labor.  We forget this because wages tend to be sticky. It is difficult for organizations to decrease pay to match current labor market conditions. If you want to earn more money then you will either need to leave your institution and work for someone who will pay you more, or convince your institution that the only way to keep you is to pay you what you can command from somewhere else.   
Misunderstanding 2 - Your Alt-Ac Salary Should Be Based On How Much Those Around You Earn:
When it comes to salaries, what people care about most is not the absolute amount of pay but rather the perceived fairness of the compensation. We set our level of fairness largely by what those around us get paid. There is no worse feeling than knowing what your colleagues earn. There is always, always, people who make more money than you. And it never seems fair. Those people who make more than you do less, are less valuable, and are less dedicated than you are.  
My advice is to stop worrying about your local comparative pay. Your salary is set by your value in the market for labor. If there is strong demand for your scarce skills and credential then you will earn more money. Give up the idea that salaries will ever feel fair. If you are not earning what you believe you are worth at your institution, then you will need to negotiate armed with comparable employment earnings data, and be ultimately willing to put yourself on the job market.
Misunderstanding 3 - Your Alt-Ac Salary Should Be Based On How Valuable Your Work Is To Your Institution:
Is there anyone reading these words who believes that your work is not critical to the success of your institution? Of course not. We all think that we are not only great at our jobs, we also think that our work is key to health of the college or university that pays our salary. 
The disturbing truth about our value is two-fold. First, we are all replaceable. When we leave the place goes on without us.  None of us are as valuable as we’d like to think. 
The second disturbing truth is that value does not equal compensation. We can be extremely valuable, but if the supply of people who can be equally valuable is large than the wages will be low. The more people who can do our work, even if that work is critical to the smooth running of the organization, the lower the pay will be.   
Misunderstanding 4 - Your Alt-Ac Salary Should Reflect Your Education and Experience:
We all think that our pay should reflect our educational levels and job experience.  In a certain sense this makes sense, as the more educated and experienced we are the better we are at our jobs. The problem is that neither education or experience determine pay. What determines your pay is the value of your work in the market for your labor. If your education and experience are valued in the market then your pay will reflect that value.  
Misunderstanding 5 - Your Alt-Ac Salary Should Be Based On Factors Such as Cost of Living:
The cost of living varies widely by location. Some schools are located in impossibly expensive places to live. Others are situated in communities with reasonably priced housing and good public schools. It feels as if pay should reflect cost of living. And in general, pay does. Wages will be higher in high cost of living areas, as schools will need to attract and retain talent.
The problem is that wages will almost never be high enough in high cost of living areas to make up for all the additional costs. The reason is simple. People tend to want to live in places that are expensive to live in. The whole reason that some places are expensive is that so many people want to be there. The net result is that salaries will feel inadequate against costs, and especially so when contrasted against peers working in similar jobs in cheaper places.  You can always try to leave your job in an expensive city, but be assured that there will be many job seekers behind you lining up to take your place.
Can you add to, dispute, or refine our understanding (and misunderstanding) of what determines our alt-ac salaries?
How can we talk about salaries when it is taboo to talk about salaries?
What are your thoughts about compensation?


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