Underpaid? How to understand it and what to do

Early in her career, Kelly Harry worked at a major news agency in New York as an account executive in advertising sales.

“I was making $40,000 a year, and I really thought that was a lot of money at the time, until I had a casual conversation with my coworker who was complaining about making about $102,000 a year. year,” Harry told CNBC. “It had never occurred to me until this conversation that I was seriously underpaid.”

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Harry, who is an immigrant to the United States through DACA, said she is grateful to work at a well-known organization. DACA, which stands for Deferred Action for Childhood Arrivals, is a federal policy that grants eligible young adults who were brought to the United States as children temporary work authorization.

She said she didn’t think about negotiating her salary when she received the job offer. This is not unusual; According to an April 2023 Pew Research Center survey, 60% of American workers said they did not ask for a higher salary when they were last hired. Of the remainder, 30% said they had asked for a higher salary and 10% said they did not remember.

“The difference between someone who often gets $55,000 and $60,000 is simply because person number two just asked for $60,000,” said Maddie Machado, founder of Career Finesse. “It’s not because they’re better at their job. It’s not because they’re more experienced. It’s just because they just asked for it.”

A pay gap between two comparable employees may also be due to market factors. terms. A phenomenon called “salary compression” can occur when new hires are paid more than longtime employees, because the recent hire was brought into the company at a time when the market valued their skills more highly.

“It’s possible that an objective person will say that you’re wrong, that these pay differences aren’t really different or that they have justifications,” said Peter Cappelli, a professor of management at the University’s Wharton School. of Pennsylvania and the University of Pennsylvania. director of its Human Resources Center.

When Harry first learned that her colleague was being paid 2½ times what she made, she did what career experts recommend: she went “back to the drawing board” and researched what the market demanded for his skills.

“The term underpaid should not be used to compare yourself to a colleague,” said Sho Dewan, career expert and founder of Workhap. “You have to compare it to yourself and the market, and there will always be a range in the market.”

“Compensation has many different elements,” Machado told CNBC. “It’s not a simple formula that years of experience equals this amount of money, education equals this amount of money, location equals this amount of money money.”

When trying to figure out where you fall in your position’s range, it’s safe to assume that “you’re probably going to fall somewhere in the middle,” Machado said.

It’s also crucial to consider your location, Machado said, because of the cost of living.

Only 34% of Americans are satisfied with their pay at work, according to a March 2023 Pew Research Center survey.

One option if you think you are underpaid is to request a salary adjustment from your employer. But career coaches say you should go into the conversation prepared.

“You should never bring up another coworker’s name in this conversation,” Dewan said. “You should never say, ‘I had a conversation with Henry. I know we had the same experience (and) the same skills. I realized he was paid 20% more than me. I want the same salary as him.'”

This is where market research comes in handy, along with the highlights of your performance review.

“You can’t just go to your employer and say, ‘I want to be paid more… just based on my vibe,'” Machado said. “When you go for that salary adjustment, you want to incorporate other data points (showing) the impact you’ve made to the company, because ultimately they might just find someone else who costs less to do your job too.”

It’s also important to avoid escalating into threats, Cappelli said.

“A lot of times your boss doesn’t want to let you go,” Cappelli told CNBC. “But the people at the top who are trying to hold the line on wages are just saying, ‘I’m sorry, we can’t do it. Good luck.'”

If your employer isn’t receptive to a salary adjustment, you can always consider leaving, but career coaches advise you to be careful how you go about it.

“If it doesn’t work out for whatever reason, that’s when you have to ask yourself, will I ever get paid what I’m worth?” » said Dewan. “And if the margins of your payment over market value (are) too high, that’s when you should consider other options.”

If you end up receiving an outside offer, you can try to use it to get more money from your current employer.

“There are some employers who really want you to shake them up in the sense that they will match the offer if you get it elsewhere,” Cappelli said. “It’s bad practice, but it’s quite common.”

“Sometimes it’s easier to jump ship,” Dewan said.

That’s what Harry did.

“I ended up finding another opportunity, which turned out to be much better. It was remote, in a… healthier environment,” Harry said. “At the end of the day, I’m now an assistant vice president. Without that experience, I probably wouldn’t have gotten here today.”

Watch the video above to learn more about what career experts recommend you do if you think you’re underpaid.