According to Adam Smith, five issues contribute to wages, ‘the agreeableness or disagreeableness of the [job], easiness and cheapness or difficulty and expense of learning, constancy or inconstancy of employment, small or great trust which must be reposed and the probability or improbability of success’.
DEFINING IDEA…
The tougher the job, the greater the reward.
~ GEORGE ALLEN, US POLITICIAN
Unsurprisingly wages are higher in those jobs that are disagreeable. The one that springs to mind is the person who cleans up a crime or accident scene once the police have left. Known as CTS Decon (Crime and Trauma Scene Decontamination), this niche area of the cleaning industry is both booming and lucrative. The ‘disagreeableness’ of the profession combined with the relatively few people with the stomach for it means that it is well paid.
How easy and cheap it is to train someone to do the job also plays a role in the establishment of wages. Stacking shelves in a supermarket, for example, doesn’t require much training and isn’t exactly difficult, subsequently the pay won’t be great. A veterinary surgeon, on the other hand, spends at least six years studying, and if you want ‘Tiddles’ to survive her brush with the Ford Laguna, you’ll need to pay for that expertise. A vet’s wages are therefore considerably higher than a supermarket shelf stacker.
For those not consistently employed, wages are also higher. A sheep shearer, for example, only works for part of the year and as such can charge more for his services when they are needed. In modern times, self-employed people of all sorts fall into this category and must pitch their services low enough to win business yet high enough to sustain them through the lean months.
Wages also vary according to the likelihood of success in pursuing that career and the amount of trust that must be placed in the person doing the job once they have qualified. Not everyone who wants to become a doctor or lawyer, for example, will successfully finish the training and go on to practice. Once they do, however, we are required to trust their knowledge and expertise, and consequently we pay for the peace of mind that a genuine professional can bring. This part of wages is usually closely linked to the length of training required to pursue a particular career.
Smith ends by drawing attention to one unusual profession that still offers profit potential, ‘The keeper of an inn or tavern, who is the master of his own house, and who is exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very creditable business. But there is scarce any common trade in which a small stock yields so great a profit.’
HERE’S AN IDEA FOR YOU…
If you have kids, make sure they understand the five variables constituting wages and consider them in their career choice. Like products, wages follow simple rules of supply and demand. If someone provides a difficult service or one in which not everyone can succeed, or that requires considerable training and trust in execution, then they will naturally compete in a limited market and their wages will reflect that.