Dear Economist

How do I calculate an appropriate salary?

I have worked full time for six years and presently earn £40K. I am also about to attain chartered engineer status, which sounds good. However, I stumbled on an old letter the other day that confirmed my admission into nursery aged four, 29 years ago! Looking back at all the money invested in my more than 20 years of formal education, I feel short-changed by my income and quality of life.

Do you know how I can calculate a “fair” figure that will reflect my master’s degree and international experience? I want to use this as the minimum salary for my next job.
G

Dear G,

I’m not going to attempt to calculate your “fair” figure: it would do you no good. Employers care very little about what salary would be a fair reward for your background; instead, they want the best possible people for the lowest possible cost. Competition from other employers typically leads them to compromise on both counts.

Your fair figure might eat away still further at your fading happiness. It seems that you were satisfied until you reflected on your education and inflated your aspirations. This is sad but typical, if the economist Andrew Oswald is to be believed.

Oswald has compared people’s circumstances with their happiness. He finds that, other things being equal, happiness rises with money, good health and a successful marriage, but falls as a person’s “expected income” rises. Expected income is the income that another person of the same age, sex and education level would typically earn. In other words, more educated people have richer peers and so tend to be less satisfied.

What is especially sad is that your income would comfortably put you in the richest 10 per cent of UK citizens, who are themselves relatively rich. As for being short-changed, I doubt that you personally paid for your nursery education. Put away your admission letter, and forget about it.

Also published at ft.com.

15th of November, 2008Dear Economist • Comments off