Underpaid? How to figure it out and what to do about it
Early in her career, Kelly Harry worked at a major news organization in New York City as an account executive in ad sales.
“I was making $40,000 a year, and I really thought that that was a lot of money at the time, until I had a casual conversation with my co-worker who was actually complaining about making about $102,000 a year,” Harry told CNBC. “It never occurred to me until that conversation that I was severely underpaid.”
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Harry, who is an immigrant in the U.S. on DACA, said she was grateful to work at a well-known organization. DACA, which stands for Deferred Action for Childhood Arrivals, is a federal policy that provides eligible young adults who were brought to the U.S. as children with temporary work authorization.
She said she didn’t think to negotiate her salary when she received the job offer. This isn’t unusual; 60% of U.S. workers in an April 2023 Pew Research Center survey said they didn’t ask for higher pay when they were last hired. Of the remainder, 30% said they asked for higher pay and 10% said they don’t remember.
Why some workers are paid more
“The difference between someone who gets $55,000 and $60,000 a lot of times is just 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 is simply because they just asked for it.”
A discrepancy in pay between two comparable employees may also be due to market conditions. A phenomenon called “wage compression” can occur when newer employees are paid more than long-term employees because the recent hire was brought into the company at a time when the market valued their skills more.
“It’s possible that an objective person might say you’re wrong, that these pay differences are not really that different, or there’s justifications for them,” said Peter Cappelli, a professor of management at The Wharton School at the University of Pennsylvania and the director of its Center for Human Resources.
Do market research on pay and skills
When Harry first learned her colleague was paid 2½ times what she was earning, she did what career experts recommend: She went “back to the drawing board” and researched what the market was demanding for her skills.
“The term underpaid shouldn’t be used to compare you to a colleague,” said Sho Dewan, career expert and founder of Workhap. “It should be compared to you and the market, and there’s always going to be a range in the market.”
“Compensation has a lot of different pieces to it,” Machado told CNBC. “It’s not just a simple formula that’s like years of experience equals this amount of money, education equals this amount of money, location equals this amount of money.”
When trying to determine where you fall within the range for your position, it’s safe to assume “you’re probably going to fall somewhere in the middle,” Machado said.
It’s also crucial to factor in your location, Machado said, due to the cost of living.
How to request a salary adjustment
Only 34% of Americans are satisfied with how much they are paid at work, according to a March 2023 Pew Research Center survey.
One option if you suspect you’re being 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 co-worker’s name in that 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 that he gets paid 20% more than me. I want the same salary as him.'”
This is where that market research comes in handy, along with highlights from your performance review.
“You can’t just go to your employer and be like, ‘I want to get paid more … simply based on vibes,” Machado said. “When you go for that salary adjustment, you want to bring in other data points [showing] the impact that you’ve brought to the company, because at the end of the day, they could just find somebody else who’s cheaper to do your job as well.”
It’s also important to avoid escalating to threats, Cappelli said.
“Often 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 pay just say, ‘I’m sorry, we can’t do it. Good luck.'”
When to find a new position
If your employer is unreceptive to a salary adjustment, you can always consider leaving, but career coaches say you should be careful how you go about it.
“If that does not work out for whatever reason, that is when you need to [ask yourself], will I ever get paid what I’m worth?” Dewan said. “And if the margins of you getting paid versus what market value is [are] too crazy high, that is when you should look at other options out there.”
If you do end up getting an outside offer, you can try to use it to leverage more money from your current employer.
“There are some employers who really want you to shake them down in the sense that they will match an offer if you get it from someplace else,” Cappelli said. “It’s a bad practice, but it is pretty common.”
“Sometimes it’s easier to just jump ship,” Dewan said.
That’s what Harry did.
“I ended up finding another opportunity, which happened to be way better. It was remote, a … healthier environment,” Harry said. “Ultimately, in the end, I’m now an assistant VP. Without that experience, I probably wouldn’t have been able to get here today.”
Watch the video above to learn more about what career experts recommend you do if you think you’re being underpaid.
