Stephen Monrad

People don’t get frustrated with low pay, they get frustrated with pay that is low relative to pay other people they know get. The question isn’t “Am I getting fairly compensated for the work I do?” The question is “Am I getting paid fairly compared to what others are getting paid?”

I was working for the government and was furious when other people doing similar work to me managed to get a promotion before I did. I thought that I was actually doing better work than some of the people who got the promotion. The funny thing is that I was angry even though the promotion wasn’t that big. It only amounted to a couple of thousand dollars a year. It wouldn’t make a material difference to my life.

I was angry because I didn’t think it was fair.

It is okay to pay people different amounts so long as there is a good story to explain the differences. It doesn’t have to be a great story, it just has to be plausible. It’s okay to pay higher wages to people with more skill, seniority, responsibility, or talent. There are plausible stories for why these people deserve higher pay. What won’t fly is to pay your friends more than your acquaintances or people with blue eyes more than people with brown eyes.

I’m not saying that paying different wages to different people is a good idea. It only makes sense in terms of other ends, such as providing incentives. If different pay levels are going to be used, though, I think it is more important that there is a good story to explain the differences than to get the magnitude of the differences exactly right.