Here’s a seemingly simple question: Are high-paying jobs desirable?
It seems like the answer here is an obvious “yes.” But there’s more to the story; otherwise, this would probably set a record for the shortest blog post on this website. So, what are the subtleties here?
The reason the answer might seem like an obvious “yes” is that it’s easy to respond by answering a slightly different question: Does higher pay make a job more desirable? That is almost certainly an obvious “yes” for almost everyone. All else being equal, the higher pay a job offers, the more desirable that job will seem.
However, frustratingly, all else is rarely equal. And while a job being higher-paying makes that job more desirable than it otherwise would be, it doesn’t follow that higher-paying jobs are intrinsically more desirable. Pay is, after all, compensation. Frequently, jobs that are widely considered undesirable must offer very high pay to compensate for the unpleasant nature of the job. So, in many cases, a job’s high pay can be a signal that the job is actually very undesirable.
It works in the opposite direction as well. Low wages can be a sign that a job is highly desirable. The desirability of that job is itself something that drives down the wages of the job. People don’t require as much compensation to be willing to do something they find pleasant and enjoyable. The idea here is what economists call compensating differentials. A job being more desirable lowers that job’s pay, all else being equal, and the undesirability of a job increases its pay, all else being equal.
Two things I’ve recently read brought this idea to mind. One was in the book The Economic Consequences of U.S. Mobilization for the Second World War by Alexander Field. There were many kinds of shortages throughout the economy during the war, and one major shortage was for labor. This shortage was, itself, in part a result of the draft. That’s partly because everyone drafted into the military was not available to other industries, of course. But that’s not the whole story. Field also notes that “defense plants faced an exodus of workers” as huge amounts of the labor force moved “to farm employments, not because those jobs paid more, but because such workers enjoyed an immunity from military service” and were thus exempt from the draft. This exemption, Field writes, “reflected the power of the farm bloc” and as a result “agricultural workers were passing up the higher wages in defense plants for fear of losing their deferment.” Draft exemption was a huge compensating differential that, for many, more than offset the lower wages of agricultural work. So we would be wrong to infer that the lower wages of agricultural work were a sign those jobs were undesirable – in this case, the opposite is true. The jobs could be lower paying precisely because they were, to many, much more desirable.
The second thing that reminded me of this idea was my surprise at learning the salary range for astronauts. Apparently, the yearly pay range for astronauts is between about $66,000 on the low end and upwards of $160,000 on the high end. Now, it’s not exactly as though being an astronaut pays poverty wages – particularly at the high end. But at the same time, being an astronaut is very difficult and demanding work, both mentally and physically. The dangers associated with the job are obvious and significant. Even a yearly salary of $161k seemed surprisingly low to me, given the demands and risks of the job.
At least, that’s how it seemed until I thought of the compensating differentials. Becoming an astronaut isn’t a career you sort of stumble into. It’s a job that people dream of from their childhood and put years of focused and dedicated effort into pursuing. I’m willing to bet that being selected to become an astronaut is, in each and every instance, the fulfillment of a lifelong dream – and how many people, upon finally reaching that threshold, will say, “Actually, given the demands of this job, the pay seems a bit low, so I think I’ll pass”? Not many, I suspect. Plus, whenever you are met with the question “So, what do you do for a living?”, you’re almost guaranteed to have the respect of anyone you answer. The high social status of the job and the dream fulfillment it represents are compensating differentials that explain why the wages aren’t higher despite the danger and physical and mental demands of the job.
The upshot – we should resist the urge to see people in high-paying jobs as inherently in an enviable situation or seeing people in low-paying jobs as being in unfortunate situations. Some people are in stressful, unpleasant jobs they truly dislike but put up with it anyway because the job pays so well. And other people make relatively little money but spend their time doing something they find fulfilling and rewarding. Compensating differentials are not all there is to the story, of course, but the idea can remind us that we shouldn’t confuse how well a job pays with how desirable it is – and that often, the fact that a job pays well is a clear sign that it’s not a desirable job at all.
READER COMMENTS
Daniel Greco
Jan 4 2024 at 11:05am
This should be highly salient to us academics, many of whom have the self-conception that we went into academia knowing we’d be paid less than if we’d gone into a different industry, because the non-monetary benefits of the job (we get to talk and write about stuff we find interesting, with flexible hours) are considerable. While I’m certainly biased (I like to think I could’ve done quite well in the private sector, so this is a kind of flattering, identity-protective narrative I’m weaving), it strikes me as pretty plausible!
Kevin Corcoran
Jan 4 2024 at 11:34am
What you say here also mirrors something Bryan Caplan said in one of his courses I took at George Mason University. He talked about how one of his peers from his Princeton PhD program went on to become some kind of quant, as opposed to moving into academia like Caplan did. While that person’s career path was far more lucrative in terms of pay, Caplan still found his situation as a much lower paid academic far preferable. He loves teaching, and when he’s not teaching, he spends his time getting paid to read and write about anything he finds interesting. To him, that kind of compensating differential more than made up for the salary disparity.
Dylan
Jan 4 2024 at 11:36am
I might revise that idea about making more outside of academia too. About a decade ago I worked in M&A and part of the due diligence process was looking at headcount and salaries, so I’ve looked at lots and lots of companies with PhDs in hard sciences on the payroll. These are people who do real work for a living, developing new drugs, better fertilizers, things like that. And, the median salary was around $65K. My sample was biased towards smaller companies and they typically weren’t the super shiny venture backed startups either, still I found that number shocking.
Matthias
Jan 6 2024 at 4:46am
The compensation in finance and software is certainly a lot higher than that.
Dylan
Jan 4 2024 at 11:28am
Kevin,
Interesting piece as always and while the rational part of me knows you’re right, I have to say it doesn’t jive well with my lived experience. I’ve had a wide variety of jobs across my career, and my income has jumped around in a very non-linear way. One thing that I’m pretty sure of though, is that if you plotted how hard I worked at each job against income, the slope would be clearly negative. Do the same thing but substitute the skills I needed to do the job (not get the job, since those were clearly not the same). My last job was the highest salary I’d ever been paid, and while I worked, nothing I did was beneficial to the company. I had colleagues that had been there for years, and like clockwork they would be switched to a new project team every couple of months, without ever having had a chance to make progress on the last. Another friend got a notice that her team was disbanded, but they had 6 months before they would be laid off. They were supposed to keep working during that time, but someone shut off the tools they used to do their work, and no one was going to look at it anyway, so they just sat around. Still another was hired on to do internal event planning a year ago, but they don’t have a budget to do any events. So, outside of making one plan for an event whenever they do have budget, she has just kept collecting her 6-figure salary and attending a few remote meetings a week and looking for something else where she hopes she can actually feel useful.
Whenever I tell these types of stories to others who have been in the corporate world, I expect shock, but I just get lots of head nods and their own stories. It’s like a generation of highly educated and capable folks have been put in a corporate version of the NYC Rubber Room
Henri Hein
Jan 4 2024 at 2:55pm
Dylan,
These are interesting stories and I believe them. I’ve seen similar situations in my own stints as a corporate grunt. We need to be careful about selection bias, though. When we hear about the person with a 6 figure salary and velvet responsibilities, it stands out and we remember it, but we never hear about the 10 co-workers that were plucking away hard. Because that’s the norm.
Dylan
Jan 4 2024 at 10:12pm
Of course you’re right, I want to make a clarification though, I’m not talking about individual slackers that are pulled up by the efforts of the people around them. The people I’m thinking about were generally smart, hard working, and at least initially motivated. They just didn’t have anything to work on. And, this was a whole division of a couple hundred people that didn’t have a purpose beyond empire building inside the organization.
I wrote another comment that got caught in moderation, but I think fits in better with the context of the post. Some people I worked with were basically OK with the situation, they collected good paychecks, had decent folks that they were working with, and didn’t much mind the fact that half of them were paid to fill in holes that the other half were paid to dig. For some it was torture though, and a number of people left to work harder for much less pay because they needed the feeling of actual accomplishment.
Emily
Jan 4 2024 at 11:36am
There’s also the matter of deferred salary. Some astronauts are career military, where much of the salary is deferred until retirement. And many have had very impressive post-astronaut careers. Two have been senators. This is not surprising — it’s hard to say how much of this is causal vs. the same qualities that made them astronauts helped them succeed after.
But in general, if you are looking at jobs that are very high-prestige and don’t have matching pay, you may be missing part of the equation if you’re not thinking about the other opportunities the job opens up.
Matthias
Jan 6 2024 at 4:50am
You need to be careful: astronauts are selected from very capable people. So them doing impressive and lucrative afterwards might have been just due to their own ability, and would have happened without them becoming astronauts. Thus we can’t necessarily infer that the astronaut job opened those doors.
Dylan
Jan 4 2024 at 11:44am
One more thought, this surprisingly aligns with a concept that I think David Graeber raised in Bullshit Jobs. Basically, the idea that if you’re working on something interesting that matters, that is supposed to be the reward and so you deserve less pay. He came at this pretty negatively IIRC, but without the value judgement, I think he’s largely right.
You give the examples of astronauts and academics. But, I’ve also seen it a lot in the corporate world where people willingly leave high paying jobs that involve very little real work, to go to a startup where they will work much harder and almost certainly have a lower ROI (financially) but, they get the reward of feeling like the work they do matters.
john hare
Jan 4 2024 at 5:29pm
For some, the desirability is to have little responsibility and little effort required. One can be skilled at anything. I am referring to those that take a job where a 30 minute orientation is sufficient to perform.
Anders
Jan 4 2024 at 5:44pm
Are we really systematically considering high paying jobs as more attractive? For artists thriving by doing something they love, perhaps? But oil engineers toiling in the Nigerian delta? Investment bankers who routinely take decisions that can cost billions and for whom a semblance of work life balance is illusory?
Or did Bill Gates tinker in his garage dreaming of becoming a billionaire? In fact how many entrepreneurs saw that as the main incentive? And does it not seem like Gates is much more happy pouring his energy into the work of the Gates foundation than as an introvert steering a huge corporation?
When I spent a year at a US high school, what really struck me was that when asked about life goals, a third of more responded to make lots of money. It was, I discovered neither a provocation nor crassness, but a cultural marker. Later, I found a survey comparing responses by Swedish with American entrepreneurs. Among the former, things like autonomy and fulfillment dominated, only half responded to make a good living, and noone lots of money. Among Americans, over half picked the latter. Yet apart from scale and differences in risk aversion, traits and outcomes were similar.
So why is this, and why cant I think of entrepreneurs where it seems possible that wealth itself drove them most of all? Maybe finance, maybe some rent seeking entrepreneurs, and, why not, President Orange, but Walmart? Bezos? It is true that America is more entrepreneurial than Sweden, despite Sweden beating states like California on almost every aspect of economic liberalism and by a wide margin on regulation (except climate change). But scale and less risk aversion could explain it.
What do people think? I have no compelling theory…
David Seltzer
Jan 4 2024 at 5:58pm
As in life many things are relative. In the mid 80’s, I partnered with a trader who now manages close to $60 billion. The partnership lasted for nearly two years. I was stacking paper until the environment of verbal abuse and 70 hour work weeks made life miserable. If I remained to the present, my net worth would be nearly a billion. BUT…I would have had to stay. some would say the cost of my trade-off was enormous. Maybe but I’ve done everything I wanted and am comfortable with the wealth I’ve accumulated running my own shop. Choices in the guise of preferences are subjective.
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