On the labour market, our career performance is valued by our salary and this money is spent on the things we need and want. The amount of our salary has a multitude of effects on our everyday life and its quality. There are even studies that have examined the connection between salary and personal happiness. According to the international salary portal, salary is still one of the most important criteria when considering a new job and survey results show that finding a better paying job tends to be a more effective strategy than negotiating a higher salary from a current employer. Why are people increasingly sensitive to how much they earn? Why is a salary such a critical part of our lives?
Growing number of single households
The number of people in the world who live alone is increasing dramatically. The trend of single households is growing around the world and brings with it new and specific types of behaviour. People favour self-realisation over making commitments. Single people often have a higher cost of living that multi-member households and often must rely on themselves and their income to cover all their expenses related to housing, meals, travel and hobbies. This increases the bond to career development, stable employment and therefore good income. Typically, this involves young people who have left the nest and are putting a priority on their career and education, and older widowed or divorced individuals. Being financially alone is a sufficient reason on its own to keep a more watchful eye on remuneration.
Real world salaries have not risen over the long-term
The world has seen a long-standing trend of low salary growth. Working people, especially in the USA and in Western Europe, have the feeling that their standard of living is not increasing from a long-term perspective. Simply put, they cannot afford to purchase more on their current salary. This phenomenon primarily affects the middle class in Western countries who have benefited the least since the 1970s from economic growth. There is also a fast-growing group of rich people, which amplifies these economic differences. Overall stagnation in real salaries means that a relatively large group of employees is dissatisfied with their income. The international survey currently shows that every second employee has the feeling that they are underpaid for the position they hold. If people themselves want to influence and systematically improve their standard of living, they seek out employers who offer better financial compensation.
A growing number of people are purposely going into debt
A stronger bond to regular income is also due to high levels of personal debt. People are under greater pressure to work if they have to repay their credit every month. This primarily involves mortgages and other types of housing loans. Eurostat compared average household debt to average household income and compiled a ranking of countries where households carry the most debt. Denmark, the Netherlands and Cyprus are at the top of the ranking. The results of the international survey confirmed that up to a quarter of employees are stressed by a lack of finances or other financial problems. People start to be the most sensitive towards their salary around their 30th birthday, when they begin to start their own family and resolve their personal housing situation.
Low financial literacy levels
Relatively few adults have mastered the principles to manage and plan their personal finances effectively. This was confirmed by the OECD’s international financial literacy test. The weakest areas of financial behaviour across the measures appear to be related to budgeting, planning ahead, choosing products and using independent advice. Take the financial literacy test for yourself. People are often unaware of the different ways they can save for the proverbial rainy day. The general rule in personal finance planning is that emergency savings should cover anywhere from three to six months of your salary, which should provide sufficient coverage for periods when we are out of work or find ourselves in an otherwise unforeseen situation. Receiving a salary from an employer is also the main source of income for most employed persons. This lack of a financial cushion increases dependency on a salary and sensitivity towards how much a person is able to set aside and save against their standard expenses.