Pay should not be viewed only in the strict sense of monetary compensation. Instead pay should be seen as an aggregation of 3 dimensions: a) Work impact and b) personal satisfaction and c) monetary compensation (obviously). Firms always try to maximize (not only competitive) this aggregate pay. The first two factors often reason out for the lower monetary compenation across various professions. Lets consider an example for each. Work impact - It is easier for companies to attract good talent with lower monetary compensation, if the job has potential to create huge impact. Agree? Example: Several of us would rather go for a job that has the potential to create a significant impact on society e.g., NGOs, consulting jobs etc. I heard a story of a consultant, who had recently completed a project with Bill and Melinda Gates foundation. According to him, the fact that he was able to mobilize one of the world's biggest charities to an appropriate channel for reaching the poorest in the emerging economies, compesated for more than 10 times its marginal lower salary compared to an investment banking job. Second case of personal satisfaction is much easier to relate to. Personal satisfaction has several components. One of the big ones is work-life balance. To make it more real. Oil refinining companies pay almost 3X to plain engineering gradutates as compared to average salaries to IIM pass outs. A major factor fo this being that the personnel have to stay in deep sea stations away from mainland for months.
Hence when we talk about market competive pay, we should look at all these factors together. A company would be able to offer a competitive pay only when it maximizes the sum total of these 3 aspects of compensation.
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