Last year Tom Cruise was told by Paramount that his salary expectations were too high. It seems that when it comes to salary expectations, there appears to be a large gap between our perceptions of what we are worth and the realities. Part of the problem is that most of us think everyone else is getting more than us. For instance what proportion of Australians as a whole earn over $104,000 a year and what proportion of Australian managers earn over $104,000 a year? More of that later, but first it is worth asking how do we form expectations about salaries? What is a normal or fair salary for a days work?

Scott Highhouse, Margaret Brooks-Laber, Lilly Lin and Christiance Sptizmueller from Bowling Green State University* argue that it is easy to manipulate perceptions of fairness. For instance suppose you are offered an entry-level job with a starting salary of $62,000 and you are very content. Now suppose you receive a salary survey from a researcher investigating starting salaries who asks you to nominate which category your salary falls into: a) $64,000 or below; b) $65,000 – $74,000; c) $75,000-$84,000; d) $85,000-$94,000; e) $95,000 or above. You are no longer such a happy bunny because there are four response categories above your salary. However had the list of options been changed to provide lots options below your salary such as a) $46,000-$50,000; b) $51,000-$55,000; c) $56,000-$60,000; d) $61,000-$65,000 and e) $66,000 or over, you are likely to feel a lot happier about your salary. The reseachers found if you provide lots of options falling above the target figure, starting salary expectations rose by $3600.

Notice this has nothing to do with individual competence, the job itself, market forces or any other external feature of the work environment. It is simply a matter of perception. If you think many people are earning in a higher bracket than you, you will be less satisfied with what you get and will expect to be paid a higher salary.

It is gets even more complicated because our age, gender and ethnicity have all repeatedly been shown to influence our expectations of our worth. Generally the findings suggest that females and ethnic minorities have lower salary expectations. The point is, rightly or wrongly, salary expectations often heavily influence career choices, and yet it turns out that our expectations are highly subjective and easily open to manipulation.

We are bombarded with television and movie characters who have extravagant lifestyles that manipulate our sense of a normal pay packet. The net result of exposure to these characters is the same as being exposed to a salary survey where your pay appears on the bottom rung – everyone in the movies seems to earn more than us! We see so much focus on the salaries in the big end of town that the effect seems to be a shifting upwards in what we think we are worth.

I am in no way defending fat cats, or suggesting we settle for second best, however there is a large gap between perceptions of what others earn and the realities. The report entitled Employee Earnings and Hours was released by the Australian Bureau of Statistics last week and it provides a fascinating insight into what employees in Australia are really paid, and the figures may surprise you. In case you are wondering, based on the most recently released ABS statistics, only 3.3% of all employed Australians, and only 15.8% of managers earn over $104,000 a year. These figures drop to 0.9% for female workers and 7.5% for female managers. The average weekly total cash earnings in Australia (including overtime) was $1,102.00 for full-time adult employees in 2006. If you are looking for a reality check on salary levels, Rodney Stinson’s What jobs pay (York Cross) is a good starting point.

If our perceptions of what is a reasonable salary are so easily manipulated, and we continue to choose careers largely based on pay considerations, we are setting ourselves up for dysfunctional career choices and chronic dissatisfaction. A little reality checking may help you make better career choices.

Jim Bright is Professor of Career Education and Development at ACU National and a Partner at Bright and Associates, a Career Management Consultancy.

Highouse, S; Brooks-Laber, M., Lin, L; and Sptizmuller, C. (2003). What makes a salary seem reasonable. British Journal of Occupational and Organizational Psychology 76, 69-81.