Broken Baselines: How Poverty Breeds More Poverty

Over the years, a lot has been written on the causes of poverty and inequality. From housing to behaviours, social systems to the law, there are many reasons why people from different backgrounds end up in different situations, as well as how even those with similar interests and roles can end up making very different amounts of money.

However, despite this, I feel there’s one factor people tend to overlook. A factor that has a huge effect on circumstances and professional income. One which may in fact explain a lot about terrible jobs, low pay and even immigration all at the same time.

And that’s how people from different backgrounds have a different ‘baseline’ for what’s considered an acceptable wage/standard of living.

What do I mean by this?

Well, imagine you’ve got two kids straight out of university, both of whom want to be salesmen. One of these is from a working class family, one from an upper class one.

For the former, they might consider a salary about £15,000 an acceptable starting point. After all, their own parents, friends and neighbours may have made only a tad above that, and they don’t consider them poorly paid.

So they’ll find a sales job offering £20–30,000, think they’ve hit the jackpot and be happy with their wage. After all, they’re doing well relatively speaking (compared to their background), and they don’t see themselves as worth more money.

On the other hand, the rich kid has a different starting point and a different thought process. For them, their parents/friends/neighbours were generally well off, perhaps making well into realm of hundreds of thousands (or even millions) of pounds a year.

So their baseline is different, and reflects that. For them, £20–30,000 is insultingly low, and a wage they won’t accept because of it. Hence they’ll go off, find a different company (perhaps a financial services company) offering a wage in the hundreds of thousands, and take that job, seeing said amount as a reasonable amount instead.

Hence you get two candidates with roughly the same level of skill and experience making completely different amounts of money for the same type of job.

And I think that’s the cause of a lot of inequality right there. People with different backgrounds have different baselines for things like an acceptable pay grade, and don’t question whether their market value is significantly higher than that.

It arguably explains a lot of immigration complaints too. For example, do you ever wonder why you’ll see immigrants work for companies that are drastically underpaying them, like those dodgy farms in the Southern US, or H1B focused IT companies in general?

Well, it’s because for them, they’re still used to the ‘baseline’ set by their home country. For example, in certain parts of Eastern Europe, salaries are often around 10 times lower than they are in the US or Western Europe.

So when they come to a new place, then find a job paying them twice as much as what they’d make back home, they’re ecstatic. For them, it’s a huge jump, and onee which makes them feel like they’ve hit the jackpot.

But they haven’t. The market rate for their job isn’t twice as high in their new country, it’s ten or twenty times as high. Hence they end up walking into poorly paid roles with dodgy companies whose wages aren’t high enough to comfortably live on in the area they’re based.

And it doesn’t stop there. No, the dodgy baseline differences are also compounded by other factors too, such as:

  1. Family/social pressures. Since it’s very easy for a family or friend group unaware of the going rates for your field to think your new job is well paid.
  2. Wages being kept hidden overall. Which in turn keeps people in the dark about the ‘going rate’ in their company, and stops coworkers comparing salaries overall. This stops them taking notes, learning who’s making the most for the same job and realising how much they could have been worth in the first place.
  3. People in certain classes/situations not knowing the market rate for a certain industry or role. This is especially true of immigrants from another country, or people whose family members have never worked in the field they’re interested in. Someone whose family never had anyone go to medical school might not know how much a doctor should be making for instance.
  4. Negotiation skills being few or non existent among certain groups. People from wealthier backgrounds certainly seem to be better at pushing a hard bargain, or pitting companies against each other to see who can offer the better perks.
  5. And finally, crab/bucket mentality. It’s not as common as people believe it is, but there are definitely some families and groups who see people striving for success/abandoning their lifestyle/background as ‘category traitors’ and try their hardest to discourage their efforts.

Either way, the result is the same; people from wealthier backgrounds often get paid more to do the same job.

So how can we fix it?

Well unfortunately, I’m not really sure. Teaching everyone useful business skills in school might help, especially stuff like how to negotiate for better salaries/pay rises/job perks. As might giving out links to useful resources on an industry and the average salaries/conditions found there. Hell, those help regardless of your background; so look up what people in your situation are making for the same work and use that as your baseline instead of your family/friends/neighbours.

And to be honest? Perhaps just letting the internet do its thing may help too. After all, social media sites and forums often bring people of very diffeerent backgrounds together, and give them a glimpse in the lifestyles of people from situations very different from their own.

So perhaps sites like Reddit and Hacker News might shatter a few illusions there too. Give people a platform to discuss how much they’re making, and it’s sure to make more than a few of them question their current situation.

Finally, a bit more transparency in terms of wages wouldn’t go amiss either. That way, people can know exactly how much others in their field are earning, as well as who in their current workplace has managed to earn a significantly lower/higher salary despite doing the same work as everyone else.

Fix these things, and the baselines will shift, giving people the opportunity to earn what they’re truly worth rather than what they are or their family/friend group are merely ‘used to’.

Gamer, writer and journalist working on Gaming Reinvented.

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