Why having some skills may not guarantee income?
This is not a simple question to answer, else poverty would have been solved in our societies.
We will investigate some of the aspects to this question and try to find an answer to this puzzle.
The world has many billionaires, but the majority of the human population generates very low income. This is a function of 2 factors primarily -
where you are born, and
what skills you have
Since you do not have control over where you are born, in which country, who your parents are, the only controllable factor in your hand is to develop monetisable skills in order to generate income.
The purpose of this article is to talk about the relationship of skills to income in the real world, but not to solve the problem of jobs and income inequality.
The availability of jobs and the value of commercial contract or the salary of a job or a task also impact the income of an individual besides the skill-sets he or she possesses.
So, let us attempt to formulate the equation of income for a seeking individual, in order to understand the relationship between the different variables.
First, what are the different variables that affect the income of an individual?
There can be multiple variables, we will try to look at the most fundamental ones.
Availability of jobs (demand)
Abundance of labour (supply) with a given skill (abundance)
Expertise of an individual in a given skill (expertise)
Commercial value of the contract for such jobs (commercial)
Demographics of an individual ( we will ignore this one - as this is not in anyone’s control)
Time dependence of each of these variables
Thus, the equation can be stated as
Income (time) = F (demand, abundance, expertise, commercial, time)
The dependent variables are not entirely un-correlated variables, but will have a direct relationship with the demand variable. Hence, we may remove the demand variable from the equation.
Or, Income (time) = F (abundance, expertise, commercial, time)
Rewriting the income equation from basic tenets throws something interestingly close to this relationship.
Income can be broken into components, which equal
= Commercial rate for unit work * Work done
= (Commercial rate) * (Work done/ Time) * Time
= (Commercial rate) * (Probability of selection for a job) * (Ability to produce
outcomes/ Time) * (Outcomes/ Time) * Time
= (Commerical rate) *1/(Abundance of supply)*(Expertise)*(Outcomes/Time)*Time
To simplify this equation further, we can write these as separate functions of the time variable, as follows,
Income (t) = K(Constant) x Expertise (t) x Commercial (t) / Abundance (t) x Time, where t represents time
This means that income is directly proportional to expertise and the commercial value of the skill, and is inversely proportional to the abundance of the skill, relative to the demand for the same.
This mathematical framework generates multiple corollaries, which we can observe in the real world.
For a fixed demand,
1) Jobs which have low expertise and high abundance - Low salary ( delivery boys )
2) Jobs which have high expertise and high abundance - Medium salary ( sales )
3) Jobs which have high expertise and low abundance - High salary ( developers)
4) Jobs which have low expertise and low abundance - Low salary ( niche )
Demand is driven by various macro-ecomonic factors and agents like capitalists, governments, corporations, and hence changes over time, thus income also changes with time.
For an invidual who is looking to generate/ increase income, what are his/ her options?
Develop expertise in a skill-set that has high commercial value - e.g. programming skills in today’s world
Choose a skill-set which has relatively high commercial value even with low / medium expertise - A python programmer with low expertise will earn more than a content writer with high expertise
Choose a relevant skill-set that has commercial prospects over time, as demand for such skills may sustain or even grow over time
Develop multiple skills with some expertise as the demand for one skill may decrease quickly due to technological revolution or uncontrollable macro factors
Continue to increase expertise in a skill set over time, as the potential to monetize a skill at same level of expertise may decrease over time, as abundance of such skilled inviduals will definitely grow
One simple way to represent this idea diagrammatically is as follows for a given skill.
Building hypotheses from this graph:
For different skills, what will change are as follows:
At what level of expertise, monetisation can start - for some skills, more expertise (more effort) may be required to even generate basic income
Level of monetisation at a given level of expertise - for certain skills, more salary at low expertise (low / medium effort)
Since the abundance of other skilled inviduals are not in your control, as an individual you have fundamentally two control parameters
Choosing the right skill (right commmercial value) for yourself
Developing a desired level of expertise in the same skill
However, since everything changes with time, few other strategies need to be pursued:
Upskill / develop multiple skills (diversify risk)
Increase expertise in monetisable skills
As an individual, you have finite time to upskill, or put effort to develop skill sets, thus making smart choices are necessary - based on passion, access to resources, trainers, cost of acquiring skills, etc.
By now, you may start recognizing that doing all these is no mean task for an individual, and support of any nature is rather welcome!
Thus, there is always a continual need for collective effort by the public and private institutions to build relevant skilling initiatives, educational policies, frameworks, resources, scholarships and guidance to help seekers to achieve their skilling objectives.
To summarize our learnings and to answer the question that we raised in this article, one can say that