Split the difference.
A video created by Indeed called “Who is underpaid?” starts with a social experiment. A participant opens with this: “The fact that women only get 81 cents to the dollar, like, that’s a fact. Everyone knows that.” Then a narrator begins, “Turn your camera off if you make over $100,000. Now $90,000.” And so on. The negative emotions and division the experiment generates in its participants are obvious.
“Annoyed,” said one participant. “Am I valued as a human being?” said another. “I put in my best effort, so it’s heartbreaking.” Another said, “They’re doing the same thing you’re doing, the same passion you’re doing, but they make $15,000 or $20,000 more than you do.”
The narrator concludes, “Now turn your camera back on if you think sharing your salary can reduce the pay gap.” The video ends with this imperative: “Share your salary.”
To speak bluntly, this experiment is stupid.
There is an obvious correlation for certain variables that this raw 81-cent narrative completely ignores. On average, women work fewer hours than men and in less demanding jobs. Even the BLS says this: “On the days they worked, employed men worked 52 minutes more than employed women.” That means the average man works roughly 17 hours more a month than the average woman, and that difference shows up in earnings. Controlling for hours worked alone reduces the raw pay gap by over 18%. Similar results come from controlling other variables like industry, education, marital status, and more, virtually eliminating the pay gap. In fact, earnings for women working 35 to 39 hours were 7% higher than men’s working the same hours.
Age alone, as I’ve written before, has a huge effect on earnings and wealth: Many sources talk about wealth differences between races. But it helps to know that the median age for American whites is 58 while the median age for American hispanics is 11, which means whites have on average five decades longer to accrue wealth and the requisite experience to earn high salaries.
Regardless, ambition and skill are worth something to an employer. One VP of engineering at Google said back in 2005 that one top-notch engineer is worth 300 times or more than the average engineer. Three hundred times. Talk about a pay gap, and that’s for the same role at the same company.
This is important for the period of work we’re in now. Dror Poleg, a writer and tech analyst, argued that there will soon be a group of professionals in knowledge work, usually for those fluent in tech, he calls the “10X Class.” He believes they’re the new robber barons, arguing from economic principles about why this is the case.
The internet makes it possible for many knowledge employees to work from anywhere. The earning potential of (many of) the most productive employees is no longer capped by geography. As a result, we will see the emergence of a new class of people earning salaries that are an order of magnitude higher than what we saw in previous decades. …
Note that I am not talking about the emergence of a handful of highly-paid superstars in the vein of Hollywood’s Brad Pitt or Tom Hanks. I am talking about micro-stars in the vein of TikTok’s Charli D’Amelio: a whole new layer of professionals than earn incomes that are a level below the biggest earners on in their field, but still much higher than what the average employee (or singer, or dancer) could earn in the pre-internet era.
I call this new layer of professionals the 10X Class. Several other trends support their emergence. As machines take up more of our repetitive and predictable tasks, the value of human creativity goes up. Concurrently, creative people can use technology to streamline routine tasks and focus only on what they do best — thus multiplying their own productivity. And as bandwidth and technologies of presence continue to improve, the number of tasks that can be performed remotely increases. Hence, these dynamics will spread to more sectors of the economy.
Three things will happen as a result of this trend.
First, employers will seek and retain employees who are more ambitious. One CEO of a Houston-based insurance company recently told The Wall Street Journal, “That’s OK, but you have to have people—we constantly look for people—who have drive, that we feel like we can promote to higher-paying jobs in the organization.”
Second, the less ambitious employees will be automated out of a job. Google the phrase “generative AI” to see how easily even the creative and knowledge classes could be removed from their jobs with a piece of software.
Third, employees will leave their jobs to start their own companies, working independently with niche skills or in niche markets to either make more money or make the same money while working fewer hours. Census data shows a sharp rise in business applications since 2020, a trend I expect to continue not only because of the ease of starting a business thanks to new technology but also because of ongoing culture wars and political strife among organizations from initiatives like equal pay and diversity, equity, and inclusion.
The next five to ten years will illuminate a difference between ambitious, talented, intelligent high-performers and the rest, widening the dreaded pay gap. The narrative will intensify, but the economics underpinning it will be much harder to ignore.