Under-earning and financial stress
‘Under-earning’ – that some people earn less than what they’d like to or even deserve to earn – might sound like an odd idea to people with faith in a free market.
The market tells us that we earn what the market decides, right? That logic says a job or a shift pays what it is worth, simple.
That is true to an extent, but that equation arguably does not apply to a few circumstances.
Some of these are created by structural and systemic pay gaps. Such gaps are well-established and supported by research and evidence.
The best example is the gender pay gap. Currently, Australia’s national gender pay gap is 14.2 per cent, meaning on average women earn $261.50 less for the same work as men each week.
The gender pay gap also leads to a gap in superannuation which makes retirement for some single or separated women a frightening prospect.
There are other recognised pay gaps, for example, government research shows Indigenous households earn 69 per cent of non-Indigenous households.
Another factor missing in the equation that says ‘the market pays what its people are worth’ is our own propensity to undervalue ourselves – which once we dig into it, is a chronic and widespread issue.
But for now, let’s acknowledge that most negotiations around worth and value are usually two-way streets. There is a buyer and a seller and both come to an agreement before a contract is signed.
Alongside under-valuing themselves the under-earner may display a number of related behaviours that could be reasonably described as self-defeating. We will come back to that.
Obviously, not everyone under-values themselves. Many people have a clear idea of this and are happy with what they get paid.
Certainly, some people over-value themselves too and perhaps are under the misapprehension they are under-earning.
It’s important to note too that a lot of people who experience financial stress are adequately paid. This blog may not be relevant to those people, but our content on financial stress should still be relevant.
Most recently we took a detailed look at financial stress based on a webinar we did on the subject. Out of that webinar came a series that included a two-part series on managing financial stress, measuring financial stress.
What is under-earning?
It’s important to acknowledge too that under-earning is not solely an issue for people impacted by systemic pay gaps, and that pay gaps may be only part of a suite of issues facing the under-earner.
Chronic self-defeating behaviours and beliefs play a part for many.
The American author and financial therapist Barbara Huson uses the phrase ‘someone who makes less than she needs or desires despite efforts to do otherwise’ to define under-earning.
She says it has seven recognisable signs:
- Financial chaos (especially around debt);
- Vagueness about money;
- A sufferer underestimates their worth;
- An anti-money attitude;
- Putting others ahead of their own needs; and
- Craving comfort.
One worldwide peer-support network addressing under-earning has a more complex definition: ‘While the most visible consequence is the inability to provide for one’s needs, including future needs, underearning is also about the inability to fully acknowledge and express our capabilities and competencies. It is about underachieving, or under-being, no matter how much money we make.’
That network is characterised by peer-support meetings which gather in person and online to specific help sufferers address and recover from under-earning.
One of its core documents, ‘symptoms of under-earning’ lists some traits that may be familiar to under-earners:
- We undervalue our abilities and services and fear asking for increases in compensation or for what the market will bear;
- We feel uneasy when asking for or being given what we need or what we are owed;
- We do not follow up on opportunities, leads, or jobs that could be profitable;
- We begin many projects and tasks but often do not complete them; and
- We compulsively reject ideas that could expand our lives or careers and increase our profitability.
In a TED Talk, Paul Sunderland, an English consultant and trainer, calls under-earning an “inability to earn what we really deserve… despite the desire, the effort, the opportunity [and] the qualifications”.
He says it is about ‘turning our backs on money’ and he details why he believes under-earning is an addictive process for some people.
That suggests an obvious point: have we checked the boxes against a belief that we are under-earning?
- Do we have the desire to earn more?
- Are we properly trained?
- Have we taken or do we seek opportunities to earn more?
If we cannot meet these conditions, under-earning could be circumstantial. Otherwise, there’s probably more to it.
The psychological aspect of financial stress
Let’s take a step back and look at some key elements of financial stress, which is what Financial Mindfulness mainly deals with. That could help clarify the link between under-earning and deeper issues for many.
From what our experts have found through years of research and helping clients financial stress:
- Involves our thoughts about money and finances;
- it is related to money worries;
- involves our emotions, especially fear;
- arises in relation to stressful situations, such as loss of employment;
- has a significant impact on our wellbeing;
- can cause sleeplessness;
- can lead us to feel downhearted; and
- can affect our relationships and behaviour.
It is clear from the above list that a lot of financial stress has a psychological impact.
This has been one of the building blocks of the work Financial Mindfulness has completed in measuring financial stress and developing an app to help address the problem.
We need to emphasise here that we are not providing a tailored solution for the issue of under-earning at present.
But we are acknowledging its impacts on many people suffering financial stress who may be interested or benefit from a solution such as Financial Mindfulness.
The relevance of the psychological aspect to financial stress is where certain types of under-earning become clearer.
As Mr Sunderland noted: why would people turn their backs on obvious opportunities to make more money and effectively block themselves from receiving it?
When dealing with financial stress and/or under-earning, it’s important to acknowledge our behaviours with money.
If you’re someone who has avoided budgeting, that is a red flag that you may be avoiding what money really means and how it really works.
What to do about under-earning?
The first step in dealing with a problem, of course, is to accept that it exists.
Ms Huson says the first step to overcoming under-earning is ‘the willingness to be uncomfortable, to do what you think you can’t do’ because ‘success always lies just outside your comfort zone.’
She says being ‘scared’ by the prospect of doing something to earn more money is a sign that steps are probably what you need to do – though she advises getting enough support as you step outside of your comfort zone.
Overcoming structural and systemic pay gaps are difficult, it takes a clear-headed, well-planned approach to do it even in the best of circumstances.
But the reality with some pay gaps is the organisation you work for may have such significant blind spots that they wouldn’t acknowledge that, for instance, a gender pay gap even exists. In that organisation it will be difficult to overcome the under-earning on your own.
Conversely, many organisations have achieved pay equality and see it as an organisational strength. We’d suggest researching these organisations and targeting them with your resume.
The peer group we referred to earlier also uses a combination of approaches:
- Peer support;
- Sharing and shame reduction;
- Addressing compulsive shopping and overspending;
- Establishing a vision;
- Accounting for time;
- Create an earning plan; and
- Personal spiritual practice
Overcoming under-earning may require pushing through to make changes in our circumstances – for instance, retraining and upskilling. But it can also be more complex.
In some instances, additional help may be needed, such as a money behavioural coach or even a therapist.
But the steps are likely to include:
- Being clear whether we are under-earning – and to what extent – by connecting with peers;
- Acknowledging gaps in our skills and qualifications and taking the appropriate actions;
- Understanding whether we are being held back by being in the wrong job;
- Learning more about our own beliefs around money;
- Deciding to earn more and committing to action in pursuit of this goal;
- Getting comfortable with the fears these decisions and actions bring up;
- Honestly confronting our financial stress and stressors;
- Properly valuing and respecting our own time: it is as precious as anyone; and
- Addressing self-sabotaging behaviour with money and improving our financial skills
It’s important to acknowledge that overcoming under-earning may not be a linear process. It could involve ‘one step forward and two back’ to re-set and realise your earning power.
It could be as simple as being braver with the rates you charge. But it could also involve loss of employment, which in itself can be a devastating life event, but one that leads to an empowering transition.
This could be a quick or slow process, but as with all financial change, once we commit it is life-changing.
We wish you luck if you are embarking on your journey to address your under-earning.