What Factors Influence Salaries?

The average American income and median annual salary for any given role is a good baseline for wage earners. However, many other factors affect salary setting, including location, age, gender and ethnicity, education level and skills, and occupation and industry.

Below are the most significant factors that affect the individual compensation of part-time and full-time workers.

Location

Unsurprisingly, annual salaries and median household income varies state-to-state. Certain American states are simply more affluent than others, with access to natural resources, such as oil and gas, established finance districts, such as Wall Street in New York City, or strong manufacturing and tourism, such as San Francisco.

While moving state isn’t possible or desirable for many wage earners on a quest to earn the highest average salaries, areas within each state may offer better prospects. Larger cities with busy metro areas offer the highest pay, with equivalent job positions in smaller towns and rural areas paying lower median incomes.

However, living in a large and bustling metropolitan area may be very expensive, and is something to consider when setting realistic financial goals. For example, it may be more expensive to rent an apartment, eat out, secure insurance, or park a car.

Your current employer may help you reduce the expenses of working or commenting to the city for the highest average salaries. Remote working (work-from-home) is one option that is becoming more practical and popular, still, some employers are introducing salary tiers, reducing the earnings of remote workers who live in non-metropolitan areas.

Age Group

Age plays a significant role on which side of the median salary line your wages will fall. As we get older, we build years of experience and salary increases to reflect the value this brings to an employer.

Recent college graduates with a high school diploma can expect to enter employment on the lowest salary due to their lack of experience. University graduates secure a higher starting average salary due to their more extensive education level.

Wage earners typically begin to receive a good salary as they move into their 30s. By this age, education, qualifications, and career experience combine to warrant higher annual earnings. The 40-49 age group often commands pay above the average national annual salary, with 15+ years of experience.

The average American income begins to fall in many occupations as careers move into their senior years. Factors that could attribute to this might include becoming out of touch with new and emerging technologies and declines in once-thriving business sectors that may lead to career path changes and reeducation.

There are exceptions to these average income rules, such as in the financial sector, where younger workers have the potential to generate an extremely good income.

Gender and Ethnicity

While significant efforts have reduced the gender pay gap, it continues on a national level. Typically, men earned more than women earned last year, even when they performed the same job. However, the gender pay gap doesn’t exist in all industries, and organizations are becoming better at paying specified wages based on their role and not gender.

Ethnicity greatly affects the average median household income. The median wage of Non-Hispanic Whites, Asian Americans, and African Americans differs from the median annual salary for all ethnicities.

Education Level and Skills

As previously mentioned, more qualifications and a higher education level will usually mean you can expect to earn a higher average salary. If you have a relevant bachelor’s degree for your industry, you will enhance your resume, improve your chances against other job candidates, and increase your earnings potential.

College graduates with a high school diploma are likely to be on a lower income than workers with a college degree or associate degree. Men and women with advanced degrees, such as a bachelor’s degree, master’s degree, or doctoral degree, have the potential for the most significant career earnings.

It is vital to keep skills up-to-date and relevant to maintain your salary trajectory. Power skills (important people skills) are crucial, and developing a specialized skillset in your industry or niche will help push your salary above the median income.

Occupation and Industry

Your occupation will have its income limits, although variances may exist between industries. For example, a medical secretary may earn a higher average income compared to a traditional secretary. Industry shortages for staff and skills can also drive wages higher, so staying abreast of industry and economic news on a regular basis can pay dividends. Industries such as IT, digital marketing, energy, and construction have experienced recent booms and occupations in these sectors could help you find higher earnings potential.