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Your value is what you earn for your company. The difference between your value and your compensation is the surplus value the company collects from your labor.

Your value is what you earn for your company. The difference between your value and your compensation is the surplus value the company collects from your labor. The company's goal is to maximize aggregate surplus value. Salary and wage based negotiation is a zero sum game until you add commissions, stock options, profit sharing.

saint_fiasco 9y ago
If you don't have alternative offers, your cost is probably very close to your value. Otherwise a competitor could offer you a higher salary and still collect a little surplus value.
- alexbeloi 9y ago
  In tech, when your employer hires you as an engineer, they hope they're getting 10x your cost back in value each year, at a minimum a startup needs to get 2x return to cover debt obligations with growth, on average they get 3-5x. You can get a rough estimate (with profit or earnings as a proxy for capital growth) by looking up a company's (or sector's) profit per employee. These are averages and not reflective of engineering roles. Walmart: ~5-6k profit per employee (Q3) Exxon: 176k profit per employee (Q3) Facebook[0]: 1.7M profit per employee (Q3) Apple: 522k profit per employee (Q3) Internet Services & Social Media sector average: 497k profit per employee Internet Services & Social Media sector average: 2.1M revenue per employee A competitor can/should/will try to steal you from your current employer with a higher compensation if they can extract good surplus value from you, relative to anyone else. The last part (relative to anyone else) is the crux of the situation, everyone selling their labor is doing so at a massive discount because of the competition in the labor pool. You can't actually demand anything close to your value because somebody else will undercut you. The people/firms that can demand the highest percentage of their value as compensation are those with the most unique skills, those for whom few alternatives in the pool exist. [0] https://csimarket.com/stocks/FB-Efficiency-Comparisons.html https://csimarket.com/stocks/FB-Efficiency-Comparisons.html
  - saint_fiasco 9y ago
    > You can't actually demand anything close to your value because somebody else will undercut you. I'm confused by this part. If a person can undercut you, they can do what you do for less money. That means your value was not as high as you thought. We might be using different definitions of value. I'm using "replacement value", and I think you are using something like Marx's "use value".
BeetleB 9y ago
>Your value is what you earn for your company. I think people are getting bogged down by the word "value". Let's use "negotiating leverage" instead. For salary negotiations, what matters is your alternatives. They are already getting that value that you define out of you. If they pay you half, the value you provide is still the same. The question is "Are you going to keep working for them, or do you have better options?" The number that matters is the difference between what you can get elsewhere, and the value you provide.
mgkimsal 9y ago
> Your value is what you earn for your company. Your value is what your company is able to extract from your labor. Doing the exact same stuff for multiple companies would give different levels of "value" to the same person. The further you are away from sales or high-level executive decision making, the harder it is to demonstrate clear value to people who make 'value' decisions.

saint_fiasco 9y ago

If you don't have alternative offers, your cost is probably very close to your value. Otherwise a competitor could offer you a higher salary and still collect a little surplus value.

alexbeloi 9y ago
In tech, when your employer hires you as an engineer, they hope they're getting 10x your cost back in value each year, at a minimum a startup needs to get 2x return to cover debt obligations with growth, on average they get 3-5x. You can get a rough estimate (with profit or earnings as a proxy for capital growth) by looking up a company's (or sector's) profit per employee. These are averages and not reflective of engineering roles. Walmart: ~5-6k profit per employee (Q3) Exxon: 176k profit per employee (Q3) Facebook[0]: 1.7M profit per employee (Q3) Apple: 522k profit per employee (Q3) Internet Services & Social Media sector average: 497k profit per employee Internet Services & Social Media sector average: 2.1M revenue per employee A competitor can/should/will try to steal you from your current employer with a higher compensation if they can extract good surplus value from you, relative to anyone else. The last part (relative to anyone else) is the crux of the situation, everyone selling their labor is doing so at a massive discount because of the competition in the labor pool. You can't actually demand anything close to your value because somebody else will undercut you. The people/firms that can demand the highest percentage of their value as compensation are those with the most unique skills, those for whom few alternatives in the pool exist. [0] https://csimarket.com/stocks/FB-Efficiency-Comparisons.html https://csimarket.com/stocks/FB-Efficiency-Comparisons.html
- saint_fiasco 9y ago
  > You can't actually demand anything close to your value because somebody else will undercut you. I'm confused by this part. If a person can undercut you, they can do what you do for less money. That means your value was not as high as you thought. We might be using different definitions of value. I'm using "replacement value", and I think you are using something like Marx's "use value".

BeetleB 9y ago

>Your value is what you earn for your company. I think people are getting bogged down by the word "value". Let's use "negotiating leverage" instead. For salary negotiations, what matters is your alternatives. They are already getting that value that you define out of you. If they pay you half, the value you provide is still the same. The question is "Are you going to keep working for them, or do you have better options?" The number that matters is the difference between what you can get elsewhere, and the value you provide.

mgkimsal 9y ago

> Your value is what you earn for your company. Your value is what your company is able to extract from your labor. Doing the exact same stuff for multiple companies would give different levels of "value" to the same person. The further you are away from sales or high-level executive decision making, the harder it is to demonstrate clear value to people who make 'value' decisions.