Earning Power

Have you ever had the opportunity to work and earn some money for yourself? Isn’t It a great feeling of satisfaction? Have you noticed that different jobs get paid different amounts? For example, someone who is a cashier might not get paid as much as someone who specializes in rocket science. This is because of a concept called earning power. Earning power is the ability to earn money in exchange for work that is provided. Earning power is a simple concept that is based on many different factors. Some of these factors include time, quality, education level, skills, and even more. Let’s jump to some examples in order to clarify what in the world I am talking about!

Let us start by thinking of a grocery store. In order to function, this store has many components all running at once, from the cashiers to the stockers, all the way to the managers and CEOs. Each job, however, requires a different duty. The cashiers and stockers are entry-level positions that don’t require loads of education or too many specific skills. Almost anyone can take out money from a register or put some cans onto a shelf, and this is why these jobs have the least earning power. Although an essential function of our grocery store, these jobs are generally simple and can be done by most people. Now let us move up a level to the managers of the store. Their duty entails making sure the entire store runs smoothly by overlooking all the other employees and aspects of the store. This is why the manager position will require years worth of work experience and more education than our cashier or stocker. As a result, the manager will also have higher earning power and generate more income or money received. Lastly, we can look at this grocery store from an even larger view. In order for the physical store to be functioning on a day-to-day basis, it needs to be managed from leaders even higher up than a store manager. A CEO of this grocery store likely oversees the store manager, all their employees, and many of the external functions of the business as well! As a result, you can probably guess, this person has an even higher earning power than the cashier, stocker, or manager due to their specialty, experience, and education level. I know that you probably are considering becoming a big shot CEO now, but beware it is not as easy as it may sound! 

Anyways, now that we have talked a bit about earning power and some examples of it, you should also know about some of the different ways to improve or increase an individual’s earning power. We briefly went over some of them earlier, but now we will get a little more specific. Since we now understand that earning power is the ability to earn money in exchange for work, how can someone increase their own earning power? One simple way is time. If you are getting paid by the hour, the more hours you work, the more money you will earn and therefore earning power goes up! Pretty simple, right? Another way to increase earning power is by improving your results on the job. Let’s go back to our stocker from our grocery store example earlier. If this stocker got an extra $100 for every 100 cans he stocked, he could increase his earning power by stocking more cans. However, if this stocker was earning money hourly, the number of cans he stocked would not make a difference. Another interesting way to increase earning power is the quality of the product or service. If we continue to use our grocery store example, we can look at the quality of the groceries we sell. If our grocery store sells better quality fruits and vegetables, customers will be willing to pay more for our products than they will for the grocery store down the street who sells moldy items. As a result, our store will generate more income and increase earning power. Finally, we can talk about the most important way to increase earning power - education, experience, and skills. As you probably noticed within our example earlier, a common trend of increased earning power was the presence of experience, education, and skills possessed by the manager and CEO. These qualities can come in many forms ranging from a college degree all the way to simply time in the workforce. It is likely that someone who is a college graduate and possesses many skills in a specific area is likely going to have a higher earning power than someone who may not. Other skills such as knowing multiple languages or being really good at Math can help increase an individual’s earning power! All in all, the more knowledge you have, the better it is. This is probably why your parents keep nagging you to get good grades and go to college! Let’s take a look at the image to the left showing median earnings by level of education. Although these values are rough estimates, you can easily see the trend in earning power increasing with the more education someone has! 

In review, we have gone over what earning power is, how it can be applied to everyday life, and even how to increase an individual’s earning power! I know you are not the age of having a full-time job yet, but this is an important concept to keep in mind. Whether you will one day be working as your own boss, or as an employee for someone else, you should keep track of your earning power and ways to increase this metric. Although making money is not everything in life, it is a key factor in someone’s ability to pay their bills and buy all those expensive items you want! See you next week! 

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Resource Link: https://wccc.mycareerfocus.org/2013/11/12/earning-power-of-a-college-degree/