How to Earn More Money: Why Knowledge, Skills, and Abilities Matter

John was born in Brooklyn, New York in 1924, the middle child in a house of 10 kids. After the eighth grade, John dropped out of school to help his father with their small farm and do side jobs to support the family. Later, after serving in World War II, he came home to the U.S., married and raised a family of his own with three children. I was kid number three.

My father always made sure we had what we needed. But I watched him struggle as job options were limited, even for a hard-working war veteran. He and my mom always wanted us kids to do better and hoped we would discover talents and skills that we both enjoyed and could earn a good living at. For them, the American Dream wasn’t about business plans or how to become rich, but about making a better life for themselves and generations to come—one step at a time.

Why Skills are So Important

Today, more than 90 years after my dad was born, it is still knowledge, skills and abilities that rule in the workplace and the marketplace. The way our economic system is set up, skills are highly valued. Skills are one of the few things that cannot be taken away like money or power.

So for most people, working people, acquiring knowledge and skills is an insurance policy against becoming a victim of the economic system. We can gain greater power over our financial destiny with every new, marketable skill we acquire, like tools in a toolbox.

According to data from the U.S. Bureau of Labor Statistics (BLS), there is a strong connection between skills attainment, income earning potential, and unemployment. This is true for formal education as well as skills acquired through on-the-job training and other experience.

Not only do people with more experience earn more and suffer less unemployment, but the BLS also expects jobs requiring more entry-level experience to grow faster than less-skilled occupations. So in the future, even entry-level jobs will pay better if you have more skills. The reality is that learning is as much a matter of economics as academics. Those that do not work to acquire new skills can easily be left behind. The system takes no prisoners.

The Skills and Earnings Pyramid

Most organizations, whether business, government or not-for-profit, are hierarchical. With a few top-paid executives and many more junior- and entry-level positions, the organization structure looks like a pyramid. In larger organizations, every job is analyzed for required skills and is “priced” based on those requirements. So, when a job opening is posted, the employer has already done analysis to decide how much the new employee should be paid, based on the level of experience the job applicant has (the “pay range”).

 

Yes, every job (and employee) has a value to the organization. The amount the organization is willing to pay is based on:

  • The skills required to perform the job, and
  • The experience of the employee—do you have the skills AND the experience? More experience results in higher pay.

Capitalizing on the Skills Gap

Here is one last but important piece of news to keep in mind. Skills are in high demand and short supply in many industries in the U.S. Many employers are having trouble finding enough qualified people to fill positions. This June 19, 2017 article in Fortune discusses the shortages in the U.S. construction industry. And according to this CNN article, many skills that are needed in the job market today and in the future will not require a college education. The source of the skills you acquire is less important than the quality of the training and the marketability of those skills.

 

At TheMoneyShelf.com, we want to help you to ascend the economic pyramid. We hope you will check out our other articles and financial literacy tools as well as our selection of some of the best books about money, personal finance and entrepreneurship.

John Florio, MBA 
TheMoneyShelf.com


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