Scarcity relative to demand
The most powerful factor, and the one that overrides most others. When few people can do work that many organisations need, wages rise until supply and demand meet.
What makes supply scarce varies. It might be genuine difficulty, as with quantitative research or surgery. It might be long training that few will commit to. It might be licensing that legally restricts who may practise. It might simply be that a field grew faster than people could retrain into it.
Note that difficulty alone is not enough — the work must also be in demand. Plenty of demanding skills pay poorly because not many organisations need them.
Value produced per worker
Wages cannot durably exceed the value the work produces, which sets a hard ceiling regardless of skill or effort.
This is why industry affects pay so heavily. A software engineer whose work serves millions of users generates enormous revenue per employee, and some of that surplus flows into salaries. A skilled restaurant worker produces a fixed amount of value per hour no matter how good they are, because the work does not scale.
The same person doing the same function can therefore be paid very differently depending on the economics of the business they sit in. That is frequently a larger effect than performance.
Restricted entry
Some professions maintain high wages partly by controlling how many people can enter them.
Medicine is the clearest case: training places are limited, licensing is mandatory, and the pipeline takes over a decade. Whatever demand does, supply cannot expand quickly. Law, accountancy, actuarial work, aviation and many trades operate similar mechanisms through certification and apprenticeship.
This is not necessarily a conspiracy — most of these restrictions exist for legitimate reasons of public safety and competence. But the economic effect is the same regardless of the intent: constrained supply sustains higher wages.
Consequence and liability
Work where errors are costly, irreversible or dangerous carries a premium, and it shows up through several channels.
Professional liability is a direct cost — surgeons, anaesthetists and structural engineers carry insurance and personal accountability that most jobs do not. Physical risk commands compensation too, which is why offshore, commercial diving and certain construction roles pay above their onshore equivalents.
Screening is the third channel. Where the cost of a bad hire is severe, employers apply demanding filters, which itself restricts the pool and pushes wages up.
Leverage
The most highly compensated roles usually involve leverage: situations where one person's decisions affect a very large amount of value.
A chief executive's judgement affects an entire organisation. A portfolio manager's decisions move a large amount of capital. A senior engineer's architectural choice determines whether a system works for a decade. In each case a small improvement in decision quality is worth a great deal, so organisations pay heavily for it.
This is why compensation rises so steeply with seniority in some fields and barely at all in others. Where leverage is limited by the structure of the work, pay flattens quickly regardless of skill.
How much of the value you can capture
Producing value is not the same as being paid for it, and the difference explains several apparent anomalies.
Where an individual's contribution is visible and attributable — a salesperson's revenue, a trader's returns, a partner's client relationships — they can bargain for a share of it, which is why those roles pay disproportionately.
Where contribution is collective and hard to isolate, individuals capture less. This is also why unionisation and collective bargaining affect wages: they change the balance of bargaining power rather than the value produced. And it is part of why care work, which produces enormous social value, pays poorly — the value is real but diffuse and largely publicly funded.
What this means for your choices
A few practical conclusions follow.
If you want higher pay, the highest-leverage question is usually not how to work harder but where your existing skills are worth more. Moving the same function into a higher-margin industry frequently pays better than years of improvement in a low-margin one.
Build towards scarcity rather than popularity — those are different, and crowded fields with high interest often pay worse than dull ones with genuine shortages. And favour skills where supply is constrained by training time or licensing, because those constraints hold up over decades.
Finally, be honest about what a premium is buying. Where pay is far above the market, some of it usually compensates for hours, risk, instability or location.