Salary is not as simple as it looks. Ever wonder why that new fresher is paid more than you? Why are you not getting a raise despite working hard for years? Understand this: Salary is not fees for your talent or effort. Two people can work equally hard, yet one earns more because their job is harder to monitor, their outside options are stronger, or their employer fears losing them. Sometimes, you may find that a worse-performing colleague may not be fired, because it is more expensive to fire an employee than to retain them. That matters because wages shape where you live, which jobs you can refuse, and how much say you have at work. The economics of pay becomes clearer when you look inside the firm, especially in cases of firm-employee conflicts. Once you see how incentives and power work, raises stop looking unpredictable. It gives you direction, not you chasing a light at the end of a seemingly infinite tunnel. Welcome to another volume of Applied Economics, where we discuss th...