Why Most People Never Get Rich as an Employee
Across economies, wages are designed to cover living expenses, not to build lasting wealth. Even at senior levels, salaries often grow more slowly than inflation or lifestyle costs. Understanding why helps professionals make informed choices about their financial future.
Photo by Nicola Barts
For many professionals, the path of employment appears stable: a steady salary, benefits, and the chance to climb the corporate ladder. Despite years of service, most employees discover that financial independence and wealth remain out of reach. The reason is not laziness or lack of ambition—it lies in the structure of employment itself.
Across economies, wages are designed to cover living expenses, not to build lasting wealth. Even at senior levels, salaries often grow more slowly than inflation or lifestyle costs. This makes employment a reliable path for income but a limited path for wealth creation. Understanding why helps professionals make informed choices about their financial future.
Employees trade time for money. A salary, however high, is usually capped by an organisation’s pay structure. In contrast, wealth creation depends on assets—investments, equity, or ownership—that grow in value without direct labour.
Consider Warren Buffett’s observation that “if you don’t find a way to make money while you sleep, you will work until you die.” Salaries, even generous ones, rarely compound. Investments and ownership do. That structural difference is why many employees remain comfortable but not wealthy.
Data from the International Labour Organisation shows that real wage growth has stagnated globally since the pandemic, while inflation has risen sharply in many regions. In Nigeria, inflation exceeded 20% in 2023, eroding the value of fixed incomes.
Employees who depend solely on salary find that their purchasing power declines year after year. Unless that income is converted into assets that appreciate faster than inflation, wealth remains out of reach.
One of the main drivers of wealth is equity. Entrepreneurs, investors, and even employees with stock options can build fortunes as companies grow. Traditional employees without equity, however, are excluded from this upside.
The technology boom illustrates this. Early employees at companies like Google or Amazon who received stock options became wealthy when the companies scaled. In contrast, workers in firms without equity structures earned steady salaries but saw no share of the wealth their labour helped create.
In Nigeria, startups such as Flutterwave and Paystack have exhibited a similar pattern. Founders and equity-holding staff gained significantly during funding rounds and acquisitions, while employees without equity remained limited to wages.
In many countries, tax systems are structured in ways that favour wealth owners. Capital gains and dividends are often taxed at lower rates than ordinary income, such as salaries. This means that entrepreneurs and investors keep more of their returns compared to employees on payroll.
For example, in the United States, long-term capital gains are taxed at a maximum of 20%, while top earners can pay up to 37% on salaries. In Nigeria, earned income through salaries is taxed progressively up to 24%, while investment income can attract lower rates depending on the structure.
This difference compounds over time, making it harder for employees to build wealth solely from wages.
Even when salaries rise, lifestyle expenses often rise faster. As employees progress, they acquire cars, homes, school fees, and social obligations. Without deliberate financial discipline, these expenses consume potential savings.
Studies in behavioural economics show that people anchor spending to income levels. Without a strategy to channel salary increases into investments, employees simply upgrade consumption. This cycle prevents the accumulation of wealth.
Most employees rely entirely on one paycheck. If that income stops—due to layoffs, retirement, or health issues—the financial structure collapses. Wealth, by contrast, is built on multiple streams: investments, businesses, and assets that generate income beyond active labour.
This dependence creates vulnerability. In volatile economies, employees who rely on one employer face a higher risk of financial instability, making it even harder to build long-term wealth.
Employment is not inherently negative. It can provide skills, networks, and capital to pursue other opportunities. The key is recognising its limitations and building beyond it. Employees who save aggressively, invest in assets, or acquire ownership stakes can change their financial trajectory.
For example, professionals who convert a portion of their salary into real estate, equities, or side businesses create paths to wealth outside payroll. The discipline lies in treating employment as a platform, not a destination.
The lesson is not to abandon employment immediately but to use it strategically. Professionals who succeed are the ones who use their jobs to develop wealth instead of just paying for things. This gap makes the difference between financial independence and financial survival in a time of uncertainty.
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