Posts Tagged salary negotiation

Question

I’m about to get a job offer from a company I want to work for. They asked how much I want. The talent shortage must be producing bigger salaries in job offers, so I’m inclined to ask for the top of the range I’ve researched. But I’m also nervous about going too high and turning them off. Is there a safe middle ground?

Nick’s Reply

Like you, I like the middle ground. Most of the time. But this isn’t most of the time. In fact, I believe we’re living in a time when there’s good reason to take bigger risks to get bigger rewards.

Why? Because on the whole, companies are pulling down unusually higher profits hand over fist. They can afford to pay you more. There’s data to prove it.

Days of bigger salaries

This is the time to ask for more, even to demand it and gently signal that you will walk away from that hard-to-fill job if they don’t meet your salary requirement.

Savvy investors tell us that the big gains are made when we encounter unusual circumstances in which our chances of a big win are somewhat higher than normal. That can make it worth the attendant risk. Of course, only you can decide how much risk you will tolerate.

I would ask for more money. I’d ask for the top of the range or more. Now let’s discuss why job applicants should demand bigger salaries today.

Employers need to hire

I don’t need to link you to 10 articles about employers crying they can’t fill jobs because of “the talent shortage.” And I don’t need to give you an Economics 101 lesson in supply and demand. (Ah, what the heck! When supply of labor is down, wages go up.)

If so many employers are desperate to hire, they must be paying top dollar to get workers like you on board, right? Wharton labor researcher Peter Cappelli suggests that, on the whole, they’re not.

What do you mean, real wages are down?

In an October 2021 report Cappelli writes that “Wages are not rising dramatically, at least on average. A shortfall between a big demand jump and a modest increase in supply should not necessarily cause a shortage in a market economy. It should cause prices — in this case, wages — to rise.”

But despite their posturing about recruiting aggressively to fill those vacant jobs, Cappelli notes employers are not offering competitive market pay. In fact, he says, no matter what anecdotal stories the media broadcast, the data tell us “Real wages have fallen by the largest amount in decades.”

And that’s why you should ask for higher pay. In fact, if you don’t demand a higher job offer, you may be getting lower real pay than you even realize.

Inflation is hurting workers

Cappelli continues: “The idea that wages are rising dramatically just isn’t true…  workers are living in a world where their money isn’t going as far as it used to due to rising costs of goods and services.”

We call that inflation. “Real wages” are wages adjusted to account for rising consumer costs.

And, today, it’s even worse than Cappelli suggested last fall. In its April 12, 2022 Real Earnings Report, the U.S. Bureau of Labor Statistics tells us:

“Real average hourly earnings decreased 2.7 percent, seasonally adjusted, from March 2021 to March 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.6-percent decrease in real average weekly earnings over this period.”

But inflation is enriching companies

Maybe employers just can’t afford to pay higher salaries, eh? Maybe you should bite your tongue and tell that employer you’d be happy in the middle of the salary range. Play it safe.

But you’d be wrong, and you’d be dumber than greedy corporations, says Lindsay Owens, the executive director of the Groundwork Collaborative. In I Listened In on Big Business. It’s Profiting From Inflation, and You’re Paying for It, Owens reviews hundreds of corporate earnings calls she’s listened to — “calls, where, by law, companies have to tell the truth.”

“The Federal Reserve chair, Jerome Powell, said that sometimes businesses are raising prices just ‘because they can.’ He’s right. Companies have pricing power when consumers don’t have choice.”

The examples she cites are chilling because CEOs brag about unheard-of profits triggered by economic factors that hurt consumers and, therefore, workers and job seekers.

• “What we learned on these earnings calls was quickly reflected in data. Despite the rising costs of labor, energy and materials, profit margins reached 70-year highs in 2021. And according to an analysis from the Economic Policy Institute, fatter profit margins, not the rising costs of labor and materials, drove more than half of price increases in the nonfinancial corporate sector since the start of the Covid pandemic.”

Owens reports one profit brag after another during the earnings calls:

• “As Hostess’s C.E.O. told shareholders last quarter, ‘When all prices go up, it helps.’”
• “Executives on their earnings calls crowed to investors about their blockbuster quarterly profits. One credited his company’s ‘successful pricing strategies.’”
• “Another patted his team on the back for a ‘marvelous job in driving price.’”
• “The head of research for the bank Barclay’s said ‘The longer inflation lasts and the more widespread it is, the more air cover it gives companies to raise prices.’ More than half of retailers admitted as much when surveyed.”

Corporations can afford handsome job offers

Companies are intentionally jacking up prices to consumers to boost their profits — using inflation for “air cover” — while they pay lower real wages. Is there anything illegal about that? Probably not. Nor is there anything wrong with you jacking up the salary you want if a company is flush. And in this economic climate, it may be prudent to pursue only employers that are flush.

This is why, in today’s economy and job market, you should always be ready to ask for more money. I’m forever telling you to make sure your job delivers profit to your employer. Now I’m telling you to make sure employers that are bursting with colossal profits deliver a concomitant share to you in the form of higher salary. Lindsay Owens might say this is the best time in 70 years to go for the gold.

(See More Money: What to ask for in a talent shortage.)

Find one smart, good employer

Are all employers so greedy that they make below-market job offers so they can hoard profits? For that matter, are all employers laughing all the way to the bank? Of course not. But successful, smart employers see an opportunity to hire the best workers by sharing their good fortune via higher salary offers. Why work among pigs?

Even if, as the data suggest, most employers are killing real wages, a wise job seeker takes refuge — and finds hope and patience — in the knowledge that they need only one good employer to make them one outstanding job offer.

But you have to ask for — even demand — bigger salaries.

Peter Cappelli offers compelling tough love to employers, and advises “looking beyond just signing bonuses and modest wage increases, instead considering what’s possible in compensation in order to attract and retain the workforce you need and want.”

Could following my advice to demand bigger salaries lead a greedy employer to boot you to the curb because they’d like to hire you for less? Could the message in this column cost you a job offer entirely? Yep. So use your judgment and do the best you can.

Me? I’d ask for more because the data tell me profit-rich companies can afford it. If they’re not willing to share their rising profits with their workforce, I’ll go find an employer that will. It’s that kind of economy. The data tell us it’s that kind of job market.

Are bigger salaries a thing? Can you actually ask for the top end of a salary range and get it? What’s your experience? Got any examples of corporate greed and low-ball job offers? How have you gotten more money from an employer?

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