Navigating Salary Negotiations During Economic Uncertainty
One of the devastating effects of economic instability is job loss, a reality that is unfortunately affecting many of my friends, former colleagues and family members. I don't intend to diminish the severity of this situation in any way. However, I've also observed another consequence of economic uncertainty that can have lasting impacts on your earning potential: it tends to exacerbate imposter syndrome, particularly in the context of salary negotiation. The thinking goes, “well, if times were better, I’d ask for more, but given the climate I’ll just take what’s offered.” A reasonable conclusion, but one that I think needs to be interrogated further.
Negotiating one's salary, particularly during times of economic uncertainty, is a crucial step in enhancing lifelong earning potential. A small bump in comp now, has a compounding impact down the line – not only when you leave for a new role, but also when a bonus is calculated, cost of living adjustments, etc. The issue though is that it can be nerve wracking to ask for more, particularly when the economic landscape is uncertain. You don’t want to come across as ungrateful, etc.
Despite the discomfort of negotiating your salary, it is a practice that is not only expected by employers but can significantly impact one’s financial trajectory, now and well into the future. For example, a 3% average annual salary increase implies that a 10% lower starting salary than expected could set an individual back by over two years in earnings! This negotiation is increasingly vital today, as companies may freeze salary increments or bonuses due to economic instability. No one has a crystal ball, but one in the hand is always worth two in the bush!
I’m not trying to be cavalier about how challenging it can be to negotiate, especially when you’ve been looking for a long time for a job, or really any job. I also know that sometimes you have to do what you have to do – which might mean accepting that offer because you just don't’ have the stamina, or risk tolerance to push even more, or prolong your start date. This is totally understandable, and above all, always do you. My point is that when we assume we don’t deserve more, or we assume what the organization may/may not be thinking, I want you to see that as an orange flag that you might want to hold on for a bit longer to determine the reason behind your decision.
Unfortunately, it is women, and other marginalized groups that are less likely to negotiate – during boom OR bust times, and so if there was already an “ask gap” this gap only broadens during times of economic uncertainty. While women earn 83 cents to a dollar earned by men, with minority women earning even less, they also tend to negotiate less. However, those who do negotiate, regardless of gender, often successfully obtain their requested terms, indicating that negotiation at the offer stage is a key opportunity to mitigate wage gaps. A 2022 study by Fidelity Investments found that while 58% of workers had accepted their employer's initial offer, 85% of those who attempted to negotiate got at least some of what they asked for.
To be clear, I’m not encouraging you to turn a blind eye to the economic climate, the opposite actually. It’s important to be thoughtful and considerate of how the economic uncertainty could be impacting your target employer. However, I am saying it’s worth examining why you may not be as willing to negotiate your initial offer at all, but particularly during unstable times, and I challenge you to explore that further. The impacts of even modest increases in salary is something that will stick with you for years, and years to come.
In sum, salary negotiation is a pivotal practice for financial advancement, and is especially crucial during economic downturns. It requires preparation, research, and a clear understanding of one's value of course. Just because times are uncertain doesn’t mean you should be any less certain of the value you bring to an organization.