Stop Waiting to Negotiate Your Pay -- Companies Expect It

BOSTON (MainStreet) — In considering the slow economic recovery and persistent stagnant wages, it is surprising to find that negotiating your salary can still lead to a significant increase in overall lifetime earnings — and that it may be exactly the right time to apply this information.

"The good news is that though the economy is still sluggish, it is recovering," says Abby Euler, general manager of Salary.com. "There are many key indicators that it may be time to start thinking about negotiation again."

Research by Salary.com showed that a 4% raise every three years can increase total earnings by more than $1 million in a lifetime.

The negotiating can still be daunting, especially in this economy.

Last month, The Wall Street Journal reported the economy has been growing at only 2% — well below the pre-recession average of 3.5%. With labor demand low, employers have not been under any real pressure to raise wages on their own. Even several years after the Great Recession, wages have not kept pace with inflation. In fact, the average hourly wage for a worker not in the government sector or working in a supervisor position came to a pitiful $8.77 an hour when adjusted for price increases, according to data from the U.S. Labor Department.

This has led many in the workforce to feel dispirited about the prospect of asking for a wage increase.

"Workers feel like they have absolutely no bargaining power," Robert Mellman, an economist at JPMorgan Chase , told WSJ.

At the same time, workers also do not feel there are better job options. In June, only 1.6% of employed Americans quit their jobs — compared with 2% to 2.2% annually at pre-recession levels. This may explain why 41% of Americans didn't attempt to negotiate for a raise at their current job or negotiate salaries when offered a new position.

Research by the economists at the Federal Reserve Bank of San Francisco also found that during the past three recessions since 1986 — and in particular, during the 2007-09 downturn — companies opted to lay off some of their workforce and keep other workers at current wages rather than cut wages across the board.

"As the economy recovers, pent-up wage cuts will probably continue to slow wage growth long after the unemployment rate has returned to more normal levels," the researchers said in their working paper.

Yet Salary.com found that 84% of the employers they surveyed expect prospective employees to negotiate salary when offered a position, as well as for current employees to ask for a raise.

Here's why the time is right to negotiate: According to Euler, company freezes on hiring and salary increases affected 90% back in 2010, but dropped significantly to 60% in 2011. Last year, it was only 10%.

"Companies are now more comfortable thinking and talking about salary increases," Euler says.

But several factors can play a role in the decision to ask for salary increases, including gender.

For instance, 28% of women said they'd rather ask a male boss for a raise as compared with just 11% of women who'd prefer to ask a female boss. In addition, the number of men who never negotiate salary went up slightly, to 17% from 15%, while for women it increased to 23% from 22%.

In general, studies have shown women are much more hesitant to ask for a wage increase than men. For example, only 7% of women with MBAs negotiated their salaries as compared with 57% of men with the same degree, according to Linda Babcock's book Women Don't Ask.

Some research has even shown that women may be viewed negatively for trying to negotiate their salaries. In particular, a study in the journal Organizational Science found that the managers they surveyed were likely to give men raises that were more than twice as large as those they would offer to females with the same skills and experience.

There doesn't seem to be any real harm in asking for a raise, though, as long as it's done professionally — regardless of gender.

Specifically, Salary.com found that no employers surveyed said they had fired or demoted an employee for trying to renegotiate their pay rate. In fact, 73% of employers surveyed said they respected candidates and employees who negotiate. And though Salary.com figures show that of those who asked for raises, women were approximately 4% more likely to get nothing as compared with men, it also showed that of those who did get a raise, men were 8% more likely than women to get an amount less than what they requested.

In other words, when women did get raises, they were more likely to get what they asked for than men.

"One thing I would encourage women to do is to have a communal motivation for asking for more," MBA Professor Margaret A. Neale of Stanford University told Forbes in June. "If I'm a man and I'm negotiating a salary, I can talk about my competencies. What women need to do is yoke their competencies with a communal concern."

Euler offers similar advice.

Regardless of gender, she says when negotiating salary to "understand your worth in the market. But also, understand your performance in the context of your company, and emphasize how your performance has benefited the company."

— By Laura Kiesel

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