Salary expectations present a difficult question for job seekers. Gone are the days that you could expect a 10%-20% increase just for changing jobs.
In today’s job market that features an under-supply of jobs, job seekers (especially unemployed candidates) may have to face accepting a lower salary.
Other job seekers who want to change careers may find that their current experience & skill level is discounted to lower salary expectations within a new industry or job function.
On the other hand, job seekers with certain high demand skills may be able to expect salary increases – because there are still selected labor shortages in certain markets. Take nursing, for instance – in certain markets, there is such a shortage of nursing talent that a nurse who is willing to change locations might expect a sizable increase (or a comparable salary in an area with a much lower cost of living).
Either way, whatever your own personal circumstances may be, it’s important to know (even for your own financial planning purposes) what your market value is.
Why Your Market Value May Have Declined:
We all know that we’ve been a terrible job market for years with an over supply of labor – that’s one of the factors that puts downward pressure on salaries. But a labor oversupply affects certain situations more than others. It’s important to first see if your situation puts you at a greater risk of a decreased salary for your next job.
There are always special circumstances – your specific skills may be so much in demand for a certain company that you may command above market compensation. However, for the majority of job seekers, some of the factors that may cause your market value to decline include:
- Unemployment: It’s not fair, but many employers feel that they can get talent for a discount in today’s job market – that’s there’s a big “going out of business sale” going on for employees. This perception increases for candidates in transition. Employers typically make the assumption that a candidate has greater motivation to take a job (even at a lower salary) if they currently don’t have a job. Obviously, these employers make an assumption that the candidate’s financial resources make them more likely to take a lower offer. This perception is very typical even though financial resources and current employment status may have nothing to do with one another – you could have just won Lotto, sold a company, done well in the stock market, won a large settlement, or have a years worth of savings. If you watch the news every night, you can see why it’s an easy (though incorrect) assumption that everyone who’s unemployed is about to loose their home.
- Industry losses: Certain industries have done so poorly, that workers have had to accept lower salaries just to keep their jobs. It’s not just the auto and airline industry, but this phenomenon has affected formerly stable positions in local government and teachers. The greater the job losses in that industry, the more likely you are to expect downward pressure on your salary when you change jobs – even if you change to a different industry. For example, an accountant from an auto manufacturer will likely face downward salary pressure from a new employer in a different industry. In fact, that accountant may be the top candidate precisely because the employer suspects they can get “a deal” on a candidate desperate to get out of a downward trending industry.
- Length of most recent job: This is a double edged sword … if you’ve been at your most recent employer for many years, your salary reflects your knowledge that’s most valuable to that company. On the other hand, if you’ve been at your most recent employer less than two years, you may appear to be a greater employment risk – most companies don’t start earning profits from an employee until they’ve been on the job for 6-12 months and hiring managers avoid risk of bad hires (especially when they have many choices).
- Industry change: Your experience and knowledge may be worth more to your current companies competitors than to companies in different industries. It’s easier to see this in some functions (like sales), but it can also apply to staff functions like HR, customer service, and accounting. You may be able to do the same job in a different industry, but will an insider be able to do it with less training and ramp up time? Or with less risk of error, or less risk that an insider won’t like the industry or company?
- Function change: Similar to industry change, you may have the basic skills to perform a new job function, but you’re competing against others who already have worked in the role who give the perception of less training, less ramp up, and less risk. Willingness to work for a slightly lower salary is a strategy that may work well for job seekers looking to change functions – to encourage a hiring manager to take a risk on them in a new functional role.
- Geography: For those considering a geographic change, different markets have different standardized cost of living multipliers often used to set budgeted salaries. These multipliers don’t always indicate the full cost of living differences.
- For instance, a $75,000 marketing manager in Milwaukee who wants to move to San Francisco would expect an 18% cost of living salary differential. However, expected cost of living expenses are 64.3% higher in San Francisco – so you’d better be prepared to live in a smaller house if you’ve left your heart in San Francisco.
- In another example, that same marketing manager considering a move from NYC (making $91,500) to Indianapolis would expect a 17.9% salary decrease. However, expected cost of living expenses are 48.8% less in Indianapolis, making it easier to afford all those weekend trips back to the Big Apple (data from salary.com).
- Age: It’s not fair, it’s not legal, yet it happens all the time. Not only is it tougher to find a job after a certain age, you may be offered less just because of your age, young or old.
How To Determine Your Market Value:
Fortunately, there are a number of good tools that exist to help you understand your real market value. Use these sources and methods to get a reasonable range:
- Salary.com: Salary.com is a good simple indicator, especially for staff level roles. Salary.com gives comparative salary information by job title and location.
- Payscale.com: Payscale.com does a more detailed analysis, taking into account title, major responsibilities, industry, years of experience, education, and relevant certifications.
- Bureau of Labor Statistics data: The bls.gov website has a wealth of information, from salary info to employment outlook for industries and job functions.
- Adjustments: A good guideline for adjustments include:
- Unemployment: -5% to -10%
- Industry losses: -3% to -10%
- Length of most recent job: -3% to -5%
- Industry change: 0% to -3%
- Function change: 0% to -5%
- Age: +- 0% to 10%
- Geography – Geographic multipliers and information can be found on Salary.com, Payscale.com and bls.gov
- Note: These are ranges used to create estimates. When you hear stories of someone taking a 30% pay cut, there are likely multiple adjustments affecting the offer.
These tools and adjustments should allow you to calculate a range that estimates your market value. These estimates can help job seekers decide whether to stay in their same industry, or if it’s worth it to try something new.
How do you stack up?-------------------------------------------------------------------------------------------------------------------------------------
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