Negotiating a Salary (Without Being Lowballed)
Companies use tricks to pay you as little as possible. Negotiate with integrity and honesty, and be firm.
Today we’re going to be discussing negotiating a salary.
Your salary is one of the most important elements of a job package. At almost every company, raises are calculated as a percentage of base salary. If you have a starting salary of $10,000, do a great job, and get a 10% raise, you’ll end up making $11,000. If you have a starting salary of $15,000—$5,000 more—do a great job, and get a 10% raise, you’ll be making $16,500. That’s $5,500 more, which is $500 more than the difference in starting salary between $10K and $15K. With equivalent performance, a slightly higher starting salary turns into much, much more money over your entire work history.
Companies Hate You
One of the great mysteries to most economists is why, since the 1970s, overall salaries haven’t gone up for the bottom 99%. Their mystification mystifies me. It’s pretty obvious: because hiring managers, Human Resources managers, and executives have decided not to raise wages. The reason, of course, is because they hate you. Oh, if you talked to them individually, they would claim they don’t. But crippling someone’s salary for life is one of the most hateful things you could do to another person, so even if they have other rationalizations, for all intents and purposes, their actions are indistinguishable from someone who hates you.
Welcome to American capitalism. If you don’t like it, become an entrepreneur. And by the way, only about one in six entrepreneurial ventures actually survives. The rest crash and burn. So good luck with that.
Companies Try To Screw You in Job Interviews
In job interviews, one of my favorite questions they ask you is, “What was your salary at your previous job?”
This is a fascinating question, because it gives them all sorts of negotiating leverage. It's also fascinating because, at least in some states and cities, it's been banned. But either way, if you say $20,000, then they can come right back and offer you $25,000, and justify their offer by saying “it’s 25% more than you made at your last job.” What they’ll tastefully keep to themselves is the fact that they easily pay other people $40,000 to do that very same job.
If you refuse to answer, they can go “tsk, tsk, tsk” and disqualify you as being uncooperative. There doesn’t seem to be any clear way forward.
Label What’s Going On
One way to proceed is by gently labeling what’s going on. Labeling is a technique from Chris Voss, author of Never Split the Difference, my favorite book on negotiating.
With labeling, you state what’s happening in the current moment, especially surfacing any unspoken agendas.
“You’re asking for my previous salary. It seems like if I tell you that, I’m giving up negotiating leverage.”
You say this nicely, and it’s the truth. Next, segue into a question, “How will you use that information?”
If they say, “we want to make sure we’re giving you a raise,” then you can say, “that sounds more than fair. When you’ve made an offer, I’ll let you know if it doesn’t constitute a sufficient raise, and we can proceed at that point.”
If they say, “we want to know so we can offer you something in line with what you made before,” that’s a non-answer. It means they want to use the information against you. You can respond, “that makes sense. When you make an offer, I’ll let you know if it isn’t in line, and we can proceed at that point.”
If they insist, you move on to the next tactic.