Lower salaries: Accepting Lower Salaries for Meaningful Work

Pay Cuts: Working for Less — When It’s OK to Take a Pay Cut

Salaries, like the stock market, are taking a beating in the current economy, and that has people puzzling over changes in pay. Workers who’ve been laid off worry their salary history will eliminate them from job opportunities in this new budget-conscious business environment. Those who still have their jobs are sometimes asked to take a cut in salary, with or without a cut in responsibility.

As the economy changes, so do the rules about salary. “In the boom times, taking a pay cut was looked at askance—that you did something wrong in terms of career development,” says Michael Zwell, PhD, CEO of organizational development consultancy Zwell International in Glenview, Illinois, and author of Six-Figure Salary Negotiation: Industry Insiders Get You the Money You Deserve. “Now, you have a strong case to make if your company made significant cutbacks and you took a job that, given the market, was the best available job to support your family. ”

Recruiters agree. “Given the economic climate and white-collar and blue-collar job loss, it’s going to become more acceptable for people to take pay cuts and it won’t have the negative stigma that it would if we were in a growth period of the economy,” says Brendan Courtney, senior vice president for recruiter The Mergis Group in Fort Lauderdale.

Sometimes taking a salary cut is definitely the right career move. Here are five situations where that is the case.

1. You just need work

If you’re out of work and you need money to pay the bills, it’s better to take a lower-paying job than to have no job at all. “There are fewer jobs out there and you may not only have to take less money, you may end up having to take less job,” Courtney says.

2. You move into a new industry

When a job change forces you to take your expertise to a new industry, you may have to accept a lower salary. The same applies when you take your industry knowledge to a different company area.

For example, if you sold software to human resources departments and you take a new position selling software to medical offices, you’ll lose your industry expertise but keep your functional expertise. If you move from sales to operations, you’ll lose functional expertise, but keep your industry expertise.

3. You change careers

Some laid-off workers will find their next job in a completely new field. “If you do that, you’re going to have to take a pay cut because you typically aren’t worth as much in your new career path as you were in your old career,” Courtney says.

4. The new job makes you happy

Having a job that satisfies you is far more important than how much you earn, says Maggie Romance, director of organizational development for Pima Community College in Tucson. She found happiness by trading a six-figure job putting out HR fires for a hospitality corporation for her current, lower-paying position doing staff professional development. “If you find the right match, the money doesn’t matter as much,” she says. “It’s about the happiness.”

5. To keep your current job

Forced to choose between taking a pay cut or losing your job? Take the pay cut and start a job search. Employers typically prefer hiring someone who’s employed to someone who’s not.

Perform well despite your lower pay, and you’ll build a case that supports giving you a raise when the economy recovers. “It may take two jobs and a recovered economy to get all the way back to that higher salary, but you can at least make a significant leap toward it if you perform outstandingly,” Zwell says.

Moving on

Once you’ve agreed to work for a lower salary, issues will arise. If you have to do the same job for less, your first challenge may be emotional. Accepting a lower salary can be difficult if you hang your self-worth on the size of your paycheck.

Instead of thinking about salary as a measure of your worth, think of it as what the market is willing to pay for your skills, knowledge and experience at this point in time, Zwell recommends.

And remember that time heals at least some paycheck wounds. “In prior recessions, there are a couple years where salaries become depressed, then they get back up to the norm within a year or two after the recession ends,” Courtney says. “While you may not make up the whole gap between what you were making and what you are now making, you will end up closer to where you were than where you are now.”

Should you take a salary lower than expected for your first job?

Sorry to break it to you, but you may have to take a pay cut for your first job.

Research by PricewaterhouseCoopers found 72% of millennials say they’ve made compromises to enter the workforce, with one-third taking a salary lower than what they expected. Unless your degree and skills are in extremely high demand, you may find yourself among the underpaid.

Even small docks in pay can sting in the long term, says Seattle-based job interview coach Lewis Lin. “The difference between a $40,000 and $45,000 salary might seem inconsequential, but it can substantially impact what you make over the course of your career,” says Lin, author of Five Minutes to a Higher Salary: Over 60 Brilliant Salary Negotiation Scripts for Getting More.

But there are some cases where it makes sense to start out making less. Ask yourself these questions to determine whether taking a lower-paying first job is the right move for you.

“What’s my bottom line?”

Take a close look at your finances. Calculate your monthly expenses to determine what’s the lowest possible salary you can earn and still be able to support yourself so you don’t waste time applying to jobs that aren’t financially feasible.

“What am I truly worth?”

Robin Pinkley, co-author of Get Paid What You’re Worth: The Expert Negotiators’ Guide to Salary and Compensation, says many people—millennials in particular—falsely estimate their market value. Get a realistic idea of what you should be earning by taking the average of what calculators on Salary.com, PayScale.com, and SalaryExpert.com say you’re worth.

Additionally, get first-person insight on what your starting salary should be, says Los Angeles-based millennial career coach Crystal Marsh. “Talk to someone who has taken the career path you’re hoping to take,” says Marsh. Lin recommends reaching out to headhunters in your industry since they have firsthand knowledge of what employers are offering.

“Will the location lower my living expenses?”

It may make sense geographically to take a lower-paying job if you’re moving to an area where the cost of living is cheaper. “A job in Alabama isn’t going to pay as much as one in New York City, but it’s all relative,” says Beth Carroll of the Society for Human Resource Management.

“Am I in a position to negotiate?”

The short answer: Absolutely. And, as long as you negotiate professionally, there should be no harm in asking for more money. “Employers aren’t going to rescind the offer if you’re reasonable with your request,” says Carroll, so be realistic. “If you walk in asking for $65,000, and the job posting says the range caps at $55,000, that can be off-putting to a hiring manager. ”

A good indicator that there’s more money in the budget is if the advertised salary range is higher than what you’re being offered. Granted, you’ll still need to be an effective negotiator if you want the hiring manager to bump up the offer. The wrong move: Focusing on your personal financial needs. “Don’t say, ‘I can’t live on that size salary,’” advises Carroll. “It’s not the hiring manager’s job to manage your personal budget.”

“Is salary most important to me?”

Evaluate your priorities before you start job searching. Recent research by Ernst & Young found that millennials are the most likely generation to say they would take a pay cut to have work flexibility. Thus, determine what matters most to you. If working from home is what makes you happy, you may need to take a slightly lower-paying job that offers telecommuting options, says Lin.

“Will this company open the door to earning more later?”

Some companies carry more clout than others. Depending on your industry, starting at a big-name employer that pays less could make your resume stand out when seeking future job opportunities. “Contrary to common belief, many larger firms can get away with paying below market value because they have a well-respected brand name,” says Carroll.

“Am I just in it for the job title?”

Choosing to start your career at a smaller firm—one that pays less—simply because you get a fancy job title won’t don’t you any favors. “If you’re a 21-year-old vice president of sales, recruiters are going to see through that,” says Lin. Focus on what matters most: Developing the skills and expertise that will increase your market value to future employers.

“What else is on the table?”

No wiggle room in the salary department? Ask for other financial perks, such as a signing bonus, reimbursement for relocation expenses, or transportation stipend; in those areas, there’s often more room for flexibility, says Lin.

Keep up with your worth

Whether you’re embarking on your first job search or are moving up the ranks in your industry, nailing down a solid base salary is one of the most important parts of your job offer negotiation. But, as you’re well aware, change is constant; what worked for you last time may not work for you this time. Maybe you want to start a family, buy a house, or go back to school, and you’re not sure how to ensure your paychecks grow with your aspirations. Need some help determining what you’re owed now and in the future? Join Monster today. As a member, you’ll get career advice and job search tips sent directly to your inbox. From negotiating your initial salary offer to asking for a raise to dealing with compensation trends, Monster will help show you how to earn your worth.

Why are wages so small in Russia? — Elizaveta Gromkova on vc.ru

Why is the salary so low in Russia? What is the salary in the USA? Salary in Europe? What is the salary of deputies? How much does Putin earn? What is the real salary in Russia? How big is the gap between the concept of “average salary” and “real salary” in Russia?

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According to Rosstat, the average salary in Russia is 48,000 ₽. One can argue for a long time about exactly how Rosstat conducts calculations, in any case, it is much lower than in most developed countries:

Average salary in Finland – €3,300

Average salary in the USA – $3,600

Average salary in Germany – €3,700

up to 1500 € + a large set of various benefits and measures to support the state citizens and small businesses.

You can, of course, assume that prices in such countries are much higher, and you will have to work longer and harder. We can agree with the second statement, but we will have to argue with the first. Europeans spend an average of 30% of their income on food, while in Russia this figure exceeded 50%. nine0003

The bottom line is that the difference between the incomes and expenses of Russians is gradually finding a common ground, ie, how much they earn, how much they spend, not being able to save and accumulate savings.

How is it that one of the richest countries in the world has such a low income and low standard of living?

There are several reasons.

The first possible reason is labor productivity. Low labor productivity is one of the main reasons for holding back the growth of the Russian economy. Demographic indicators in Russia cannot boast. Mostly not young specialists work in production. It is difficult to lure young people to the factory with low wages. Those who want to earn money either look for better options or simply leave. Those who remain are older or those who are looking for the kind of work that will allow them to cheat. nine0003

It would seem that the solution to the problem is obvious: raise everyone’s wages, bring order and discipline – that’s an increase in labor productivity. But an increase in wages will lead to an increase in the cost of goods produced. It is extremely difficult and unprofitable to sell more expensive in the face of fierce competition and the constant economic crisis. Any employer will look for ways to save money. The only way to sell a product without increasing its value, but at the same time raising the wages of employees, is to cut your own income. Not every businessman will take such measures. nine0003

Another important factor influencing low wages in Russia is high interest rates on loans from Russian banks. Any business needs credit both at the initial stage and in the process of systematic conduct of activities and further development.

The low level of the Russian economy, high inflation and, as a result, a high risk of non-payment of interest on loan obligations, bankruptcy of companies, etc., affect high interest on loans.

As a result, a high interest rate on a loan for a businessman is reflected in the salaries of employees.

The next reason is taxes and insurance premiums for each worker. Most working people believe that they pay 13% of their salary. With an official salary of 30,000 ₽, after deducting taxes, it will be 26,100 ₽ – it seems to be not bad either, and not particularly less. And for the employer, the employee’s salary will cost 36,319 ₽.

That is, from a salary of 30,000 ₽, an employee will pay 3900 ₽ for tax, and the employer also – 6319 ₽ for insurance premiums for the employee (to the Pension Fund, the Compulsory Medical Insurance Fund and the Social Insurance Fund).

For each product purchased for sale in business, the employer also pays 20% VAT.

Of course, the employer’s expenses are borne by the employee by cutting his wages.

In order to somehow bypass these mandatory payments, in many cases the employee is offered to work under a minimum wage contract. In 2020, the minimum wage is 12,130 ₽. That is, under the contract, the employee is paid 12,130 rubles or so, and all insurance premiums and taxes are paid from this amount, and everything else is paid as bonuses. The employee receives a salary, as they say, “in an envelope.” nine0003

An employee will now have to take care of his worthy future pension himself.

Often an employee works without a contract at all and without an entry in the work book. In this case, it is practically impossible to confirm your seniority and work experience in the future.

In some cases, the low salary of an employee is the fault of the employee himself. This is not about all employees, but rather about employees who do not have any aspirations for more. they do their job well, they get some kind of necessary minimum for it, they don’t need more. nine0003

Most often these are people who do not understand their earnings; there is a category of people who always received, say, 15,000 ₽, and then suddenly began to receive 20,000 ₽, they will start trying to work harder in order to get 25,000 ₽ next month, and then, 30,000 ₽, perhaps (they will start working work harder, take overtime, etc.), while another category of people will work the same way as before, believing that an extra increase in salary simply fell from the sky.

Why, then, should such people be paid more when they are ready to do their work for the same salary and everything suits them? nine0003

Many people themselves refuse to work more to increase their wages. They do not seek promotion, refuse transfers to a larger department, move to another city or employment in a more prestigious and highly paid job.

Why wages are low in Russia and what needs to be done to get even less

This text was written by reader T—Zh. If you also want to think aloud and open your own discussion, please fill out this form. nine0003

People often complain about low salaries in the comments.

A sawn-off shotgun and a smile

rips off the veils

There is a popular myth that ruined the lives of a lot of people: that you have to do what people need. In fact, this factor is indirectly related to salary. For some reason, the Russian collective unconscious always comes to the conclusion that the matter is specifically in Russia. The place is cursed: they steal, everything is done by pull, everyone is bad. This, of course, is generally true, but not specifically in this case. nine0003

At first this position surprised me, then it started to irritate me. The last straw was 5,000 likes on the tweet of a girl who did not understand why waiters earn little.

In response, I decided to explain how wages are formed from an economic point of view.

Poverty Rule No. 1

Choose a profession with very low requirements

The main factor is the most common balance of supply and demand. If there are many workers, but few employers, then the price for labor will be low. The waiter in the original tweet is a prime example. Qualification can be obtained in a few hours, a maximum of days. This means that the whole country has potential waiters. nine0003

In this case, the supply is clearly greater than the demand, which makes it possible to pay very little for such work. And it doesn’t matter how hard this work is. As long as there are candidates who are not afraid of this, nothing will change.

Exceptions:
💶 In some countries, for example, in France, the minimum wage is quite high. Above the minimum, they still do not pay, but even these funds are enough for a normal life. But we must not forget that it is precisely such professions that are automated in the first place. It’s especially ironic when diner workers go to rallies to raise the minimum hourly wage. They raise the minimum wage, and then McDonald’s and others put burger machines instead of people and fire half of the staff. nine0003

👷‍♀️ Politically active groups with powerful trade unions are able to get more pay. When there are a million low-skilled workers in the sphere, this is a whole million votes in the elections. And if you managed to create an industry trade union, then you can then run around politicians and trade votes in exchange for preferences. For example, dock workers in the United States receive $200,000 a year precisely because their lobby once protected this industry from competition with the help of laws. Today, the political power of dockers is small, but past efforts are still paying dividends. nine0003

/ticket-to-usa/

Can you move to the USA?

Poverty Rule No. 2

Give preference to areas where there are few employers – or even one

For example, go to medicine. The qualification required is high, the supply is therefore lower, but the demand is tiny. Yes, many doctors are needed, but in this industry there is usually only one buyer – the state in the face of a bunch of polyclinics with a unified salary scale for doctors. The bargaining power of this buyer is enormous – this situation is called “monopsony”. Like a monopoly that sells high, only the other way around: a monopsony buys low. If we had a medical Uber, where millions of patients and doctors negotiated services with each other, then the doctors would drive Mercedes. nine0003

All about work and earnings

How to change profession, get more and what to earn. Twice a week in your mail

Everything is about the same with teachers. In some countries with public education, everything is also bad, in others the teachers’ union was able to win high salaries and a ban on qualification tests.

The situation is different with the military, police and firemen. First, you need an average qualification. Secondly, states, especially authoritarian regimes, invest in these areas in order to maintain power with their help. But in any case, the budget is not rubber, and when there are too many such workers, then everyone gets a small salary. nine0003

/you-are-in-the-army/

I am a contract soldier, that’s what Russia gives me

Exception:
👨‍🏫 The US can afford to pay high salaries to teachers and the military. Simply because they do not need to simultaneously deal with doctors and university professors: these areas have been taken over by the private sector.

Poverty Rule No. 3

Get skills that are useful only in your country

If your skills are useful only in one country, then the salary will be local: the price of similar labor in the world will practically not affect it. It is unlikely that Russian-language copywriting, knowledge of 1C and Russian legal practice will be needed outside of Russia. But the Russian plumber will have something to do in Finland, as well as a domestic react developer in Germany. nine0003

The easiest way to maximize demand for your services is geographically. When labor can be sold at low cost anywhere, its value rises.