Salary may not be negotiable for recent grads

It’s common to assume that salary, benefits, moving expenses, etc. are negotiable during the job interview process.  To a degree, this is an antiquated notion–especially for recent grads.

This isn’t all bad news, though.  Interviewing for a job with defined compensation is like shopping for a Saturn: the prices are set, so you don’t have to worry about uncomfortable questions and questionable negotiating tactics.  A relief, because you’d be going up against a seasoned recruiter; no contest I’d win.  Here are four reasons why comp may not be negotiable for recent grads right now:

1.  Employers have pre-defined pay grades. Especially at the junior employee level, corporate positions are treated more like commodities.  Entry-level positions will average between $35,000 and $45,000 around the country, with exceptions for certain professions and geographies.  Companies define compensation all the way up the ladder, but the higher you go, the wider the range.  The comp for a role has nothing to do with the candidate, but rather the value the company has already determined for that role.  So if a junior-level position is listed at $45,000, you can bet there’s not much, if any, wiggle room.

2.  Employment discrimination concerns. This is similar to the first point in some ways.  Let’s say there are 50 junior-level positions in the IT department at Mega Corp, and the job requirements include a 4 year degree with a technical major and at least one internship.  Assuming all the people hired have similar resumes, and the positions all require roughly the same level of responsibility, all employees will be paid the same.  A company cannot justify paying someone $10,000 more just because they negotiated a higher salary.  Or, even worse, they can’t pay someone $10,000 less because they didn’t negotiate a salary.  That would expose the company to claims of compensation discrimination, and resulting legal costs could wipe out any short-term realized cash savings.  Ergo, similar employees in similar roles are compensated equally.

3.  Excess supply of candidates. Not only are recent grads struggling to find work, but as I wrote about in November (Election Results to Impact the Job Market for Recent Grads?), laid-off mid-career employees are competing for entry level jobs as well.  Candidate supply has never been better.  Econ 101: low demand and high supply equals lower price.  Even if a company could negotiate, they don’t have to.  There are dozens of other qualified people ready to take the offered salary.  Hopefully this will change in the next few years, but for now, it’s important to note.  Here’s a graph I just made up that’s not based on any data whatsoever, but illustrates my point:

Available Candidates vs. Open Jobs

4.  Movement toward internships and probationary periods. Eliminating risk takes on greater importance when there isn’t a lot of money to throw around.  Every dollar counts.  Interns aren’t just cheap labor, they’re a low-cost, try-before-you-buy option that ensures companies don’t make the wrong hiring decision.  The same is true for probationary periods.  Employees under either type of program will be paid the same, no matter what, so there’s no room for negotiation.  (Once the company realizes what a gem they have on their hands, that’s another story.  That’s one of the strongest bargaining chips a candidate has.)  Making the wrong hire is so costly (money, time, momentum, morale) to a company that they’ll do whatever they to minimize exposure to that risk.  Once hiring comes back, it’ll be slow, and cautious.  Internships and probation periods will gain popularity until companies know they’re on stable footing again.

Don’t expect compensation to be negotiable, though there may be exceptions.  I’ve already started a post on how to handle The Salary Question, so that’ll come next.

(Update: here’s How to handle “The Salary Question.”)

Related Articles

• Is an internship the new entry-level job? (cnn.com)
• Election Results to Impact the Job Market for Recent Grads? (getalegup.wordpress.com)