To 'Low-Ball' or Not to 'Low-Ball'

Laid-off workers say they are sacrificing about $10,000 in pay for every year they are out of work as companies "low-ball" salary offers. While it may lower costs initially, such a practice could cost an organization a lot more as time goes on -- especially in turnover, disengagement and employer branding.

By Kristen B. Frasch

It seems a growing number of employers are offering lower-than-expected salaries to job candidates who are re-entering the workforce as the recession ebbs. Why? Because they can.

"Companies will pay you less because they know you have no choice but to take it," Holly Erickson, 38, a resident of St. Clair, Mo., tells the St. Louis Post-Dispatch.

According to the story, many unemployed job seekers are sacrificing about $10,000 in pay for every year they are out of work, although researchers have yet to pinpoint just how many workers have taken hits to their careers and wages because of the recession.

A survey in September by job-search site CareerBuilder found 54 percent of 925 unemployed respondents reported fielding compensation offers that were more than 25 percent lower than the paycheck they received at their last job.

But this could also mean many of the 26.6 million Americans classified by the U.S. Bureau of Labor Statistics as "underemployed" have opted to accept a lesser job just to survive.

"We should be sure we're comparing apple to apples here," says Christopher Kelley, founder and CEO of KnowledgePay, a Sycamore, Ill.-based compensation consultancy and software provider.

That means, he says, that "just because you were earning $60,000 a year before, working as a senior financial analyst, doesn't mean the company should have to pay you at least $55,000 a year to be an accounting clerk."

"People may be willing to go into more entry-level jobs for either their own cash-flow issues or just to be working productively," Kelley says. "However, those lower-level jobs earned less even at the peak of the economic boom and have likely slid back a bit as well."

Whether employees are opting for lesser roles or are being offered less pay for the same work they were doing before the recession, they represent the downwardly mobile workers and underemployed -- the latter of which includes unemployed people looking for work, involuntary part-time workers and those who have given up the job search altogether. (That last group's number has risen to 17 percent from 8 percent in June 2007, according to BLS data.)

Low-balling jobs and compensation "is a subset of the underemployment issue," says Lois Melbourne, CEO of Aquire, an Irving, Texas-based workforce planning and management consultancy.

"If take lower jobs than their qualifications, they are going to be expecting lower pay," she says, "but if they are taking the job with the higher responsibilities, yet are low-balled for pay, they are likely even a larger flight risk."

And it's not just the underemployed worker who loses out in this situation, according to Melbourne. A company's reputation is also threatened by the practice.

"I think it is a worse reflection of the employer brand if the pay is just lower because the candidate is desperate for a job," she says.

Though Melbourne doesn't doubt salary low-balling is going on, she doesn't see it being encouraged in the HR circles she counsels.

"By the time offers are being made," she says, "the [HR or hiring] manager wants the individual and is typically really glad to have found a great candidate among a lot of 'wannabes' who are sending in their resumes for every open position they can find.

"Retail and restaurants in the Dallas area have lowered their starting pay, according to the students we are currently hiring," she adds, "but if you stay with them for six months, then the bump up is nice.

"So, some industries with entry-level positions may play the low-ball game, but I don't see it in the professional positions."

Kelley's take on the practice? "Penny-wise, pound-foolish," he says. "That's the fate of employers who knowingly low-ball applicants during this time-stalled labor market.

"The purist labor economics point of view is that the price for labor -- i.e., wages -- is merely the result of supply and demand," Kelley says. "We are in a period of high unemployment -- i.e., increased supply -- and lower demand, and so it shouldn't be a total surprise to see wages falling. That being said, human capital is not just like all other commodities.

"If people perceive that they're being taken advantage of, it does great harm to the fabric of trust and overall worker engagement," he adds. "Certainly, there's a greater risk of those people bolting out the door the first chance they get.

"Almost as bad to the business is having those disenfranchised employees staying."