reducing salaries in hard times

El obrero
In discussing contract consulting rates with two recruiters recently, I was forced to face an interesting question – is a recession the time we should be willing to accept reduced rates (or salaries)? Can you justify making 75% of what you once made, just to keep making money?  Or is it better to grit your teeth and keep searching for – at least – pay equal to your previous position?

This question first of all depends on whether you’re in a position to weather a long downturn. If you’re living paycheck-to-paycheck, this question is answered with a resounding “yes.”  If you have some money set aside, you may be able to hold out longer for a better rate.

But what about taking that lower rate when you move on to the next job? Do you think the excuse that “it was just a filler” will work?  Do you think the next company will bump you back up?

And what about titles, or responsibilities? Does it appeal to you to work your way back up the line?  For most people it is not desirable if avoidable.  Nobody wants to be the 40-year old supervised by a 23-year old.

It’s not always easy. I know plenty of people who, for one reason or another, have had to make the decision to scale back in their careers, either salary-wise or responsibility-wise (or both).  People do it out of fear or desperation or sometimes simply out of a desire to work, no matter what the level.

Many people may see this as an analytical question:  should you accept an X% reduction in pay during economic hard times? I think this is a question that can only be answered by the individual in each case – what is your balance of pride versus need to work versus will to work?  Can you be effective knowing you’re working as hard (or harder) for less?  Can you make do? In the end, it’s not something a career blog or a coach can help you with; you need to know whether you can handle the reduction, and live with the consequences.

photo credit: Libertinus

12 comments

  • A PInch of Cheer

    This is a tough question, and I think it what matter on the circumstances.

  • It's a tough balance between long-term professional development, and pressing financial obligations. Pride might also factor in there somewhere too. Most people would never want to find themselves in such a situation. And when they do, there are usually few choices.

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  • I am a contractor and recently went through this situation.
    Quite often recruiters try to get you to accept a lower rate because their commission is so high.
    I recently accepted a lower rate and then found out the previous person, who only last two week, actually charged slightly higher. I also found out the recruiter charged $12K in commissions!
    Stick to your guns – good people are always in short supply.

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  • I'm not in such a postion, fortunately. I am busier than ever (even in a declining industry – publishing – I will retire before it dies completely), with little chance of a near-term layoff. And I have a large enough cushion to retire today if I had to (under reduced circumstances, granted, as I am still somewhat young). But I would flip burgers at McDonalds (I guess they really don't do that any more) if I had to feed myself and my family, and to Heck with the career implications. What I might earn tomorrow doesn't pay the bills today.

  • Jobs – like any other product known to man – are subject to the laws of supply and demand. If you are going to insist on charging the same amount for your services when demand has obviously slackened, you are going to be waiting a long time to make a sale, i.e find a job…

    When things pick up again, and they will, supply and demand will work in your favor. The key is to ensure your skills, abilities and positioning are minimally effected by pay compromises.

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  • I'm not in such a postion, fortunately. I am busier than ever (even in a declining industry – publishing – I will retire before it dies completely), with little chance of a near-term layoff. And I have a large enough cushion to retire today if I had to (under reduced circumstances, granted, as I am still somewhat young). But I would flip burgers at McDonalds (I guess they really don't do that any more) if I had to feed myself and my family, and to Heck with the career implications. What I might earn tomorrow doesn't pay the bills today.

  • Now that the economy has somewhat recovered from the devastating effects of the financial crisis, it's only fair to give back what they have taken. Otherwise, this will incur the wrath of the employees who have been affected by the salary reduction.