Pay For Less

We all know how scarce jobs are becoming and we all know how the market works when there is an oversupply of product compared to consistent demand… prices drop. What happens when the labor market is flooded with experienced workers and the job market dries up because of the abundance of potential workers? Do employers take this into account and actually lower the salary for open positions knowing that they can expect to hire a very experienced worker for less because the competition is fighting tooth and nail for any opening? We can also think about it from a currently employed status too. Will the employers lower their yearly raises and bonuses given to their current workers because they know they can “get away with it?”

Our economy has shed over 2 million jobs this year… with more to come. Unemployment has increased by nearly 2% this year alone and there are over 10 million people registered as unemployed. The national unemployment figure is currently at 6.7%. Since December 2007, the beginning of our current recession, over 2.7 million people have been added to the unemployment line.

As always the unemployment statistic does not include people who are working part time who need full time work and it also ignores people who have just totally given up on looking for work. This could potentially add millions to the 10 million who are counted as unemployed. As jobs are being cut and the unemployed workforce grows, competition increases for the jobs that do become available. Workers will fight amongst themselves giving up perks, hourly wage requirements, health insurance, retirement plans, and many other costly employer funded benefits… to just have a job.

This means that the worker is dropping his required price due to the competition for the available job. Of course the employers know this and will drop their pay scales for the jobs opening up. It only makes fiscal sense doesn’t it? It’s a function of the business world and supply and demand.

Even if all of this makes perfect economical sense, is it right and what ramifications do you get when you pay experienced workers less than they believe they are worth? Sure, the workers who “win” the new job will be happy that they are earning money again, but are they happy and will they be efficient? Yes, they have to be at least efficient enough to keep their job and thus they must do a certain amount of work which ensures their continued employment. But, can you expect someone to give full effort for less money? Can you expect someone to put in extra hours and give their job everything they have when they have sacrificed all of their perks they were being given before?

The situation exists today. Let’s look at a hypothetical example. Person A is an experienced worker and has a credible resume. He has performed his job with excellence year to year but his job has been cut due to the horrid economic times. Let’s say he was making $20 an hour with full benefits (vacation, health insurance, retirement, etc). Now, he’s out of work and fighting against similar people and resumes. However, the prices have dropped to reflect the oversupply of workers.

Now, he has agreed to work for say $12.50 an hour with limited benefits (very few vacation days, horrible insurance coverage if any at all, no retirement, etc). Will this worker show up at work and give the same effort he gave while at his last job? Some will, most won’t… how would you react in this situation? As prices/salary drops for workers, effort and efficiency will decline. As effort and efficiency decline, so will the profit and product quality of the places they work for. People need a job, but they also believe they should get paid what they are worth. If they are being undercut, you will not receive full effort.

Same thing goes for companies who pull the plug on bonuses and hourly raises for current employees. If an employee has excelled in their position even during bad economic times, they will expect a subsequent acknowledgement of their work and dedication. For the people who do not excel, removals of monetary rewards are justified even without economic downturns. However, even during an economic crisis, if the company is making money and staying in the black, rewarding deserving employees is still a must. It cannot be completely removed or the workforce will feel unappreciated and effort and quality will decrease.

Is there a happy medium? In the end yes, but during volatile times, we see things get worse and the workforce mental status declines. This all feeds upon itself until enough good news turns the tide and the workforce begins to believe things are heading back in the right direction. Until that time happens, jobs will continue to be lost, salaries will continue to be cut, raises and bonuses will be nonexistent, and worker efficiency will decrease. Employers must find ways to motivate their workers in the dire times we are in to help deter the effects of workforce resentment. Is there a way to motivate you without money? I think the answer is yes and it’s up to employer’s to find the answer.