You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.
ROB: Chances are your salary isn’t rising as fast as inflation. You need more money, and you’ve heard stories about people getting massive pay increases by switching jobs.
ROMA: But before you march into your boss’s office to demand a raise, remember, there is a recession looming. That doesn’t mean you shouldn’t ask. But your pitch needs to be researched and realistic. After all, unemployment is still low and certain sectors are struggling to find workers.
ROB: Welcome to Stress Test, a personal finance podcast for millennials and Gen Z. I’m Rob Carrick, personal finance columnist at the Globe and Mail.
ROMA: And I’m Roma Luciw, personal finance editor at The Globe. We’re all paying more for everything from groceries and gas to rent and your mortgage. To combat that, you can either cut spending or make more money. That means finding a side hustle, looking for a new job, or asking your current employer for a raise.
ROB: Today, we’re talking about that last option, how to negotiate your compensation, given the combination of inflation, a labor shortage and a potential economic downturn.
ROMA: Now, Rob, normally when we see a recession, it goes hand in hand with job losses. In this case, the job market’s tight and there’s still parts of the economy where workers are desperately needed. And, yes, pay increases are happening. Can you give us some sense of why that’s so unusual?
ROB: Well, the pandemic created a lot of churn in the job market. A lot of people left their jobs and those vacancies are still there. Employers are having trouble filling positions in a bunch of sectors and that even goes down to, you know, part time jobs that students might have. We are heading into a downturn and that usually means big time layoffs. I’ve covered a lot of recessions in my career, and they’re usually nasty. We’re going to see a little of that. We can’t sugarcoat all of this, but I do think that there are labor shortages in certain areas, and we also have a whole wave of retiring baby boomers who are going to be vacating the workforce. So that suggests that there is still going to be some tension in the job market, and some need for employers to deliver.
ROMA: Okay. So some things will be in line with previous recessions, but the bottom line is we don’t know how things are going to play out and they might look a little different this time. After the break, we’ll hear from a compensation expert about what’s going on in the job market and how to negotiate your salary.
ROB: Manny Campione is a principal at Normandin Beaudry , a compensation consultancy. The firm found that salaries increased on average by 4% across Canada this year. That’s a historically high pay boost, even though it might not feel like it with inflation around 7%. Here’s our conversation.
ROB: Inflation is continuing to hang in there. It might be declining just a little bit, but our sense of inflation seems to be that it’s getting worse. I see I’m I have a chance to negotiate a wage with my boss, my employer, late this year, early next year and I’m thinking, wow, there’s a lot of pent up inflation in my personal budget. I feel I need a bigger increase. What are you forecasting for what employers will actually give in 2023?
MANNY: I’ll say 3.8% just to kind of keep it easy. What I do believe is important to understand, and if StatsCan has their figures right, we will be in a labor shortage for likely the next ten years. So as the demand goes up and the Labor continues to remain flat, if not low, we can expect to see a spike in pay over the course of time.
ROB: So this labor shortage is retiring baby boomers, correct?
MANNY: Retiring baby boomers, those choosing not to return to their previous jobs, I’ll call it post-pandemic. And a lot of folks that have kind of gone back to school or changed their minds. But certainly the fact that a lot of employees are retiring certainly leads to that.
ROB: We’re in this unusual job market where everyone’s talking about a looming recession and yet employers have been complaining for two years that they can’t find people. How does that affect compensation?
MANNY: There’s a few factors in play, Rob. And, you know, certainly this convergence, if you will, of the labor shortage, higher than average inflation rates and the economic downturn are leading to what I would say the first time in my professional career, a very uncertain time related to pay inflation and just in general recruitment. And what we’re seeing by and large specifically for those hot jobs or hotter jobs, is a bidding war for the best and brightest talent. It straddles roles that are high tech, like A.I. and it also straddles roles that are hourly.
ROB: I heard a radio item in Ottawa the other day about restaurants offering medical and dental coverage to their hourly workers.
MANNY: I would say certainly that that’s an indication of the change where we’re certainly starting to see total rewards. That, again, the concept of monetary and non-monetary rewards become more and more important for the workforces that historically have not seen anything more than just the monetary side of rewards.
ROB: I hear a lot of people saying, “I’m going to go ask my boss for a raise because of inflation. I need it.” How do employers react when they hear someone make a pitch for a raise that way?
MANNY: You know, if it’s as blunt as that, it’s not likely going to be received well. I think there’s certainly some empathy and certainly a great deal of understanding. But, you know, as there is a downturn in the economy looming and base pay specifically is a fixed cost to the organization, I think there needs to be quite a lot of context and conversation around it. And let me give you a couple of examples, Rob. Related to salary increases over the course of time, there is no direct correlation between inflation and pay increases. In fact, since 2013, the rate of salary increases on average has been roughly 0.5, if not 2.5% above inflation. And certainly we’re seeing in 2022 that line crossover. And then when we think about, you know, the employee motivation, I think there’s more than just pay that needs to be discussed. I think there’s an awful lot of pressure right now on job titles. There’s an awful lot of pressure on career progressions. There’s certainly much more at stake than just pay at this time.
ROB: Now, people are often fixated on the cash when they’re talking compensation. You’ve mentioned some bureaucratic things that could be changed like titles, etc.. What other aspects of compensation might you want to bring into the discussion if you’re talking to your employer about a raise?
MANNY: Well, I think we just need to help remind ourselves, if you will, that, you know, during the pandemic, overall psychological health, physical health, social health and financial health, where we’re all discussing, we just need to remind ourselves that benefits probably were the most important during that two, two and a half year period. And, you know, you factor in that there’s an awful lot of flexibility that was injected into the workplace through hybrid work or, you know, work from anywhere. Those are extremely important aspects to what could be called for rewards that certainly need to be openly discussed.
ROB: I’m just wondering if the door is closing quickly on going to ask for a raise from your employer. Just given that, given all the headlines about recession, slowing economy, we’re all going to be getting defensive. Is the door closing? Is it almost closed? How close are we to the endpoint here?
MANNY: I don’t think the door’s actually going to close. In fact, if we go back to the comment on the labor shortage, if you’re a critical talent in a critical role and the supply is relatively low and you know you’re marketable and you see different rates of pay out there that you think are more akin to your value. I really don’t think there’s an issue. Speaking to your manager, I would certainly want to characterize it or I’d prefer to characterize it as a discussion rather than a demand. Regardless of the economy, if you fit into that employee segment, then it’s certainly worth asking. You know, but the crux of all this, and I think it’s important to state is, you know, there’s a strong correlation between high performers and higher paid employees. So if you’re not a high performer, I’m not sure how that’s actually going to translate well with the conversation.
ROB: So normally we get a recession and I’ve seen a few recessions, and usually the number of big layoff announcements starts reaching a crescendo. At some point, so-and-so is laying off a thousand workers or going to reduce their workplace through attrition. But this underlying demographic issue of retiring baby boomers, is that going to shield a lot of workplaces from these mass layoffs that we might have seen in previous recessions?
MANNY: I think from a generalization perspective, we’re going to see organizations probably hoarding their talent or hanging on to their talent as best as possible. But there will be some organizations perhaps they’ve over hired. Perhaps they’ve realized that the pure economics of their business is probably too talent heavy. And I do think we’re going to see some organizations shed some of their workforce. And I think we’ve seen it in a couple of tech scenarios. We’ve certainly seen it with Shopify, and I think we’ve also seen it from Wealthsimple, and I wouldn’t be surprised if there’s other organizations that follow suit.
ROB: We’re hearing a lot of stories about people switching jobs to get big raises. How typical is that right now as we head into the latter stages of 2022?
MANNY: You know, if we, you know, follow the headlines, I think we’ve all heard about the great resignation and we’ve seen a lot of employees switch jobs or even switch careers. I would say it’s probably pretty prevalent. I’m not necessarily sure it’s because of money. I think there are a lot of individuals out there that kind of hung on to their jobs during the pandemic and decided one way or another to think about changing roles. And I think we started to see that particular whiplash happening in 2022. And certainly the amount of the employees that are leaving is fairly high in some cases.
ROB: Manny tell us a bit about what’s actually happening in the bidding wars.
MANNY: Yeah, it’s certainly real and it’s certainly alive and well. And I think there’s two questions that were typically asked later in a typical interview that are now getting asked upfront now. One is, you know, what’s your hybrid work policy? And the second is, how much can I earn or what’s the pay for this role? The whole bidding war piece is a fact. And we’re seeing it again in some jobs in some sectors where the candidate themselves has more than one offer in hand. And, you know, they will state more candidly now than ever before what they’re earning or what they expect to earn. And in some cases where they have an offer on the table if the new quarter can match and or offer more than what’s on the table.
ROB: One of the ways we can arm ourselves when we go into conversations with our employer is to sort of know what the lay of the land is, who’s making what. I’m doing the same job as so-and-so. What’s their pay band? How can workers get this information before they walk into, too, to negotiate?
MANNY: Well, I think there’s two sources of information. One is fact, and the other is conjecture. The millennials, if I can use the stereotype, and Gen Z, they share everything. They will text their way through it. They will TIK TOK their way through it. And typically, after, you know, base salary, increase their bonuses and they share the details of their performance ratings and pay increases. And I’m not sure that lends itself well to having that information as a fact based decision making tool. Again, I would default to asking for a degree of transparency in the data from the organization or again, looking at valid and reliable sites on the Internet.
ROB: Manny, if I’m going to talk to my boss about a raise, I’m wondering just how aggressive and forthright I should be. What are your recommendations?
MANNY: I think the conversation has to be genuine to your style and to your approach. If you’re going to be aggressive and it’s a personality thing on the receiving end, if someone came into my office to demand an increase. I’m not sure how I would react to that specifically if it was out of character. If there was a job offer on the table and it was a bona fide job offer, then I’d want to discuss what in fact is being asked and how I possibly or potentially would want to retain that employee. And, as we mentioned earlier, with a labor shortage, it is in the company’s best interest to do everything they can within reason to retain their best and brightest.
ROB: Can you sour your relationship with your employer by handling the conversation of compensation in a not great way?
MANNY: I think it varies by the dynamic that every manager has with their employee. If the employee comes in and makes demands, and that’s not typical of them, then I think there’s something else going on and there’s certainly a conversation worth having. If it’s professional, if it’s fact based, if it’s in the spirit of education and perhaps even empathy, then I think we’re going to have a really good conversation.
ROB: Manny thanks for joining us. After the break, we’ll hear from an Albertan who first tried to negotiate a raise at his work but wound up switching jobs to get the pay he wanted.
JUSTIN: So my name is Justin. I am from Edmonton, Alberta. I’m 27 and I work for the public sector here in Alberta. Yeah. So I was doing my job in an acting capacity for about a year and then they ended up posting that job to hire me permanently. I applied and they ended up offering me that position. So I thought in my mind this is a great opportunity to do it for a year. They’re offering it to me. I’m going to advocate for a higher salary than I was making at the time. So they offered me the position at the salary that I had been making for the past year. And I requested that they offer me a salary that they would determine if they were offering somebody a job who had a year experience. In my mind that was 8%. So I requested an 8% raise. They ended up turning it down. So they said, no, you can take the job at the rate that we’re offering it to you, which is the rate that you’ve been making for the last year, or you could not accept the position. You know, today, my earning power is less than it was a year ago. My costs are, you know, substantially higher than they were a year ago. And so I was willing to kind of stick to my guns a little bit more and say, this is the request I’m making. I have the rationale to back it up. You know, I have the experience, I have the knowledge that that makes this request something that I think you should take seriously. And I’m willing to stand by that because of how important, you know, this ask is to me.
ROMA: Justin tried to push back with the human resources rep, but his organization had strict H.R. policies around pay.
JUSTIN: So based on my experience, based on the type of job I was applying for, based on my particular situation, the guidelines said that they had to offer me the salary. And unless there was, you know, extenuating circumstances that needed to be approved by my bosses, bosses, bosses, boss, there was nothing they could do. And they thought my situation didn’t merit going through all of those approvals. And as such, they were stuck giving me the salary that they offered. I guess it’s reasonable to have these H.R. guidelines and their public guidelines so people know going in that it’s, you know, more of a transparent process. So I do understand it from that point of view. But also my organization’s kind of facing a staffing problem... I wouldn’t call it a crisis, but certainly they’re facing staffing issues of not being able to find qualified candidates, not having people stay in roles for very long so that they can kind of build up institutional knowledge. Me as somebody who, you know, I’ve been doing the job successfully for a year, I’ve built up connections within the organization. I was the successful candidate when they offered me the position, so they thought I was qualified. I thought that like, this is why you’re missing out on this? These candidates, if you have these H.R. guidelines that say you can’t pay people what the going rate is for people in this type of position or based on cost of living increases, if you can’t accommodate for inflation and everything going on, you know, in the world around us. So you’re going to be losing candidates. You’re going to keep on losing candidates. So I was not necessarily surprised, but I definitely was disappointed.
ROMA: Instead of focusing on his disappointment, he started looking for a new gig.
JUSTIN: And at that point, my idea was I’ll start actively applying for jobs outside of the organization. But one of the jobs that I actually applied for previously, so when I knew that my position was being posted publicly, I applied for the position that I was in, but I also applied for a number of other positions just to see what happens. And one of those positions ended up coming back and they gave me an interview and they ended up offering me that position. And so at that point, I wasn’t looking at the job that I had versus basically no job. It was me comparing jobs that were both exciting, that I was interested in doing. And this other job came with a pretty substantial salary increase as well. So at that point it was an easy decision. It was a 30% increase from the salary that my current employer offered me. I was expecting them to come back with like maybe 5%, maybe 6%, and I was wholeheartedly willing to accept that. And so when the new employer came back with a 30%, I kind of had to sit back in my chair for a second. So, yeah, I’m feeling lucky, that’s for sure. And then in addition to that, you know, the job that that I’ve now accepted came with being able to to work in a different scope of work. I’m at a more senior level in the organization. I get to be a part of projects that I’m really passionate about that are different from the projects that I was working on in my old position. So it’s kind of on one hand, the salary is absolutely a more important part of how I made my decision. But also, you know, taking on a new adventure and trying something new was interesting to me as well. So both of those put together at that point, there was nothing really that my current employer could say to me that would change my mind.
ROMA: He’s very happy with how things played out, but if he could do it again, he’d start job hunting earlier.
JUSTIN: Don’t be afraid to apply for jobs, even if it’s something that you think is a long shot. Even if it’s something just in the back of your mind you think might be interesting. Fill out an application, you know, send in your resume. The worst they can say is no. And, you know, the worst you can say to them is no. And in the best case scenario, you find a team that you really like at a salary that works for you. And, you know, maybe something unexpected turns into a great opportunity for you. So that would be my first piece of advice is don’t, don’t stop applying for jobs. Even if you’re happy where you are, right? When you’re happy where you are, that’s probably the best time to apply for a new job because then you’re you’re you’re not rushing to leave here at your current opportunity. You’re not willing to accept the first thing that comes along. You kind of have some, some more. You know, you’re waiting for a better opportunity that really fits you as opposed to the first two job opportunities that come along.
ROMA: He’d also advise jobseekers to be upfront with their salary expectations.
JUSTIN: My second advice would be don’t hesitate to make your needs known when it comes to salary and benefits and things like that. If the job has a posted salary range, which for a lot of the jobs I apply for in the public sector there, the salary ranges are posted. Don’t feel afraid to advocate at the top of that range and to be firm in your expectation that you’re offered a salary at the top of that range. The organization has been approved to post the job for that salary range. They have the budget for the top of that salary range. So you shouldn’t be afraid to advocate for the top of that salary range. And if it’s something that maybe the salary range isn’t public, don’t be afraid early on in the process to ask the reporter to ask whoever you’re dealing with what their salary expectations are. So you can be sure that you’re in agreement with what that is. You know, right now, I guess there are more people looking for employees than there are people looking for jobs. So if you’re somebody who’s looking for a job, you’re a hot commodity. You can kind of set your expectations. And it’s up to the hiring manager to meet it. And if they’re not able to meet your expectations, then, you know, there’s probably going to be other opportunities coming along the line.
ROMA: Justin took a chance on a new job to get the pay he wanted. Finding that balance between risk and reward is tricky as you navigate your career and economic uncertainty. Rob, what are your takeaways from what we heard today?
ROB: 1) Asking for a raise is a basic way to advocate for yourself. You’re starting a conversation about the value you bring to your employer.
2) Make sure you’re in line with your coworkers. Ask how your company decides how much to pay people and the salary range for your peers.
3) If a pay raise isn’t happening, ask for something else that has value. Examples are flex hours, working at home, a training or travel allowance, or a new computer.
ROMA: Thank you for listening to Stress Test. This show was produced by Kyle Fulton, Emily Jackson and Zahra Kohzema. Our executive producer is Kiran Rana. Thanks to Justin and Manny for joining us.
ROB: You can find Stress Test wherever you listen to podcasts. If you like this episode, please give us a five star rating on Apple Podcasts and share it with your friends.
ROMA: On the next episode of Stress Test, we’ll tackle a topic that’s a personal decision, and one that’s increasingly impacted by money; whether you can afford to have children and how many. We’ll dig into the top financial concerns for Canadians who are increasingly delaying kids or having fewer in the first place.
ROB: Until then, find us at the Globe and Mail dot com. Thanks for listening.