The wage you negotiate when you first start a job may haunt you for the rest of your career! Unfortunately, too many potential employees fail to adequately leverage their bargaining power at this critical point.
Young Workers Most at Risk
Particularly for younger workers who don’t have as much experience in the recruitment process and may question their credentials relative to other potential hires, negotiating a starting salary can often be an intimidating process, with many choosing to simply take what they are offered. This could be a big—and costly—mistake, according to a recent survey by online employment marketplace ZipRecruiter.
The survey of 50,000 jobseekers found that 64% of respondents said that when they were last hired, they accepted the first salary offer they received. When looking just at 18- to 34-year-olds, that figure rose to 84%.
Major Career Impacts
Data from a separate study add some math and assumptions to calculate the impact of not negotiating a higher starting salary. According to these data, newly hired employees in various industries found that those who chose to negotiate increased their starting salaries by an average of $5,000. The study offers the following as an example:
Assuming a 5% pay increase each year over a 45-year career, negotiating a starting salary of $45,000 rather than $40,000 will translate into additional lifetime earnings of over $750,000.
Obviously, that $750,000 number depends on a number of factors: How much is the offered starting salary? How much is an applicant likely to be able to increase that number through negotiation? What annual wage increase can the applicant expect? How many working years will the applicant have on the job?
But the key point is that—especially early in one’s career—a lower starting wage can have significant compounding effects on future earnings potential. This is true even when switching jobs.
Some states and cities have even gone so far as to outlaw the practice of asking applicants about their current or most recent salary in recognition of this fact.
Better Bargaining Power
With the unemployment rate remaining at historic lows, applicants have relatively greater leverage than in less favorable job markets. It may make sense for them to consider their potential bargaining power before accepting the first wage they are offered.