Salary Negotiations

One thing that we aren’t really taught in schools is how to negotiate a salary. This means that one side in a negotiation is almost better prepared. If a manager has 5 direct reports, they negotiate (at least) 5 salaries a year. An employee likely only negotiates one. It’s an imbalance of power.

Employers also have more information. They know how much everyone else in the org is making.  Information asymmetry leads to market failures. See 2001 Nobel prize for Akerlof, Spence, and Stiglitz.

So how do we fix this as employees?  Build a network you can talk salary about. Practice your speeches asking for a raise. Prepare your arguments. Explain the value you add to an organization. How is it making more money from your actions?

Also, think outside the box. Salary is one part of compensation. Bonuses, time off, benifits, office location, title, responsibilities. Everything can and should be on the table. Know what is the most important for you.

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