This article on CNN’s Money & Main St. made me mad.
REALLY MAD.
The headline reads Overqualified and underpaid workers: Workers are downgrading their job prospects, but employers get to cherry pick the best talent for less pay.
Cartoon by Hugh
Taking advantage of your new hires by putting them in jobs they’re overqualified for and underpaying them on top of that is incredibly short-sighted.
And fiscally irresponsible.
Ok stupid.
Employers who do this guarantee themselves a future of bored and frustrated employees, average performance at best, and of course there is the high cost of turnover.
NEWSFLASH.
Turnover is expensive. Depending on the salary level and position estimates range from 30% to more than 150% of annual salary.
Undercutting someone’s salary for the short amount of time that they will actually stay with your company until the job market turns around – and it will – and they find a job that pays them what they’re worth and provides challenge and an actual career path – and they will – is kind of like not paying your utility bill.
It’s all fun and games while you’re getting the “free” electricity – and then when it catches up with you, you pay. You really pay. Not just the amount you owe for the electricity you’ve used, but when your power gets turned off you have to go without electricity until you get the bill paid. Major inconvenience…ya think?
Then there are the fees. The late fee, the reconnection fee – and most likely there is now damage to your credit and who knows how much that is going to cost you.
I’m thinking it would have been a heck of a lot easier and cheaper to just pay the bill.
This excerpt from the CNN article has DANGER written all over it.
“Sixty-four percent of workers who were laid off over the last 12 months said they have applied for positions that were below the job level they had held previously, according to a survey by Career Builder.
And the vast majority of employers said they would consider experienced candidates who apply for jobs for which they’re overqualified, Career Builder said.
Brian Rushton Phillips has 13 years of experience as a creative director in the publishing industry, but since he was laid off in February, Phillips, 37, has been applying for senior and even intermediate designer positions that are one or two levels down from his last job.
“The positions I have been applying for are typically $20,000-$30,000 less than I was making before the downturn,” he said.
“I was looking for jobs at my level but there weren’t many available,” he said. “There are mainly junior positions available.”
Still, Phillips has struggled to even get an interview and believes if an opportunity does come up, it will likely be a downgrade from his previous experience. “I am prepared to take whatever I can get.”
But the tough climate often works out to the employer’s advantage, because companies can hire more experienced and capable candidates, like Phillips, at a lower cost.”
It makes me furious when companies do this and this article makes me even more mad because the way that it’s written implies that this practice is ok.
Now for the part that really ticks me off.
“Because of the tough job market, most job seekers are willing to accept positions they’re overqualified for even if it means taking a paycut and a demotion.”
Before you start writing in the comments “But I need a job!” and “I have bills to pay!” and “How do you expect me to feed my pet liger / goat / lizard?” let me say this. I once took “a step back” in my career and took a job for less money at a lower level with delusions promises of grandeur within “six months.”
HA.
The only thing grand about that job was the day I quit less than a year later when I was so incredibly bored and frustrated and 1-800-TIRED of pinching pennies – and I found a job that was challenging, inspiring, and paid me what I was worth.
And then there is this:
“Employers have even increased the requirements for specific positions and lowered the corresponding salary in response to the current climate, noted Jo Prabhu, who runs placement firm 1-800-Jobquest in Long Beach, Calif.”
“Even her own business has benefited, Prabhu admits. Last year the recruiters she employs earned commission plus a base salary, but now “I hire recruiters for our organization on commission only.”
“There are a lot more recruiters willing to work for just anything,” she said. “We are taking advantage of the fact that we no longer have to pay anyone a salary.
It has saved a lot of our overhead cost.”
Sweet.
Hope you’re budgeting five to ten times what you’ve “saved” for the turnover and replacement costs over the next two years.
Look.
Before you say it I get supply + demand. I have a degree in Economics.
But this is not peanut butter we’re talking about. It’s not that simple.
It’s people. And people are not a commodity.
It’s your workforce. It’s your brand and your reputation.
It’s your company’s future.
You get what you pay for.
To learn more about Stephanie and how she can help your company implement strategies to attract top talent, click here.
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Great post. Peanut butter performs the same no matter what you paid for it. People are not so simple.
This is so true! And, as many will tell you, paybacks are h-e-double-hockey-sticks. Employees will be so disgruntled that the cascading transitions of people shifting jobs when the economy begins to improve will look like seismic shifts.
No one loves to be underpaid and overworked.
You are so right. Have been there: quit a marketing firm after 3 months because I was so frustrated with the repetitive work and the low salary. Best choice I made in a long time. Hold now a position that is challenging, earn lots more, have more benifits AND i have great motivated colleagues.
Don’t know where you come from but I see this happening every day in Brussels: young talented people with 2 master degrees + an MBA, speak fluently 3 to 4 languages, and still they are willing to accept crappy internship jobs for the NGO’s and lobby groups surrounding the European institutions. Accepting 600 to 800 euro while you need at least 1500 euro to live in Brussels, living on cheap found and not going out too much.
And it just pisses me off that companies abuse these talented young people with loads of potential by holding a carrot in front of them “you’ll have a great career later on”. No… be honest, be true, treat your people like you would like them to treat your kids, brother or sister. They will work the double of their required hours and you’ll have a great talent for half the price.
Make that: 1500 euro netto (3000 euro bruto) to live decently in Brussels: a room in a shared appartement, cheap food and not going out too much.
Good post! Short term thinking caused this mess and is creating new wounds. I argue with HM’s daily about the danger of underpaying talent and their looming exodus in 6 months. Its why much of the talk of branding is BS!
Stephanie, you are so right about this! The costs of turnover are a lot higher than the savings incurred in the short term. An organization needs to think about its brand and the long term effect this will have in the candidate marketplace. Great post!
When it comes to money, everyone seems to lose their ability to think clearly. It seems that our government lost the ability to think more than 8 years into the future when Ronald Reagan won the presidency and as we have gone on, the rest of the country has followed. You make a point in your post that is entirely lost in our society now, “It’s people. And people are not a commodity.”
While this statement is correct in theory, the sad reality is that is truth now. People cost alot, what with healthcare, time of for being sick, time off for children, hopes and dreams outside of work. Once Wal-Mart figured out that it was cheaper to treat their employees as commodities instead of human beings, an irreversible trend was started. It will never get better, because the current measure of success it how much money you profit, not how good you do the job.
Awesome post Stephanie!
It’s ironic to me that some companies actually think they are getting away with it. Do they honestly believe that employees will not notice… or that they haven’t already.
The next few years in recruiting is going to be a very interesting time. I wonder what kind of “lessons learned” we will be reflecting on three years from now.
Keep it up!
Looking forward,
Michael
Stephanie. I couldn’t agree more with your commentary. Companies taking this approach are wrong on so many levels. Many companies are going to face a rude awakening when the economy does rebound and they find that they suddenly have no employees (which includes no recruiting department because they laid them off – so they will have to pay multiple fees at premium cost (pay me tons of money) to find new employees. Additionally, I would imagine that an employee who is overqualified for a position may not perform quite as well as an employee hired at the correct level. Doing menial work doesn’t inspire much motivation to go above and beyond. A manager once directing work now tasked with performing the details may find it to be so boring that it becomes taxing to perform at a level that exceeds expectations. The outcome of this practice is an overqualified workforce that spends 25% of their day slinging resumes looking for something new!
hi, stephanie.
i’ve read this post many times because i’ve had multiple reactions.
as you said, it’s these employees who’ll soon be your front-person — designing or building your product, talking with your customers, etc. it’s smart to treat them fairly and honestly. there’s definitely gaming going on in some of the offices the article references that’ll breed discontent, turnover, and bad reps.
then my other reaction is — if a company can support they’re offering a competitive salary, are they taking advantage of the employee? if the hiring landscape for certain jobs no longer requires the offering of sign-on bonuses and other sweeteners, is that?
i enjoyed reading your post, the article, and comments related to both.
f
p.s. the first link to the article was broken when i tried it.
Hi Fran,
Thanks so much for reading and for sharing your thoughts!
In this case I’m not talking about companies who are paying competitive salaries. I’m talking about companies who are taking advantage of this very very tight job market and offering people jobs at a lower level and/or salary than the person’s experience warrants just because they can.
It will catch up with them. Guaranteed. I stand by my statement that it’s short-sighted and a bad business practice.
Thanks again!
Stephanie
I agree that the recruiting firm mentioned in the latter part of the article appears to be taking advantage of the current economic situation, and from an HR and retention standpoint theirs is not the approach that I would take. However, I believe the main point of the article is that people are adjusting their sights downward because there just aren’t as many higher-level positions available now, as the creative director appears to have done, and when they accept a mid-level position (presumably being paid appropriately for the work they’re doing and the expertise they bring) the employer gains commensurately more than if they’d hired someone who just had that mid-level experience. I handle staffing and compensation for a small division of an aerospace company, so let me provide a view from the employer side of things.
Let’s say someone who used to be a purchasing manager applies for our mid-level purchasing agent opening. We can’t dismiss their resume as “overqualified” because that overqualified = more years of experience = age discrimination — not a good thing for anyone to do, but especially not for government contractors whose hiring practices are subject to even greater scrutiny than other private employers’. We can’t hire this person as a purchasing manager because we already have a purchasing manager and the opening is for a purchasing agent, but we could hire them as a slightly more senior purchasing agent (keep in mind the level of the work that needs to be done is the main determinant of pay, although the new-hire’s skills and experience being applied to that work are certainly taken into account) and pay them what we pay other senior purchasing agents with similar backgrounds. That’s being fair; paying them their former manager salary for working as a purchasing agent isn’t fair to the company and other employees, and lowballing them because the economy is bad is unfair to the individual. If we hire them into the sr. purchasing agent position they get work and a good paycheck, we get a very qualified person and, perhaps down the road, our next purchasing manager if the opportunity arises.
So it’s not all about terrible employers taking advantage of people, it’s adjusting your expectations to the reality that the market has shrunk and there are fewer “chief” jobs out there now.
Ray:
At least you have it right and are not making statements based on emotion but based on facts.
The question that many organization keep asking themselfs is yes I have this person who is overqualified and I will be paying less then he is now making. If I hire him will he leave as soon as another job becomes available. So many companies are not hiring the best person they can they are hiring what I would say is the best person for the job.
I very much enjoyed reading your article. I agree that bosses who pay far below what a position is worth will regret it as soon as the downturn is through (in the event that they are not someone who would regret it just on principle). I don’t think that you meant this to apply to overqualified applicants accepting POSITIONS beneath what they’re accustomed to (and thus lowering their pay). If an available senior position does not exist in the company and an applicant accepts a “junior” job title, the employer can expect to pay for the junior position, but should not expect “senior” responsibilities to be taken on by the new employee.
The restaurant business is the biggest violated of low pay. People are referee to as labor. Because most of these businesses are poorly run without true leadership they fail left and right.
Thanks for posting your beliefs.
Lots of interesting comments from employees, laid-off employees, the recruiters, but I didn’t recognize any from employers.
I run a small business and I’d like to chime in with a perspective from the guy who is writing checks in this economy. We happen to be hiring right now. Are we trying to take advantage of anyone? No. Unequivocably no! You worked for a company that had to lay you off. Now you want to work for a company is in a position to hire. Quite a contrast. YOur past experience may well have been your market worth salary. But, it also wouldn’t be the first time in the history of the world that employers paid employees more than they were worth (dot.com days, autoworkers, etc.) These guys are willing to risk thier precious capital on you during a scary economy. Not only do you want to go to work for them, but you also seem to want to tell them why they are wrong to hire you for less than what you think you are worth. Keep in mind that this company is going to spend the 2-5 x your salary (your numbers) training you. They are going to pay for all of the mistakes that you are going to make. In addtion to your salary, your new employer pays the costs of FICA, workers comp, and unemployment insurance on you. If you don’t work out or if you quit after a few months, they have nothing of value that they can show for your brief tenure with their company except a lot of cancelled checks. Very little anyway. Don’t kid yourself. You on the other hand, will have gone from unemployment checks (perhaps nothing) to a job that undoubtedly pays you more than what you are presently earning. You will likely be more employable WITH a job, than you are without one. Not only will you receive a bigger check, but you will learn new skills, meet new people, and have a bigger and more diverse resume. You can quit with no notice. If they cut you loose because you don’t meet their performance standards, they will be charged with your unemployment costs. How fair is that equation? But, let’s say that you are as good as you beleive that you are…remember that it is YOU who ultiimately is saying “yes” here. Let’s begin with the premise that this is a successful business…after all they have a job to offer you in a challenging economy and you have none, right? PROVE to them that you are worth more than they are offering to start you at. Be up front, “I think I’m worth this much to you. And, I beleive that I’m going to be worth considerably more to your company than what you are willing to start me at. Can we set some goals? Now, if I can help you achieve those mutually established goals in an agreed upon time, would I be in line for a bonus or a raise (both of which should be specified up front)?” Find out what your employer is looking to accomplish. If you are truly as good as you feel you are, set goals togethrer. Put them in writing. Define the tools that you will need. Document the progress with your employer along the way…like monthly. You don’t want finger pointing 6-12 months down the road. Perform. Then you will have your raise. And, if you perform and don’t get your raise, you will at least show your next employer that you are serious about about bringing value to thier firm and, given the chance, you will meet or exceed thier expectations of you. THAT will move you back to where you once were–and probably catapault you to new heights. I am a big believer that the cream rises to the top. Have you ever read the book “Good to Great”. Good employees cost you money. Great employees make you money.
I agree in part mostly to what you said, but that does not hold true in my industry. We are a number of years removed from the Dot.Com burst. What I can tell you is this, in the IT world of consulting, working for a consulting firm is paramount to being a prostitute. You see we work for a firm who locates a client in need of it services, They charge that client between $150 – $200/hr for their services. My former firm paid $200/Hr for outside help. We the thing is that nobody in the management of the consulting firm has a clue how to do the work. Yet they pay the engineers $25/hr -$31/hr, with no benefits. Back in the 90′s we used to get benefits, so our poor employers our now paying $11.77/hr. That was a number quoted to me in an interview Tuesday. So in essence the company stands to make $391,518.40 profit/year ($188/hr) off of my service, while paying me $24,500, this is not only an insult but should be criminal. They cannot afford in this struggling economy to pay us, the $30/hr ($62K) because they would only make $353,600/yr or $170/hr. Boo Hoo, I do not feel in the least bit sorry for them, I will go into business for myself, before I work for that rate. I would even follow them from client to client offering my service for $100/hr a 50% saving for them and a 70% increase for me. These guys need to wise up at $200/hr they only need to work the person making $60K/yr 7.5 weeks to pay off thier salary or 44.5 weeks of profit. The word I am looking for is Greed….. These firms are not dropping their bill rates, but are not paying their people any more either. I know I was an IT manager paying the bills.
IT pros are NOT trained by the company, we are all educated by oursleves, because No company will pay for our training.
When I was still trying to eke out a living as an actor, I worked often as a waiter. Cliche, I know, but there’s two reasons why so many aspiring performers make extra cash as waiters and waitresses: a) a charming, winsome personality can make a lot in tips, and b) the base pay sucks — criminally so, to the point where quitting without any notice because you just got cast in a show doesn’t make you feel guilty AT ALL. Not even a little itty bitty bit.
Which is to say, Stephanie’s totally got a point – especially considering that skilled talent is much more expensive to replace than your typical waiter.
Excellent post! It has always been a bad idea. You correctly point out how this is a bottom line issue due to the cost of turnover, but it is also a top line issue. You are living in a dream world if you think your disgusted employees are going to go out there and delight your customers. Watch your top line continue to evaporate, scurry to cut more costs, even more poor revenue results… you get the picture.
Your commentary about the article is on point. This short term thinking by a handful of corporate execs is not going to help their companies in the long run. People are lowering expectations and taking lesser jobs out of desperation. I decided that I would not be one of those individuals by standing my ground and demanding that I am paid for what I am worth. It is not fair that the cost of living is increasing, yet my paychecks are getting smaller. The doing more with less philosophy is not going to help me dig out of the financial hole that was created when I was laid off.
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