Salary and Compensation: Earning More Can Hurt You in a Recession

We all know the importance of negotiating raises if we want to get paid what we’re worth, but can all our tough salary negotiation in good times come back to haunt us in bad times, when earning more may be a liability as companies look to cut staff? 

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We all know that we should negotiate for raises each year, especially when we’ve worked our tails off for the last 12 months. After all, if we don’t ask, we don’t get, and the more money we bargain for, the more likely we’ll get the pay increase we want. It’s as simple as that. (Plus, the three percent “cost of living” increase that most of us pour souls blindly accept each year hasn’t kept up with the average American’s household expenses since Eisenhower was in office.)

Some people, such as my husband, are adept at negotiating raises. Last year he convinced his employer to pad his paycheck with a few extra Benjamins each month. (Clearly, we don’t earn a ton of money.)

I was thrilled when he got the raise, and not just because it meant extra cash in our checkbook. The raise demonstrated my husband’s ability to show his employer the value of his work, and it showed that his employer agreed he was worth more money. He had taken on extra responsibility that year, spearheaded certain philanthropic causes his employer supports, and his creative work (he’s a copywriter) had a direct impact on his employer’s revenues. (For salary negotiation tips see, 10 Mistakes to Avoid When Negotiating a Raise and Negotiating a Better Job Offer.)

But now that he’s making more money (I assume he’s at the high-end of the pay scale for his position) and the economy is bad and his employer is in serious cost-cutting mode, I’m a little worried he’s at higher risk of getting laid off. The situation he’s in right now—where his employer may be evaluating whether they could get someone to do his job for cheaper—has got me thinking: Can all our tough negotiating come back to haunt us during a recession, when companies are planning layoffs?

I think it can, because I’ve seen very good, very qualified, very hardworking people lose their jobs seemingly because they earned a lot of money or were at the high end of their positions’ pay scales. (Of course, I’ve also seen middling underperformers lose their jobs when the economy was bad, too. Recessions don’t seem to discriminate.)

It’s shameful that we should be penalized with a pink slip for earning respectable amounts of money—indeed, for earning what we’re worth—when business goes south and our employers need to make cuts. 

Most of us work so hard to earn a decent living. We put in long hours and make sacrifices. So when we finally work up the nerve to ask to be compensated accordingly and we’re laid off six- to 12 months later because we’re earning “too much” money, it’s a slap in the face. It also shows just how little power and influence we have with our employers. They giveth and they taketh away at will.

Knowing our “high” salaries can be a liability when business is bad, are we better off playing it safe and not haggling for more money each year, with the hope that our jobs will be more stable if we’re earning less when the economy goes south? Or should we negotiate for a raise anyway, even if it means we might get the axe later? Would earning more over a potentially short-term timeframe offset the cost of possibly being out of work later on? 

I say, the hell with playing it safe. If we don’t make a case for more money when business is good—or at least stable—we’ll never get more than 3 percent pay increases. We have to advocate for ourselves while we can. If we don’t, it just gives corporate America more leverage to drive down our wages. Plus, earning less doesn’t guarantee job security any more than hard work. So we might as well try to earn more while we can. Take the money and run.

What do you think? Are you worried your salary puts you at risk for a layoff? Would you rather take what the company gives you than negotiate for more if it meant you could keep your job when business went bad? 

(I updated this blog entry on 12/17/08 with a link to a story I wrote yesterday, How to Ask for a Raise During a Recession.)