196. The Negotiators Dilemma
Why salary negotiations are destroying our society
Everything is negotiable.
Rumor has it that God wanted 15 commandments but Moses negotiated down to 10.
The fact is, sellers want to sell high, and buyers want to buy low. The space in the middle is where the negotiation happens.
CraigsList is filled with items priced at levels that most sellers know they won’t receive. Negotiation is not just allowed, it is practically expected.
You can find the same negotiation expectations throughout our culture. It is expected when you’re buying a car or buying a house. It is definitely expected when you’re shopping for used merchandise.
Even supposed “haggle-free” prices are negotiable (yes, I scored another $2,000 from Carmax just by asking).
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My mother is a non-negotiator. She doesn’t haggle.
When she buys a house, she agrees to the asking price.
When she buys a car, she pays MSRP.
That’s just who she is.
I don’t like it. I think she’s getting conned and I have a special level of codependency for people who are being taken advantage of.
But I’ve learned to accept her beliefs. It is who she is. She is allowed to not like negotiating.
As it turns out, she is not alone.
18% percent of people claim that they don’t like negotiating - that it feels “unpleasant” to them. Another 40% of people claim that they are bad at negotiating.
This is all incredibly important when it comes to your company’s core values.
Research has shown that women are generally less assertive than men in all business negotiations.
Needless to say, when it comes to salary negotiations, women don’t push as hard and so tend to agree to lower salaries than men.
Problem? You tell me.
When you add race onto this, it just gets worse.
Though African Americans usually negotiate as much as whites, inherent bias with hirers has resulted in lower pay for African Americans than whites.
This racial bias isn’t hypothetical. It’s reality.
I’m not saying that racial bias is always done consciously. It’s not. I’m just saying that the facts prove it is widespread - regardless of whether you want to believe it or not.
With such negotiation bias, you can probably guess the shitshow that is happening with salaries.
You guessed it, salaries are embarrassingly inconsistent across gender and race.
The white man wins. (Actually, the Asian man does better, but that’s a different conversation.)
On average, for every $1 in salary made by a white male:
White women make $.83
African American men make $.70
African American women make a paltry $.60
In fact, check out this chart that shows men’s vs women’s average salaries from 1960 to the present. It’s a doozy.
If you’re not yet clear on the problem, let’s get to the uncomfortable part of my ramblings.
Your Company Bias
We’ve established that white men will negotiate for higher salaries. We’ve shown that white men are, in fact, paid higher salaries than women and African Americans.
So be honest with me — does your company expect new hires to negotiate their compensation? From what we’ve learned above, do you still think it’s the right thing to do?
If you believe in gender and racial equity, that behavior is plain wrong.
There are five major problems inherent in companies that expect salary negotiations
1. It’s sexist
Men are more likely to negotiate higher salaries than women. Boom - you now have a gender pay gap. You proud of that?
2. It’s racist
Throughout modern history, racial bias has historically led to African Americans getting paid less than white people for the same job. African American women? Well, they are screwed.
3. It’s socioeconomically biased
Wealthy people tend to negotiate higher salaries than poor people - even when going after the same job.
4. It penalizes the less aggressive
Not everybody feels comfortable negotiating. Remember my mother up at the top of this story? She’s really smart and is an accomplished businesswoman. Why should she make less than someone not as skilled simply because she doesn’t like to negotiate?
5. It lacks transparency and integrity
If you’re paying different people different amounts for the same job, despite no difference in their tenure or abilities, you are screwing somebody over and they probably know it.
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When I’ve had this discussion with other people, quite a few have had the fervent point of view that negotiation is expected.
“If people don’t negotiate well,” I was told by a group of others. “It’s their fault. They just need to learn how to be better negotiators.”
You know what, I bet the people who are claiming that everybody should be a better negotiator are the people who are already good negotiators. Isn’t it always the wealthy who preach about the meaninglessness of wealth?
Here’s what it all comes down to - there are two different tactics that can be taken in order to solve the pay discrepancy dilemma:
Fix the people
Fix the institutions
The Fix The People Solution
The “Fix the People” approach to eliminating salary disrepancies follows the belief that everybody should just become a better negotiator. It’s a bit Darwinian in its thesis, a little “survival of the fittest negotiator” vibe.
If you believe in the “Fix The People” approach, I suppose you consider salary discrepancies to be OK. If a less experienced person gets a higher salary than the more experienced, well, that more experienced person just needs to learn better negotiation skills.
Unfortunately, this is a naive way to view the solution. It’s not fair and it won’t work.
Look at my mother, and the 40% of working adults who say they don’t like and aren’t good at negotiating. They aren’t all of a sudden going to change. Why should they be paid less than somebody who is potentially less qualified? Why should they be paid less simply because somebody else likes negotiating?
We don’t have to live in a Zero Sum world.
Fix The Institutions
The other solution is to fix the process of hiring.
There is one solution that is guaranteed to fully expose and remove the biases of salary negotiation: radical salary transparency.
Radical salary transparency is about being upfront with salaries. It means openly displaying salary ranges on job descriptions. It means letting colleagues know each other’s salaries and the reasons why one is paid a different amount than another.
Radical transparency can be tough for leaders. It requires more thought and more work than just being inconsistent with salaries. It requires turning away from someone you really want to hire because they refuse the offered salary.
Yes, it is tough. But you can do tough things.
In fact, all you need to do is look at the government in Finland for inspiration.
They got so frustrated with gender pay gaps that they, the Finnish national government, decided on radical transparency. They post every single worker’s salary for the public to see. Want to know how much your colleagues are being paid? It’s right there on the Internet to find.
As it turns out, some states in the US are moving closer to this type of Fix The Institutions transparency.
It’s a start. A good start. Just not the entire solution.
It’s going to have to rely on you (yes, you) and how you handle the hiring process at your company.
Tell me, what are you going to do now?
Are you ready to embrace radical salary transparency?
Don’t leave my mother in the dust.
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A Somewhat Relevant Quote
“The pay gap between men and women offends our values as Americans, and as long as it exists, our businesses, our communities and our Nation will suffer the consequences."
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