Over the next several weeks, millions of 20-somethings will don caps and gowns and walk across a stage to pick up a piece of paper that was four years in the making. The lucky ones will land jobs soon — if they haven’t already — to start collecting what is likely their first real paycheck, or at least the biggest one they’ve seen.
By earning their degrees they’re already steps ahead of their peers who opted to start working right out of high school, with the potential to earn much more throughout their careers. But there’s a good chance that most of the grads signing offer letters in the coming months will make a mistake that will eat into that premium and have a ripple effect for decades: They won’t ask for more.
Only 38 percent of new college graduates who started working in the past three years negotiated their job offers, according to a survey of nearly 8,000 college grads by NerdWallet, a personal finance Web site, and Looksharp, a job site targeting new graduates. But the majority of the companies surveyed — 84 percent — said entry-level candidates wouldn’t risk losing their job offers if they negotiated on salary.
And most of the grads who asked for more money, about 80 percent, saw a bump in their offers. “Negotiation is an intimidating thing to do,” said Abbey Stauffer, general manager of education for NerdWallet. “But it’s surprising in that there’s such a mismatch between what employers are offering and what students are doing.”
The mismatch isn’t unique to millennials either. Other studies show that most people at all ages and experience levels who ask for raises get them. The main issue is that most people don’t ask.
Forty-three percent of all workers surveyed by PayScale.com last year said they had asked for a raise. Boomers and Gen X workers were more aggressive, with 48 and 46 percent respectively saying they’d asked for a raise. Gen Y workers were the most reserved, with only 38 percent asking for more.
Of course, people with more work experience may have had more chances to ask for a raise. But young people who asked for one were just as likely as Gen Xers and Baby Boomers to get it. Between 74 and 77 percent of people in all groups got the pay they requested or a smaller raise after asking.
When studied by income level, people who made more were more likely to ask for a raise — and to receive one, even if the raise they were granted was smaller than requested. Low earners were less likely to ask, and more likely to be rejected when they did, according to PayScale.
For most workers, the biggest challenge is often figuring out how to start the conversation. Thirty percent of millennials said they shied away from the topic because they were uncomfortable negotiating, according to PayScale. Another 23 percent said they didn’t want to be perceived as pushy.
Younger people who don’t speak up for themselves risk exacerbating some of the other challenges they already face after launched their careers amid the recession and slow economic recovery. Many millennials are struggling to find jobs, and those who do often get stuck in low-paying positions. They’re also staying in those jobs longer, which makes asking for a raise — either at the beginning or after they’re more established — all the more important.
Some employers might head off the conversation by saying the offer is non-negotiable, but that’s rare. Three-fourths of the 700 companies surveyed by NerdWallet said they had room to increase salaries by between 5 and 10 percent during negotiations for entry-level positions.
Even a small bump can make a difference over time, because every raise would be based on that higher salary. A person who negotiates for a 5 percent increase in pay on a $40,000 job offer at 22 can make an extra $170,000 by the time she turns 65 than if she had not negotiated, assuming 3 percent in average annual wage growth, according to NerdWallet.
So how to accomplish this intimidating task? One of the first things to figure out is timing, Stauffer says. “Sometimes inexperienced job candidates will have that conversation before they actually have an offer in hand,” she says.
Once an offer is in hand, do the research. How much does a person normally make in that kind of a job with that level of experience? Also factor in location, because salaries tend to be higher in cities that are more expensive to live in. Web sites like PayScale.com and Glassdoor.com, which aggregate employee-reported salary data, can help. “Really get an understanding of what your market worth is,” says Lydia Frank, an editorial director with PayScale.
With that information in hand, job candidates should base their arguments on what they think they will bring to the company. They should focus on their accomplishments and skills, using numbers and specific examples to show how they can help the team, Frank says, not on why they need the extra money.
One way to start the conversation is to say something like, “I’m really glad to get the offer and looking forward to joining your team, but it looks like the salary you offered is lower than the market rate for the area,” Stauffer says. If the employer says no to the request, it’s okay to ask for a day or two to think about the offer, she adds. That might also give the company more time to find a way to improve the package. she says.
If the salary is non-negotiable, some people can ask for additional vacation time, flexibility with the work schedule if that’s important and a slightly bigger bonus, but all within reason. “You want to be respectful and reasonable in your request,” Frank says.