For most employees, a recession is usually not the prime time to ask for a raise, but that might not stop many Americans from trying this year.
A December poll revealed nearly half of American workers are hoping for a promotion or raise in 2023. Despite the gloomy economic environment, the numbers may still be in their favor.
Data released last week from the US Department of Labor shows the job market remains robust, suggesting that employees may still retain the upper hand even as a likely recession looms.
Bright Side of Work Life
The December poll, part of the Human Workplace Index (HWI) by Workhuman, reveals that American workers are optimistic about 2023.
Besides nearly one-half of employees aiming for a pay bump or promotion in the months ahead, around a third are looking to switch employers to find a better-paid position. The report notes workers are less worried about macroeconomic forces and are instead concentrating on what they can influence in their personal situation.
Higher pay is not the only thing workers are out for this year either.
Gaining more control over their time is critical too.
Work-life balance featured prominently among those surveyed. More than a quarter of survey respondents named greater work-life balance (27.9%) and setting better boundaries (25.2%) as their top priorities for 2023.
Workers are generally confident this can be achieved too. Almost 41% of those surveyed expect the work-life balance to improve in 2023, while only 21% think it will worsen. Workers are twice as likely to believe connecting with colleagues will be easier this year than it was last year.
When it comes to increased income, getting a raise isn't the only route they are trying. Workers are also turning to moonlighting sources of income if they can't get paid more at their day job. The survey found that around one-half of employees took up a side hustle or freelance role in the last year while continuing to work full-time. Among those that did, 44% cited economic uncertainty as their main reason for doing so.
This dovetails with the new workplace trend of “career cushioning,” which has seen employees ready for a backup job (or two) in case of a sudden layoff.
Recessionary Raise
Recessions typically coincide with large layoffs in the workplace. As consumer spending dwindles, revenues plunge, so most firms try to cut their operational glut by reducing staffing costs to keep themselves afloat.
Bumping up pay packets for more workers does the inverse, increasing a company's costs, so getting a raise seems less likely during a recessionary phase. Yet, workers who can demonstrate an outsized contribution to the company are in a stronger position. Employers may be more willing to increase pay for workers who can take on additional responsibilities and make up for reduced staffing, perhaps doing the tasks their recently retrenched colleagues had done.
Financial experts say timing is critical.
“A go-to strategy would have to include making the request during an annual review,” says Curtis Crossland, MBA, CFA, and Co-Founder of Suttle Crossland Wealth Advisors.
For smaller, less-structured companies, the end or beginning of the year is usually the best time to ask, Crossland adds.
However, considering the current recessionary environment, Crossland advises first finding out about your company's financial health.
“You have to assess where your company is at,” he explains. “This can be done with financial statements if you work for a company that publishes those, or by conversations with supervisors or leaders that would know.”
Once you decide to make the ask, you must prepare your pitch. Don't make the ask without having a compelling case to back it up.
“List out all of your reasons and show the value and performance to back it up,” is the advice from Kyle Hammerschmidt, Founder and Investment Advisor Representative at MOKAN Wealth Management.
“The more value you provide, the more likely a pay raise request will be accepted. My suggestion would be to list your accomplishments over the last 12 months and since you started,” Hammerschmidt adds.
“Also, state the time since the last raise, and show that you have been able to continue out with duties and performance since the last raise.”
“The most important is being confident in the process of asking for the pay raise,” he concludes. “Understand there will be some pushback.”
If your employer declines your request, it's best not to show your disappointment.
“If you are unsatisfied with the result but show a great attitude, you put yourself in the position of controlling the job situation going forward,” says Crossland.
“You can look for a new job while still working without the animus that might be there if you made harsh demands or came across as rude. You also never know when you may need a professional reference in the future from this employer.”
Recessions and raises don't seem like a natural fit. Yet with the pandemic having tossed so many workplace norms out the window, anything is possible in the current post-pandemic work environment. While firms may feel the pinch from falling profits, life is not getting easier for employees.
With high inflation gnawing away at cash savings, a pay raise is becoming less of a perk and more of a necessity for many workers. Approached the right way, there's no reason why high-value workers can't negotiate a pay raise now to get through the tough times ahead.
This article was produced and syndicated by Wealth of Geeks.