How Low Can It Go?
According to economic theory, low unemployment will lead to rising wages as employers compete for the small pool of qualified workers. Unemployment in America hit a historically low 3.8% in May 2018. Aside from a one-month dip to 3.8% in April 2000, the unemployment rate hasn't been 3.8% or below since 1969 – almost a half-century.
In June's just-released labor numbers, the unemployment rate returned to 4.0% – but that's because 601,000 workers entered the workforce. The imminent retirement of baby boomers suggests that unemployment will continue to trend downward. Ian Shepherdson of Pantheon Macroeconomics predicts a 3.5% unemployment rate by the end of 2018.
So, where's your raise? According to the Bureau of Labor Statistics, current annual wage growth is 2.7% – well below expectations for such a low unemployment rate.
Management is probably not waiting for labor report readings to increase your paycheck. Wages are determined on value – what does the company have to pay someone to do a particular job, and how is that person rewarded if their value is exceptional?
You must convince your employer that your value has increased. It's better to show how you're contributing to the value of the company – but it's also fair to point out that your value has increased in the marketplace and it will be harder to replace you now.
Ask and Ye Are More Likely to Receive
The first step may simply be to ask for a raise. CareerBuilder notes that over half (56%) of employees have never asked for a raise, but two-thirds of those who do ask receive the raise. However, it's important to do some homework before you make your request.
Start with a difficult chore – a proper assessment of your work skills and track record. Has your value in the marketplace really increased? What evidence do you have to make that case to your boss? Is your pay already in line with your value?
Check Glassdoor and other resources to find salary information and expected skill sets for your job in your area. If your skills warrant more based on your findings, point that out. Explain how you've been a good worker, highlight accomplishments, and point out other areas where your skill set can increase value – but be honest. Employers want to see tangible effects.
Have a proper overall perspective of what your current employer can afford. Employers know how much it costs them to recruit and replace workers in their line of business. If the company simply can't afford to pay you more without harming the bottom line or their overall pay structure, they may decide they can't afford to keep you – and start shopping around for your replacement.
Are you prepared to go that far to get a raise?
Sometimes Quitters Do Win
You may have to switch jobs to get a pay increase. Obviously, it's best to have a new job in hand before you quit – because you may be competing with other "quitters" as well.
According to the Department of Labor, 3.4 million Americans chose to quit their jobs in April 2018 – double the number of Americans laid off in the same month. The percentage of job-hoppers in America has almost doubled since the third quarter of 2009 – when the unemployment rate was near double digits and the Great Recession had just begun to ease.
Keep your resume in shape and updated with your recent work accomplishments (although we suggest you don't save it or print it out at work unless you want to send a very strong message). Check out employment websites to get a feel for alternative employers if you do decide to make a change.
Use your network of contacts to get an idea for other available jobs – but be careful of the message you send. Don't leave the impression that you're unhappy with your current position unless you really are.
With little experience and few accomplishments to use as leverage, consider whether a change in fields is warranted. The Wall Street Journal reports that in some industries, including health care and construction, the labor shortage is so acute that employers are willing to hire and train inexperienced employees. The jobs aren't glamorous, but they may pay well – in this case, directly due to the low unemployment rate.
Before beginning a job hunt, it's good to check your credit, as bad credit could affect your chances of being hired. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
If you're really serious about a pay raise, you must be prepared to go someplace else to get it. Have a Plan B – and maybe Plans C and D – thought out before you begin.
Unemployment may be low, but that doesn't mean you'll automatically receive a raise. You'll have to correctly assess how much leverage you have and apply that leverage wisely.
Do the necessary research to understand your position and your alternatives and know what you will accept and what you won't. Be prepared to switch jobs if you are serious about higher pay and have the resume to back it up. Consider other perks such as extra time off or schedule flexibility if a pay raise seems unlikely.
Low unemployment rates may offer you an opportunity to improve your situation. It's up to you to decide how to use that opportunity.
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