What is Your Salary Requirement?

By: Malcolm G Boswell, Labor Economist               

One of the most common questions asked during a job interview, and yet most people feel it is the hardest question to answer. If I ask too high, they may not give me the job. If I ask too low, I may be paid less than the company wants to pay; worse yet, they may think that it reflects poorly on how well I value my skills and abilities and not offer me the job. So, what is the right answer?

The best answer to this question is using labor market data regarding wages in your area. Most states have a Labor Market Information Website that should be easily found by entering “Labor market information <<insert your state’s name>>”. In most cases, you will find a link to the site from your state’s employment and unemployment agency’s websites. 

               It is not enough to find the wage data, it is equally important to know how to interpret it. Be aware that in some cases, the sample size of wages for a particularly obscure occupation may render no wage data at all, since Bureau of Labor and Statistics (BLS) requires states to only publish data with a certain confidence level (usually no less than 85 percent) meaning that the wages offered are within a plus minus of the difference between 100% confidence and the minimum confidence level allowed for publication, in most cases that is within a plus minus five percent of the stated wage (95 percent confidence level) Why is this important? Because the best answer is not a set number, but rather a range that you determine best reflects the wage level you feel best reflects your experience and skill levels given the wage ranges for the occupation you are applying to in your area.

So let's illustrate this using data from Oregon’s Labor Market Information website www.qualityinfo.org for Portland tri-county area (Multnomah, Washington, and Clackamas)

Enter a keyword that describes the occupation you are looking to get wage data for, for this example, lets looks for “Logistics” and we find three options from which we select Transportation, Storage and Distribution Managers.

For this example, the selection was made from the Occupation & Wage Information and the “CUSTOM REPORT” was selected to get ONLY the wage data for expediency. It is recommended that when first using this or any tool, you request the complete report to become acquainted with the different types of data available as at different times, different data may be useful to you.  For purposes of this article, this data is all we need.

Notice that the data is for 2017, this is because the data takes time to collect, review, clean and prepare for publication. In many cases, the data is updated early in the second half of the current year to reflect current year data. This data is collected via a wage and occupation survey conducted twice a year and until enough samples are collected to guarantee our minimum publishing standards.  Because wage data does not change very fast, the data is very reliable. 

Next look how the data is published in percentiles (10, 25, 50, 75 and 90 percentile) this simply means that data in the 10 percentile means that 90 percent of people working in this occupation make more than this. While the data was not intended to mean this, most folks use this as a guideline for entry-level wages. Each higher percentile reflects a higher level of skills, abilities, and experience. Because each occupation is different, one has to understand one’s own occupation to know how long it takes to move from one percentile to the next. For example, a fast order cook may move from the 10 percentile to 50 percentile within a couple of years, whereas an engineer may take up to seven years to go from 25 percentile to 75 percentile. Another thing to remember is that, while each percentile offers a single wage data number, each percentile is a wage range for which the stated data is the average for all wages in that range.

So, if you are a Transportation, Storage and Distribution Manager with six years of experience and you know the company you are applying for is a large company you may answer the question “What is your salary requirements?” you might answer something like “According to the local labor market website, the market wages for this position at my level of experience is somewhere between $34.53 and $42.76 as of 2017, so I am happy to negotiate a salary within that range.” Not only does this tell the company you are applying to, that you have the skills to locate key information and how to apply it, that if they want to be competitive in recruiting quality applicants, they need to pay market wages. It also offers the employer flexibility to negotiate and gives you confidence that you neither over or underpriced your talents. But make sure that you quote the real range that reflects your skill level. 

A caveat that is very important, in particular to folks who have worked more than 10 years with the same company or have extensive (think 15+ years) experience in their field, that the high end of the market wage range may reflect a salary well below your last salary, that is because companies, in order to retain institutional knowledge and reward loyalty, will raise wages to well above market wages to retain their most talented workers. If you lose that job for whatever reason, your market value becomes the listed market value in these wage ranges. Know that the top wage range reflects the wages (minus any bonuses or performance-based compensations not cited in the base salary) in the cited wage for that percentile (90th percentile. Many people in this situation will hunker down and not apply or accept any job offers below their last salary, and that can lead to long-term unemployment, which erodes savings and potential employer confidence in your skills and abilities as they will likely wonder why someone so talented has been unemployed for so long (underlining the assumption that something must be wrong with this person!).

For a list of each state’s Labor Market Information websites and other contact information go to https://www.bls.gov/bls/ofolist.htm

 If you have further questions or comments on this article, please contact or comment me via Linked-In options. Thanks