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Does income inequality exist because job applicants trust recruiters? #HRMustFall

In South Africa, unfair wages are a part of life. Carrie Gracie, the former BBC journalist made international news when she won her unfair pay case for being paid less than her male colleagues. Job applicants don’t have the freedom to ask what colleagues are paid when an offer is made, they assume the employer is being fair.

INVITING INEQUALITY

Income inequality exists because of behaviours and choices made

Inequality isn’t by accident.

Inequality is made, created, it is an act of choice by those who make decisions. Women paid less than men, black people paid less than whites, a weak negotiator less than one more persuasive. A job applicant with less negotiating power or less knowledge about a company’s pay policy will agree to accept an unfair offer when a company is not upfront about a salary range. This invites inequality.


KNOW THESE ECONOMIC TERMS 

Symmetry: means two sides are the same = in economics, equally fair.

Asymmetry: two sides are not the same = unequal / unfair.

Information Asymmetry: when one side of a negotiation has more information than the other side. Example: recruiters know what employers will pay but applicants don’t.

Moral Hazard: when you make a bad choice because you have no fear of negative consequences. For example, you drive a car and have insurance. The insurance makes you feel confident so you take risks and drive faster.


Why you can’t trust recruiters

If you applied to a job advert that didn’t state a pay range and recruiters contacted you to ask your pay expectations, you are participating in an unequal opportunity recruitment process.

In economics, when one side of a negotiation has more information than the other, it’s called an asymmetric information advantage. If applicants are willing to work for less than what the employer is willing to pay, applicants will be paid less.

Recruiters claim the lack of pay information provided allows job applicants the freedom to ‘peg the negotiation.’

They suggest the lack of upfront information about a salary range allows applicants to lead wage negotiations. Ask any job applicant, the lack of advertising ethic and transparency is not conducive to a positive recruitment experience.

Hi Leonie I disagree that asking a candidate their expectation before naming a price range is exploitative, as it gives the candidate an opportunity to peg the negotiations in the range that he/she is comfortable with.  The anchoring effect favours those who peg their price first.  But I do get your point that in a very competitive labour market, candidates who are desperate will opt for a lower salary in order to get the job.  It would be helpful if proper market research was done to determine what salary bands are applicable for jobs. Recruiter on Linkedin

Applicants do not feel ‘comfortable’ when asked about pay expectations. They instinctively know they are being trapped and being selected based on how much they are willing to settle for.

The only truth in the quote is:

 candidates who are desperate will opt for a lower salary in order to get the job

Asking job applicants to state their pay expectations is unfair as it places the candidate at a negotiation disadvantage, ‘show me your cards.’ Yet the Constitution says everyone is entitled to fair practice, that would make this unlawful behaviour.

Recruitment practice has lost credibility as the talent attraction function is no longer an essential feature of the function.

WAGES ARE NOT BASED ON FIRMS MARKET RESEARCH, THEY ARE BASED ON WHAT EMPLOYERS ARE WILLING TO PAY WORKERS FOR A VACANCY AND WHAT APPLICANTS ARE WILLING TO AGREE TO.

Unfair recruitment targets uninformed desperate, vulnerable applicants – not talent.

Moral hazard and recruiters – what’s that mean?

Recruiters are engaged in the economic activity of finding capable workers willing to work for the pay the employer is offering.

The moral problem is when recruiters force decisions and actions they know are unfair, like placing job adverts omitting pay ranges and then contacting candidates to ask their pay expectations.

Recruiters know there are no penalties (yet) for unfair recruitment. They omit pay ranges from job adverts in order to maintain negotiating power and find applicants who would trust them enough to accept an unfair offer. By excluding pay information in adverts and asking applicants their pay expectations, recruiters can drive applicants wage expectations down.

Recruiters claim they would never exploit applicants yet workforce inequality exists substantiating the risk the public takes when trusting recruiters.

Employers and recruiters don’t make moral judgments – if they did, we wouldn’t have inequality

Companies such as Truworths, paying among the lowest rates in retail, fiercely defend the right to not disclose pay in adverts and want us to believe they are virtuous but can’t provide proof that they make moral judgements when assuming positions of power and dominance during negotiation:

Truworths chooses to not disclose salaries with advertisements for employment opportunities so as not to inadvertently and prematurely exclude good candidates from positions based purely on their salary expectations.

Truworths offers market-related salaries and remunerate fairly based on the requirements of a role, the candidate’s qualifications, skills and experience. Furthermore candidates are welcome to discuss their salary expectations during the interview process.

Get Smarter, a training organisation, uses similar Truworths tactics, describing pay as ‘negotiable’ in adverts:

Due to the “open” nature of the requirements, we feel it better for a candidate to indicate what they are looking for, and we can then have open and honest conversations with them through the process.

Truworths and Get Smarter, refusing to publish  recruitment policies and procedures, cannot substantiate how their procedures are fair –  because they aren’t?

Interview Costs

Recruiters say they must know if it’s worth their while interviewing applicants: if they interview applicants who expect to be paid 8k but the employer is only willing to offer 4k, they are wasting time and money. 

Applicants are the first victims of wasted time and money when they apply for jobs they cannot afford to take.  Applicants have fewer resources than employers and increase their vulnerability when applying for jobs without knowing how much they will be offered. 

Recruiters and employers, even some economists, want applicants to believe they must ‘sell’ their labour. This is untrue and an attempt to weaken the labour markets position.  Labour creates a means of production resulting in employers ability to generate profits. Labour is not at the mercy of employers, legislation provides equal rights to both parties as they need each other equally.

Employers sell and must invest in relevant resources to enable them to produce what they sell. When a vacancy is identified, a cost is attached. If a company is looking for labour at a particular cost, they should state it in the advert.

If time and money are precious to employers and recruiters, it would be rational to place salary ranges in job adverts. The claim that omitting this information in an advert calling for applications is cost effective practice – is just plain stupid.

Appoint Africa Case Study

I was recently pursued for a managing director vacancy at an NGO, help2read, in Cape town, I’m in Johannesburg but willing to move. When a few weeks had passed after a telephone interview with Appoint Africa, their outsourced recruitment firm, I decided to investigate if the vacancy had been published.  I believe the unregulated recruitment environment creates opportunity for fake vacancies to be advertised so firms can conduct labour market surveys to see how much competitors are paying.

The advert was not upfront about pay, yet Appoint Africa had asked about my pay expectations. I emailed, Help2Read to ask about the values embedded in their recruitment process.

They instructed the recruitment firm to respond, creating an impression they lacked standard operating processes and procedures as required of a registered NGO receiving funds. Appoint Africa responded:

We understand that there is no obligation on a Company to disclose in an advert the salary for a particular position.  This does not amount to an attempt to exploit talent nor is it an unfair labour practice.  

Recruitment firm Appoint Africa uses the word ‘obligation’ when justifying why there is no pay in their advert. ‘Obligation’ implies unless they are forced, they simply won’t oblige us. Their actual decisions and choices show a lack of moral judgement and refuse to recognise that their concept of ‘fair’ is not fair to applicants.

As someone who was headhunted by Appoint Africa and encouraged to apply for the position, I want to let my readers know Appoint Africa made me feel violated and unfairly treated. I’m working on a legal challenge, contact me if you can help.

Appoint Africa implies they act unfairly because no regulations or individuals exist to challenge their ‘fair.’  Without enforced regulations or penalties, Appoint Africa denies the Constitution and deprives job applicants of their rights..

They claim advertising without stating pay and headhunting candidates to ask their pay expectations is fair recruitment practice. It’s a violation, not recruitment. Recruitment is about matching talent to productive opportunity, financial implications are the employer’s own. If my pay expectations are important, tell me what the employer is offering and I’ll tell you if I’m willing to take the opportunity.

Perhaps I want to work for 10k but at a fantastic organisation, I’m willing to take home 7k. Why should I provide an answer that could remove or limit an opportunity?  I am not price fixed flesh – I am a rational economic agent making choices based on opportunity, physical and intellectual needs.

The Constitution enshrines the right to fair labour practice.

Standard recruitment exploits two particular information asymmetries and diminish labour’s right to fair wage negotiations in a free economy.

  1. Employers placing job adverts that are not upfront about pay, are bullies when they contact applicants to ask their pay expectations
  2. Employers use payslips to price-fix wages and spy on competitors remuneration strategy

Talent Exclusion

Questions about pay expectations result in an exclusion of those who believe they can compete and deliver among the best paid. However many applicants applying to adverts posted by recruiters do not know who the employer is, their pay trends or policy position on fair recruitment. Applicants feel vulnerable when forced to state an uninformed amount that could jeopardise the opportunity.

Espionage

Pay slips contain confidential remuneration information regarding a competing firm, as it is in South Africa, I assume corporate espionage is illegal in most countries.

Price Fixing

Labour cannot be price fixed. Using a payslip to fix a wage offer is unfair and implies a slave system where labour has no economic right to negotiate their pay.


Does income inequality exist because job applicants trust recruiters?

Recruiters and employers require applicants unconditional trust, yet fail to support how they are unconditionally fair:

  1. applicants trust that recruiters know what employers are willing to offer prior to advertising
  2. applicants trust that an advert is a market signal denoting real opportunity and not merely a labour scoping exercise to determine the most vulnerable applicants willing to work for the least
  3. applicants trust that when a pay range is not published, that it is not to hide an unequal pay vacancy
  4. applicants trust that recruiters do not contact them simply to conduct market research regarding pay
  5. applicants trust that recruiters do not use pay information to obstruct an opportunity to discuss the value applicants could bring to an organisation regardless of pay expectations 
  6. applicants trust that employers have priced the job according to validated policies and procedures
  7. applicants trust that current pay has no bearing on what they can justify and negotiate for within or outside of the employers pay range
  8. applicants trust that when an offer is made it is compliant with policy and unconditionally fair

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