True Science for a Real World

Saturday, January 11, 2014

The Invisible Slap

A friend of mine was recently disappointed due to the ridiculously low offer made by a potential boss to start a new job. As most people who feel disappointed towards the salary, she felt she was overqualified, having tons of experience, the right background from prestigious universities for both undergrad and Master's degrees, all the confidence and the adhoc personality.

Anna shows off her more than impressive background

It was just obvious that she passed the hiring bar by a wide margin, but ultimately was slapped by Adam Smith's invisible hand right in the face when she was extended an offer.

Adam Smith's invisible hand slaps Anna in the face

Supply and demand is quite often misunderstood principle of Economics. It has extensive application on real life!!

It works like this: an employer has a vacant position and offers a given amount of pay as salary. The market has at the same time potential employees or people who seek employment. These candidates reach out to the employer and if they meet the expectations they are extended an offer, in which case they can accept it or not.

IF the candidate accepts an offer, the employer is happy that he filled the outstanding position and understands that if another similar position opens up in the future it is ok to make a similar offer or perhaps even decrease it a little bit. Who knows? Maybe he offered too much and that's the reason why the candidate took the position in the first place.

IF the candidate rejects the offer, the employer scratches his head in confusion and determines that maybe the candidate wasn't happy about the offer, hence he decides to increase the benefits of coming to work in this position. Whether it is by increasing the base salary, bonus rewards, relocation aids, stock options, more vacation time, dental plan, corporate car or whatever, the punchline is that the employer will try to make the offer more appealing to future candidates.

Naturally, there are many companies with many outstanding job offers and many people seeking job opportunities everywhere, thus making this cycle extremely dynamic and so it's difficult to determine who has the upper hand on the mechanics of this game:

If there are many people out there who can perform the job and are willing to take the pay level, then it's tough luck for you; the employer will just hire the next guy who's willing to take the offer.

A candidate with less experience and qualifications is likely to accept a less rewarding job

Highly demanding candidates will be sent to the shark pit regardless of their qualifications in excess of the hiring bar

In contrast, if the skill set requested to perform on the job is quite particular such that you stand out as one of the few who can do it, then that's the time to get cocky and ask for a big fat signing bonus, third-world-politician-like salary* and a bigger office.

When the qualified candidates are few and far in between, the employer will expand the offer to unimaginable extents

To sum up, while it is true that you could alter the offer in your benefit by convincing all the other applicants to reject it, it's nearly impossible to get that ninja guy** to reject an offer, especially if full of debt. It's a stalemate. The next time you're made a job offer do your due diligence in advance. Know what's the market average for similar positions in similar companies and use this knowledge to make a better assessment of your choices.

*This means very, very high. Usually associated to an insanely high pay per actual work ratio
**No Income No Job or Assets 

Some resources and further reading:

  1. Shake the Invisible Hand
  2. Learn the ABC of Economics
  3. Dive deep!


  • The characters appearing in this work are fictional. Any resemblance to real persons, living or death, is purely coincidental... not!
  • Obviously, I don't own the shark image.
  • I don´t know how to draw sharks (or anything else for that matter).

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