Cost of living has nothing to do with wage? [closed]

Question

I have a friend who's received an offer for $17/hour as a co-op in NY. My friend is a masters student in Computer Engineering doing advanced AI and machine learning.

I'm trying to figure out if this guy responding to my friend is out of his mind. Cause I scuffed at his responses.

In my experience undergrad students (2 years in) in software engineering get averages of $20 per hour in the area I live.

So I told my friend to ask for a higher salary, as they do have expenses and the nature of the work is more technical than a simple web dev job.

My friend sent an email to the hiring manager and the co-op office official. Asking for $22/hour and looking forward to the next meeting.

The co-op office official replied all to the email.

They said something like:

I understand your desire for a higher rate however the rate offered is comparable to what other co-ops get paid and cost of living has nothing to do with rate. I leave it to the hiring manager to decide.

In a follow up reply, my friend explained their financial picture more. And remarked that the nature of the work is different from an average co-op student. I'm assuming "other co-ops" means everyone doing them.

The co-op office replied again:

Your expenses have nothing to do with it!

The hiring manager hasn't replied yet.

Overall in my friends calculation, it's an additional $400. $1760 for two months of work (10 hours a week). Their expenses are $1322 a month.

What do you guys think? Do you think cost of living is excluded from the hourly rate calculation? And shouldn't be considered when negotiating wages?

I told my friend to ignore the co-op official and wait for a reply from the hiring manager.

EDIT:

My friend is graduating soon and a foreigner. The job offer looks like it is extended beyond graduation. But they have to go through the co-op office through school because of legal reasons.

Answer 1

It doesn't matter what we think, it matters what the employers "think". And the beauty of a free market is that if your friend disagrees with what he's being paid he can simply look for new employment.

You're not going to make these people change their minds. They have some policy in place which pegs co-ops - regardless of competence, or field of study - at that wage, and I'm sure it suits them just fine. Why would they hand out more when people seem perfectly willing to work for $17/hr?

The ball is in your friend's court, and the only reasonable thing to do if he can't afford to live off of his wage is take his expertise elsewhere.

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Edit #1: International Student Situation

You've now added the details of your friend being an international student, as well as having his wages paid though the university.

It sounds to me like your friend is stuck until he graduates 2 months from now, so it's rather too late to tackle this problem (although there is a small chance if getting some sort of bonus, so who knows?).

If he's interested in being employed by that company such that he will remain in the country, then he should probably rock the boat as little as possible. This might include not asking for a wage hike at such a critical junction in his life (about to graduate, and will presumably have to leave the country if a company doesn't sponsor him).

However, if he thinks that he'd rather work for some other employer then he should probably start looking for a job right away.

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Edit #2: What is One Owed?

When asking for a raise your circumstances do not enter the equation as far as the employer is concerned.

An employer makes you an offer, which is what they feel that you are worth. This amount will always always be the minimum amount they can get away with paying you - cost of living, moving expenses, etc. don't figure into it. You could be living off of ramen noodles, and supplementing your meals from a soup kitchen for all most of them would care.

However, you're a human being with agency (free will), and - presumably - options. If you accept their offer then you're agreeing with their assessment of your worth. The employer owes you nothing at that point - you've already signed on the dotted line.

If, however, you feel that you're worth more, then you can negotiate prior to accepting, or look for other employment. However do not expect to get anything more than what you've negotiated into your employment contract.

Answer 2

This is the message you (and your friend) need to burn into your psyche:

You are worth what the market will pay.

An employer (someone with cash in their pockets) has three choices. At the end of the day, do they want:

• The cash in their pocket.
• The work visc's friend will do for the cash in their pocket.
• The work someone else will do for the cash in their pocket.

Those are the choices they have and the choices they make every day. Your friend's job is to make the second choice the most attractive choice.

If your skills aren't distinguished (recent grad), then you have to work for a little less cash, or be some other employer's "someone else" (3rd choice).

When your skills become distinguished (specialized knowledge, high productivity, leadership, etc.), then that second choice starts to look more and more attractive to employers, and you can ask for a little more of that cash.

NOWHERE in that list of variables employers consider are your (your friend's) personal expenses.

Answer 3

Should you consider the cost of living when you get an offer? Absolutely!
Does it influence salaries along with economy metrics? Sure.
Is it something you could use during negotiations? Rarely.

Sure there might be a couple of cases - perhaps your team is being relocated to a different city with a higher cost of living. Or you have the option to work in office A or office B and you calculate that the cost of commuting to office B is $100 higher per month so you ask for an increase if you pick B. But here's the catch, if you move to a different flat in 6 months and your commute costs decrease by $150, do you go back and request a salary reduction?

You are not paid to survive in the nearby area; you are paid to work. Imagine the reverse: you make an offer to work for X and the company replies: "We are sorry, here's our full budget, along with an estimation of the value you will contribute and the general economy forecasts. As you see, for our company to meet its goals and survive we need to hire someone at X/2". Would you be convinced by that argument? Because that's the argument you are making to them!

Furthermore, in a negotiation you aim to persuade. Even if an argument is perfectly valid, it is pointless if it doesn't work. They have indicated that they believe that your argument is invalid. Of course you can try to persuade them that it is, but it might also be easier to find a better argument: you've already mentioned that the usual rate (according to your experience) is higher, plus that the work is different from the average. Those are much much stronger points! Notice how they didn't stay that those arguments are invalid, instead they said that they have different figures.

In the end, there is no justification for asking for a salary X besides wanting salary X. You might have a lot of valid, persuasive reasons but nobody has to accept a deal they don't want; even if they are making the stupidest mistake.

Answer 4

Your economics are false.

Fill a job is simple supply and demand.

A person that wants to live in a big city might be willing to work for less than living in a rural area. Yes it will be harder to make ends meet but cost of living does not directly affect salary demand.

I might be willing to take a low rate to work at a ski resort with high rent.

I might not be willing to live in rural North Dakota for any amount.

Houston has a fairly low cost of living for a big city yet many jobs still pay more than San Francisco.

Where cost of living may more fairly come into play is a transfer to a higher cost of living. You did not chose the city. But if you tried to lower salary based on move to a lower cost of living they would scream like banshees. I worked for a company that would give a one time bonus for transfer to certain locations.

Answer 5

There are two ideas being conflated here. One is the rate your friend should be able to get as a highly skilled student about to graduate. I agree, $17/hr for someone with decent ML or AI skills seems low. I think you are correct on that.

However, that matters not. Your friend's financial picture certainly does not matter to an employer. UNLESS your friend is in very high demand and is being actively recruited. But it seems that is not the case here.

Separate the two ideas. The rate and your friend's needs are not connected. Period. It is very unlikely they ever will be at this point with this hiring organization. That is the reality of the situation.

It seems like this question was asked to argue a dogmatic point and not to seek information on the situation. You are making broad, sweeping generalisations about complex, nuanced topics that people study for decades and still don't fully understand.

At the end of the day, if it really bothers you, it's like any programming problem. The best way to understand it may be to implement it yourself. Start a business and pay what you deem an appropriate wage for your talent. As Jeff Bezos says, " your margin is my opportunity".

Answer 6

An employer sets the compensation for a job at what they think they must to attract and retain someone to do the work the employer wants done. Generally speaking the employer 'does not care' what a given individual's cost of living is.

It's for the individual applicant or worker to decide whether the offer is satisfactory - they might base that decision on their cost of living. They then decide whether to apply or negotiate.

Answer 7

If the people doing the hiring want to base your salary on what they think you need, then it may be a good approach to show your expenses to justify a raise. Not that no one hiring ever considers this, but it is really far down the line in priority for figuring out salaries.

It's usually some balance between what the market is for this candidate's qualifications, how this position contributes to the a company's income, and the amount of risk they want to take by paying more or less.

Some candidates ask for more or less depending on their understanding of all of these variables along with their level of desperation. Sorry, but if a couple of candidates have the same level of expertise as you do and are willing to work for half the salary, you may not get the job/raise no matter what.

Generally, I suggest demonstrating how you are much better than the other candidates and demanding what you can get on the open market.

Answer 8

Most answers have covered working in a free market system, where your expenses do not dictate what the job will pay. Two entities are free to set their prices and when they agree, there is a deal.

I want to add additional perspective.

Compensation is measured in more than dollars

Job rates generally should factor in COL requirements, and generally you'll see higher rates in more expensive areas. However, compensation should to be measured in more than dollars. In your friend's case and many college student's cases their first jobs, internships, and coops will have sub-standard wages. But the wages are not the complete compensation. These companies are taking higher risk by taking on employees with little to no experience. There is going to be higher administrative costs per unit work of these entry level employees (more review, checking, grooming, mentoring, etc...) They offer you access to real-world on-the-job experience. That real-world experience is what is going to set you on a growth path for the rest of your career.

Your friend's compensation package (and other interns / coops) is something more like this:

1. Base Wages
2. Opportunity
3. Experience
4. Networking
5. Travel / new city / new experiences
6. Possibility of extension / offer of full-time employment.

If you can get more money, then go for it. But, in times like this, perspective is required. The opportunity to enjoy a new city, while getting paid a little bit, and gaining real job experience is likely worth much more than asking for a few more bucks an hour.

To conclude, everything is negotiable, and negotiating is part of the game. But to negotiate you must hold a position that is negotiable. An intern, co-op, or fresh grad doesn't have much leverage. It's best to take the opportunity, have a positive attitude and gain invaluable experience. Then next time you'll be in a better position to negotiate. Personally, I wouldn't squabble over a few bucks at the expense of a growth opportunity.