We're excluding things that are illegal,
unethical, immoral, or unsafe. That sort of behavior aside, the
worst thing that an employer can do to an employee is to pay
him or her significantly more than a free-market wage. What?
The worst thing you can do is to pay someone too much? We can
see people's hands going up, volunteering to receive just that
type of harsh treatment. But, the results are often devastating
for the employee.
We are talking about situations where employees are paid 50 to
100 percent more than they could get elsewhere. When an
employee is significantly overpaid, several things happen. In
most cases, the employee does not recognize that he or she is
overpaid. It's human nature. Most of us believe that we are
worth more than what we are currently being paid. At most, we
think we are paid fairly. It is a very unusual person who
recognizes that his or her compensation is well above what he
or she could earn elsewhere and adjusts his or her lifestyle to
compensate.
The second thing that happens is that the overcompensated
employee, not recognizing the precariousness of his or her
situation, builds a lifestyle that cannot be sustained by less
than this current income. For most, even if they know they
can't reach their previous income levels, they behave as though
they have. Spending on "extras" chews up cash and savings are
minimal. Often, it takes the current level of income just to
service debt.
Then, the unthinkable happens. The goose that laid the golden
eggs is gone. It could be a plant closing, a layoff, or perhaps
an employer who finally realized he or she could replace the
overpaid employee at a substantial savings to the business. For
example, a company that operated call centers wanted to be on
Fortune magazine's list of best places to work in America. To
achieve this, it offered above-market-rate compensation,
extremely generous benefits, three to five weeks of vacation
and numerous other prerequisites such as "fun days." The
company made Fortune's list. Then, the economy turned downward
and things got tight. A bright, young analyst figured out that
the company could save millions by outsourcing its expensive
call center operations, and it wasn't long before the party was
over.
Most people who find themselves out of work will try to replace
the income they have just lost. They believe they can because
they think they are worth what they were making. Refusal to
accept lower-paying jobs lengthens unemployment and makes
matters worse. They try to hang on to the lifestyle they built,
not realizing that they will never again attain their former
level of income. We've seen cars repossessed and foreclosures
on homes. Marriages have broken up under the stress. In one
particularly sad case of which we are aware, a person committed
suicide.
It may sound odd, but in our years of experience, we have found
that the most unfair thing an employer can do is to pay an
employee a lot more than a free-market wage. Doing so might
make the employee happy for awhile, but it sets him or her up
for financial ruin when the gravy train comes to an end. We've
seen it time and time again.