In this module, we are joined by Linda Babcock, the James M Walton Professor of Economics at Carnegie Mellon, and a world expert in negotiation. Thank for being here. >> I'm happy to be here. >> Linda's specialty is the role of gender differences in negotiation. She is the author of many well-cited articles and two award-winning books. First, there was Women Don't Ask and, more recently, there is Ask For It. In fact, I just gave my copy of Ask For It to my recently graduated English major daughter. I suggest that you do the same. Actually, don't just give your copy. Buy a second copy and share that with your kids. Here at Yale, the Women in Management group gives all the women incoming MBA students copies of her book. I also wanna mention that Linda founded an organization called PROGRESS, which teaches women and girls how to better negotiate. In fact, in 2006, PROGRESS, in partnership with the Girl Scouts, created a badge that you could earn for being a better negotiator, the Win Win badge, how to get what you want. This module is decidedly not just for women. All of us can learn how to be better prepared negotiation, how to be soft in style, and hard in substance, and how to aim high without crashing. So let me now turn things over to Linda. As a starting place, how much more do you get, dollars and cents, when you negotiate? >> So, this is $627,000. Would you like to have that much extra when you retire? You might be thinking, well, what would I have to do to get that extra $627,000? And you might be thinking it was either illegal or dangerous. Well, actually it's none of those. What you would have to do is negotiate. So let's see how this would work. Okay, take these two people graduating from college today at age 22, and let's say that they both get job offers for $40,000. The green person says, $40,000, that's great, I'll take it. But the blue person decides to negotiate, and that person gets the offer raised from $40,000 to $44,000, so you can see that at 22 the gap in their salaries is $4,000. So let's take these two people as they go through their careers until they retire at 65. And let's assume that they each get 3% raises every year. Well, by the time they reach 65 their gap in their salaries is over $14,000, and that's because, of course, a 3% raise on a base of $44,000 is greater than a 3% raise on a base of $40,000. So the gap widens in their salaries over time. Now, if we think about how much more money the blue person made over the green person, we can think about how much extra that person would have when they retire. So the first year, the blue person has $4,000 more, and if that blue person took that money and put it in a savings account. And every year that person put the extra money they earned by negotiating that one time in that account. By the time they reach 65 that person would have $627,354 in that account. So you can think about it this way, that that amount of money is the return on a one time negotiation. So let's look at another example. Think about two people who are just graduating with a Masters degree at age 27. And let's say that they're both offered the same salary, which is $70,000. Again the blue person decides to negotiate and gets that offer raised from 70 to $77,000. But the green person just decides to take that offer. So the gap their first year at age 27 is $7,000 in their salary. Again let's do the same exercise. They each get 3% raises until they retire at 65. Now the gap in their salaries is over $21,000 between the person that negotiated and the person that didn't. And if you took all of the money that that blue person made because they negotiated over the green person, and if that blue person had just saved it in a savings account. That blue person would have an extra $839,412 by the time they retired at 65. That's a lot of money for a one time negotiation.
