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I think compensation is a matter of supply and demand. We are seeing that now more than ever as people are willing to take significant decreases in pay after layoffs to have an income again.
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Is it common now in your industry? I never heard a case in my company or the similar companies where employee took a downgrade to maintain their job, unless there is a down-role change. Either loss of job or staying at the same salary.
More being able to negotiate, I think. It would not surprise me at all to find people more than competent but no clue how to advocate and negotiate for themselves. Took me a long time to figure it out.
Mix of negotiation and the economic status of the company. Companies will give you a number they're comfortable with but most of the time you can ask for higher that's within range.