What happens to Market Competitive pay during recession?

Whether we like it or not, recession surely has/is going to have a certain impact on our compensation levels, particularly of those who are in a strong bargaining position.

Even before I entered the HR department, I always questioned - why do all HR policies designed in favor of the organization and not the individual, why is the benefit of doubt not given to the employee, why do I have to accept standard offer letters? I realized quickly that it's the difference in negotiating power leading to such situation.

A common trend in B-school campuses is that if the last batch is paid Rs.X then the current batch will Rs.X+y, even while the last batch guy is still working for the same salary and waiting for his first appraisal (this is because of the cycle - consider this: Generally campus placements happen a month or two or even more in Engg colleges and there will be a month or two after finishing college before joining, next year the company comes around the same time to the campus and by that time the guy who joined in the last batch would've worked for not more than 10 months at the most).

This has been the cause for heart burn for many alums, who work hard for getting in to the dream firms and despite their working hard for 10 months, the junior guy is gonna earn more than him. This will continue even after the annual raise sometimes as the annual raise could be less than the increase in campus offers. I had seen one alum who is now with a bank behave very nicely as long as he was doing cv reviews and later act horribly during the placement week. I can understand his behavior quite well now.

Coming to the issue of recession, this year average salaries across campuses have fallen dramatically and surely those who didn't get admission last year are celebrating this year, similar to the joy of those who didn't invest in the market last year as they had no clue about it - they are better off without the prized admission/investment.

But then the student on the campus is asking what went wrong? what mistake of mine is causing the trouble, how can the astro-charts of so many students didn't predict this doom, can we this is an accident and we will be normal again after sometime? My answer is NO, it will not be normal for this batch after sometime. This batch will have to work much more harder than others to make it to the half way mark, forget about raising the bar but then is life all about raising the bar all the time; may be sometimes it is just enjoying the challenging journey. If you are a better person, you are better off than many others with more money, surely.

Coming to the point mentioned in the title, because of the doom predictions, all the analysts have been conservative and in fact so negative that they cut down growth, profitability and demand projections that companies that were recruiting aggressively yesterday realised suddenly that they are over-manned, they have surplus. Manpower is something that you cannot put in cold-storage for sometime and there is no proven "convenience yield" except in IT services where the "Ramalinga Rajus" of the Indian IT services have mastered the art of billin the client based on head count rather than on the value delivered.

So suddenly Competitive Pay in India nose-dives and everyone is worried if he is gonna be next in line to receive the pink-slip. But thankfully Indian culture (which has a heavy dose of lethargy that is projected as something else) demands that you be sympathetic to the bread-winner and questions the focus on bottom-line. Even the stock market these days is rejoicing about lesser than expected losses if not the more than expected profits. So you wouldn't be able to secretly enjoy the sadistic happiness of "My friend got fired but I'm not, you see," likes.

The reaction of different sectors, functions and market forces has clearly shown that Market is rational only when it is stable but then if it is stable it is not market. To sum up, Market that always tries to be rational is always irrational and reacts wildly to negative news and acts exuberantly to positive news and it is only the guy who got more than what he expected who feels that Market is rational and competitive, ask those who managed to get placed this year.