You can take advantage of an economic downturn to hire desperate out-of-work people for a pittance. But if you do, it may not be the bargain you expect. For a business that needs skilled workers, a downturn offers a longer lasting bargain—a chance to hire top notch people at reasonable rates, and develop a loyal team to carry your business into the recovery.

During the last major recession, a manager I know at a big USA telecom company complained that he wasn’t paying enough to his contract labor. Top management dictates that contract labor could only be paid perhaps one third to one half as much as before the recession. People who were out of work for a while became so desperate, they would sign on as contractors for hardly anything.

Why did my friend complain about getting such a bargain?#

Because it is so darned expensive.

My manager friend does not handle phone calls from you to your grandmother. Those are simple. When you call the number, the nearest telephone system switch knows where your call should go. His group deals with services that are much more complicated. His group needs to be highly skilled.

Here is an example. When you call a toll free number, the switch has to ask a central database where to send the call. If that is busy, the switch has to ask where to make a second try. A lot happens behind the scenes to make your connection. Several other telecom services are similarly complex, such as those charming Interactive Voice Response systems everybody loves to hate (“For English, press or say one…”).

It takes months to train a new worker to work competently in such complicated systems. People willing to work for peanuts are not necessarily the very best, so they may take longer to train than brighter people who cost more. Besides, they aren’t committed to it. They are being paid so little that they never stop looking for something with better pay.

My friend spent too much of his budget training people, because the best ones left as soon as they could. That’s why he complained about the cost of the bargain top management forced onto him.

If you think about it, that bargain puts his entire company at risk. A two hour outage in a telecom service is all it takes to make the front page of the newspaper in the worst way. Some bargain!

What my friend understands, and what the top brass ignores, is the wisdom of paying enough.

In a downturn, more superb talent is available in the market than usual. You can hire the very best—and you no longer have to offer sky high pay. If you pay reasonable rates instead of rock bottom, and treat the new hires well, you can build loyalty to keep them as times improve.

When the recession ended, my friend’s company was still training new hires, over and over again, and getting by with too many of its workers not quite knowing what they were doing. By paying enough, at the end of a downturn you can have a well trained team ready to deliver for you. Guess which company will have the better edge!