Ask HN: Where Is the COLA? | Hacker News Reader

Ask HN: Where Is the COLA?

77 pointskryogen1c120 comments

Cost Of Living Adustment (COLA): increasing pay to match inflation to result in a net zero change in purchasing power. theoretically separate from performance review/salary raise.

Why aren't companies doing this? I've only seen one company since leaving the military that does performance review+COLA to change pay. Myself and many friends got a ~3% pay "raise" last year when mostly everyone agrees inflation was ~6%! This is a pay cut. (the one company i personally know that does cola+performance, the CEO is prior military).

isnt this obviously bad? you guarantee employee turnover to keep ratcheting payscale (which the US is seeing on historic scale) and disgruntle the remaining workforce. does everyone really think theyre saving on payroll short- and long- term by not doing COLA?

what am i missing?

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does everyone really think theyre saving on payroll short- and long- term by not doing COLA?

People accept an annual pay cut. They have for decades. Employees don't leave, and whether they're happy or not generally doesn't matter so long as the work gets done. Have a look at a graph of the net worth of wealthy people over the past 40 years and then ask yourself if it works long-term because it obviously does.

Except this past year it hasn't. Seen any articles about 'The Great Resignation' lately? The pandemic helped change employee attitudes and they're much more willing to quit for a better deal now (and there's plenty of companies desperate enough to give it to them).

Companies have always (at least the past few decades) been more willing to pay more for a new hire than to increase compensation to keep an existing employee, so now that everyone is short staffed, people are taking advantage of that reality and quitting their jobs for a new one much more frequently and getting the increases they're being denied from their former "stuck in pre-pandemic mindset" companies.

Seen any articles about 'The Great Resignation' lately?

Yep, and very few mention money as the reason why people are leaving their jobs. It's much more often about a re-evaluation of people's priorities. There's no reason to believe people will find new jobs that give cost of living adjustments.

Wanting to make more money to keep up or get ahead versus staying put in the same job for years or sometimes decades is a re-evaluation of people's priorities. But it's not the only factor or only priority for a lot of people, sure.

There's people in this very thread that say they're planning to interview because they're not getting a COLA adjustment.

I already switched jobs and got a significant raise in the process this year, or else I might be joining them if I get a sub-COLA raise (it's sounding like I might based on what I've heard of the process so far). Hell, I still might later this year, I don't know. It wouldn't be the only factor for me, just a factor. Things are mostly good here, but I've stunted my income trajectory quite a bit already by staying way too long at previous jobs, and probably should play a bit more catch-up, and I'm only likely to get that by switching jobs again.

Well, actually, people quite often mention pay as a reason to quit on forums like reddit. It isn’t the trigger, but low pay and difficulties coping financially, even with multiple jobs, is one of the top reasons that makes people leave their employment.

> Yep, and very few mention money as the reason why people are leaving their jobs. It's much more often about a re-evaluation of people's priorities.

Yet, somehow, the new job is almost always (much) better paid. Strange, isn't it?

> The Great Resignation

Any chance it has something to do with mandatory vaccination?

Not really, I think people who are silly enough to quit their jobs over a free vaccine are hopefuly in a small enough (but unfortunately very visible) minority that this isn't a huge factor. I may be wrong, though.

> over a free vaccine

You know what else was free? Bullets in communist Russia and gas in Hitler's Germany. Price is not the only thing that matters.

Unlikely. JPM and Citi are about to let quite few go, about 3% of workforce, due to Anti-vaccination recalitrance. While 3% feels like a lot, it's less than great resig.

Considering the majority of people quitting are in places that have no mandatory vaccinations (service sector in general), it's mostly a negligible factor.

In specific industries it might be a somewhat larger factor (health care I do think is more significant, for example). But even in those industries, there's far greater effects leading to people quitting, like quitting to become a traveling nurse and making 3x the pay, or just getting burnt out from the demands of the pandemic.

The Great Resignation was already in full force before any vaccine mandates were even in place, also.

For the places that have enforced mandatory vaccination, it seems to end up around ~1% or so of employees that are willing to go that route. And frankly, a substantial number of those are older workers that are probably at retirement age anyway. The "Great Resignation" is much more substantial.

No, mandatory vaccination triggered the "Great Self-Dismissal of Fanatical Antisocial Psychopathic Science-Denying Anti-Vax Menaces to Society and Dangers to Themselves and Others", not the "Great Resignation".

Many of them go on to overcrowd the ICUs and morgues, so they are actually unwittingly doing their former employers and co-workers and evolution itself a huge favor by resigning and letting natural selection take its course, to smugly "own the libs".

It's kind of like Mitt Romney's idea of "Self Deportation", but for Trump supporters and gullible Fox News suckers instead of immigrants, and they're self-deporting themselves from the Earth, not just the USA.

> Many of them go on to overcrowd the ICUs and morgues, so they are actually unwittingly doing their former employers and co-workers and evolution itself a huge favor by resigning and letting natural selection take its course, to smugly "own the libs".

How does one get that brainwashed?

No, most people are not sociopaths and are happy to get vaccinated to protect themselves and their community.

> most people are not sociopaths

Well, that's cringe. Is that what they broadcast in the US? I just don't see how a sane person can come to this conclusion on their own.

Good people don't accept annual pay cuts. That's why companies looking to retain the best talent are doing yearly salary evaluations. Look at what Basecamp and Netflix are doing. Your managers job is to ensure that you're being paid in the top 10% of people in your field in the most expensive COL city in America. That's how you retain the best talent.

Your managers job is to ensure that you're being paid in the top 10% of people in your field in the most expensive COL city in America. That's how you retain the best talent.

Everyone's manager should be making sure that everyone is in the top 10% of earners in their field? I'm not very good at math but I'm fairly sure that's impossible.

Right. When someone with essentially no skin in the game is yelling to the internet about how dumb the people with massive skin in the game who spend all of their time trying to optimize a specific situation, and how they just don't get it, you've got to wonder if it crosses their mind that they are they one with much more limited info who is less likely to "get it".

Then again for the most part these people aren't trying to understand what is going on. They just are angry about something and want to yell.

Why aren't companies doing it? Because they don't have to.

When inflation was 3% a few years ago and I was given budget/guidance for raises in my group, I pointed out to the CEO that the 2% they wanted to give one person was effectively a pay cut. The answer? "Well, you can give him an extra 0.5% if you think it's warranted."

Employees don't push for it so businesses don't do it. It's that simple.

That's the fun thing though: if the only way to extract a COLA is by switching jobs, then employers have made the workplace so unfulfilling both intellectually and financially that employees have no problem doing so, which raises the costs of hiring employees.

Pretty much but no one thinks that far ahead. I really don't get it.

Few businesses can afford to. A low margin business with price sensitive customers is not going to be able to optimize for much more than low prices today. Even governments cannot do it even though they have a monopoly due to politics.

They get it. They do not want that. It is important to keep these costs low, because they have to be payed in this quarter. When employee leaves, they try to push his work on other employees, which mostly accept that. So they save money in that case. But, it business grows or enough employees leave, they simply invest in headhunters, which search for candidates. This happen 2 or 3 quarters later and also is booked on different internal account. In meantime, they save money. Easy calcualtion. Been there, saw that.

My current employer is all too quick to say how well the company is doing, I bought up COLA with a director and was told 'we were all the in the same boat'

Sure we are, and that's why I'm jumping ship

That is the correct think to do.

Remember, never be loyal to your company because a company CANNOT be loyal to you. (You can be loyal to a good boss though.)

Jumping ship makes sense for each individual. I think the question is whether it makes sense for someone at the top of the org who can change this.

I've read that Henry Ford raised wages to lower turnover. Quoted text is from a Forbes article, I haven't dug for the original source.

> At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford's turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.

[0] https://www.forbes.com/sites/timworstall/2012/03/04/the-stor...

I bought up COLA with a director and was told 'we were all the in the same boat'

I hate that attitude from higher ups. An employee looking at inflation and wondering if they'll need to heat their home less or much less food is not in the same boat as a higher up manager who might have to buy a new Mercedes every other year instead of every year. It might be the same problem for everyone, but it absolutely doesn't have the same impact.

I remember a long time ago, my manager sort of implied I was up for a promotion this cycle, and that same day there was an announcement about revenue being at an all time high. Then the promotion cycle came up, and I was passed over, and reason given to me was that they need to make budget cuts.

I'm a little surprised I did not quit at that point, and I do have some regrets on how I acted after the fact, but it really annoyed me that we just tolerate companies bragging about how much money they make, but then playing the victim whenever we point out that maybe that maybe that should be reflected in our wages.

----

FWIW, I do not think the manager was trying to mislead me. I think he was almost as blindsided as I was. I think it's a little bullshit that the executives making the unpopular decisions hide between middlemen so they can use the "don't shoot the messenger!" approach.

Revenue isn't profit, of course. Can definitely be in a situation where a company increases revenue but costs escalate faster and budget cuts are needed.

Yeah, that might be true, but it didn't look like they were cutting budgets anywhere else, and we never got an announcement that profits were down or below expectations. Entirely possible they just didn't want to announce that so brazenly though.

Companies in the private sector pay you based on the market for your skills, not cost-of-living.

They may move in tandem, but they are not in lock. If there is a shortage of talent even without inflation, your market rate will rise. Likewise if cost of living increases, but there is a surplus of talent—your compensation can still fall.

Almost anyone browsing this board makes far more than the cost it takes to “live”.

> If there is a shortage of talent even without inflation, your market rate will rise.

True, but rarely will a current employer keep your salary at the market rate. You have to jump ship to get the market rate.

I doubled my salary in July by jumping ship. My old job was way under market rate, and management knew we were under market. They'd rather have turnover than give raises to keep up.

I agree companies have a current vs new hire agility problem relating to the market rate. It don't think this is reflective of CoL adjustments.

For the past 10-15 years, the market rate has far outpaced CoL—yes even in the Bay Area (assuming FAANG-like companies and startups)

> Companies in the private sector pay you based on the market for your skills, not cost-of-living.

They problem is if you stay too long, you no longer make market rate and HR "can't give out X% raises" to get you to market because of some arbitrary made up BS rule.

I am a unionized software engineer and we will be bargaining for COLA to address the issues you highlight.

When workers don't have democratic organizations of their own, their interests fall by the wayside.

Which union? I haven't really heard of any for software. I would love to have one at my work.

Yes. I would like to learn more about your union experience.

I'm a member of the Communications Workers of America, which is actively supporting software developers organizing in a number of sectors.

https://twitter.com/webuildnpr https://twitter.com/CODE_CWA

Is it possible to just unionize the IT division of a company?

Indeed. In general, you have more bargaining power when you unite all of your coworkers in one union. But it may be strategically wise to begin with a department where mutual understanding among coworkers is high; once you've got the union up and running, you can help coworkers organize and join.

All the resources I found say you need 30% of the employees at a company to organize. Do you have any details about how this works at the division level?

Close, but that's not quite right - 30% is the threshold within a "unit" (which can be one department) for a "showing of interest" which can be used to trigger a National Labor Relations Board election. An election is one of the most common ways to get an employer to live up to its obligation to bargain with its employees, but there are several. For an overview, check out "Labor Law for the Rank and Filer" by Daniel Gross.

Legalities aside, if you want to organize a union with your coworkers the first step is to form an organizing committee that is broadly representative of the unit you are trying to organize. You can then either form an independent union, or join an existing one. I'm happy to answer further questions by email (which you can find in my profile).

Where are you located and which union?

There isn't a law requiring companies to give COLA raises so most companies won't. The reason they don't need to? You're not accounting for COLA yourself, so why should a company?

Do COLA adjustments in your own job/career. That's why so many people are moving jobs in this market. That's why so many high paying engineers move jobs every couple of years. COLA baby!

I tend to move jobs every 2-3 years and receive a 25-50% raise each time. COLA baby!

I’ve talked to my non-engineering family about how I switch jobs and they have a hard time understanding since it’s just so different than their experience with the job market. “Don’t you need to stay put so you have more seniority?” The concept of being in-demand and getting 20-50% pay raises every few years is insane to them. Me too, admittedly.

Problem is, that works early in your career, but you're not going to see 20-50% pay jumps when you're 45. You will eventually hit a compensation ceiling for your particular role and start seeing 3-5% bumps, then eventually 0.5-1% bumps. In order to get big pay jumps for switching jobs in your late (15+ yrs) career, you are going to need to level jump, too.

Agreed. I'm fully aware that the pay jump train ends sometime. I recommend people take advantage of this tactic when they're young.

My own tactic is to move jobs often, but also take on multiple remote roles at the same time.

I have strategically jumped to gain skills and a higher salary. My current job is, to me, a unicorn and I plan on staying put for a while (even if there wasn’t an equity component). I think I have mostly hit the ceiling for my years of experience and skill set, but I like what I’m doing so I don’t mind.

Agreed. I shouldn't have assumed the OP was an engineer. This strategy is definitely software engineering specific for the most part.

What are you missing? I don't know. I'm assuming this is a US thing? Because we've had this in Belgium for at least as long as I've been alive. My pay automatically went up by ~3.5% this month. It's required by law (mostly, it's complicated). The actual percentage depends on a number of factors, as does the frequency, but for people in tech it tends to be an an annual affair.

It's not a perfect system, but it works reasonably well, even if it does somewhat disadvantage people with lower wages.

I'm in the US and have a similar experience as the poster.

These across-the-board mandated policies do impose a cost, they make the economy as a whole less flexible and decrease employment, at the margin. For example, Belgium has both higher unemployment and lower per capita income than the United States.

Sure they have a cost, but you fail to mention the benefits. We have a lot less poverty and far fewer people having to work a second job to make ends meet. You win some, you lose some.

> higher unemployment

Yes, but the US also measures unemployment differently. People are culled from those statistics much faster in the US than in Belgium.

> lower per capita income

True, but that's not caused by indexation of wages (COLA) alone - I'm not even sure it's a statistically that significant. It's down to a combination of factors, such as market size, startup culture, taxation, social welfare...

> These across-the-board mandated policies do impose a cost, they make the economy as a whole less flexible and decrease employment, at the margin.

The Belgian economy is less flexible by default, because it's constrained by three languages, seven governments, a total area slightly larger than Maryland and a population roughly equal to Ohio's.

Whether it's a cost is debatable, if Belgians on average live almost three years longer, on average have cheaper and better education, etc. If you compare the quality of life [0], Belgium is ahead of the US in many metrics except precisely cost of living,, housing size and wage. All I'm saying is: economical statistics don't paint the whole picture.

0: https://www.oecdbetterlifeindex.org/countries/belgium/

At initial glance I also think it would be much cheaper to give out adjustments like this than have like 10% of your staff leave. Some napkin math indicates otherwise: if you have a staff of 10 that each make 100k on average, a 5% COLA costs you $50k vs. 1 person leaving (10%) and costing you maybe $25k in recruitment. That $50k is year over year too, not just a one-time deal, your avg salary is now $105k.

So in this fictional, theoretical employer scenario it would take 3 people leaving (30%) in order for it to have been less costly to just have given out 5% to everyone.

Even with my napkin math I still think its better to take care of your people reasonably vs. use a spreadsheet to drive decisions and hope people don't leave.

One issue is that you may pay ten people 1MM annually to write your software, but the productivity distribution is likely not only non-equal but also non-linearly so.

Those at the top of the productivity distribution are the more likely to be able to find new employment, so you may be losing more than a tenth of your development output by going that route, and finding a replacement for that type of employee may be much more costly and difficult than average.

Dangerous to model the cost of someone leaving on a spreadsheet like this :) https://twitter.com/benjiweber/status/1480219318273073157

+1 I think this point is really important.

When discussing pay versus employee retention, the toy model people present often implicitly assumes a high percentage of employees will leave if pay lags. But the economics totally change based on the percentage, and empirical data suggests the percentage is actually pretty low.

A more realistic model would see “1 person leaving” happen every year, too.

Also, “maybe 25% in recruitment” isn’t all the costs. You have to get the new hire up to speed in your company. If that takes that employee 3 months and also 3 months of the time of the remaining colleagues, that’s $50k in itself.

Finally, you can’t keep not correcting salaries for inflation for many years. The number of people leaving per year would go up dramatically, and you wouldn’t be able to get new hires.

The new hire is going to be at 105k as well. As people leave you will eventually ratchet up to the rate you don't want to pay anyway. You are right that it would probably be exponential the further wages get from market. One day a large portion of people would leave and their replacements will be less effective and cost a lot more.

On the other hand, if you are a executive you can keep rolling the dice, get a nice bonus and leave yourself in two years because you know the real money comes when you switch companies.[0]

[0]https://rationalwiki.org/wiki/IBGYBG

It also is in the company's advantage for 1 person to leave and now give the other 9 the work of 10 and push them to maintain productivity. Now they're saving 100K per year.

I had a previous company do that to a department that had 40 employees, and three years later it had 5 employees (a couple of layoffs, but mostly steady attrition with no hiring to replace them).

Saved them a ton of money in the short term. But the department also stopped being able to do anything but be in "keep the lights on" mode, almost entirely maintenance and very little new feature development, and they also lost two major clients in the process as well as they couldn't keep up with SLAs, and thus their revenue ended up dropping by several million dollars a year, so I'm not sure if they really saved money in the end.

This is the issue with letting COLA types of pay increases lapse, then that employer may fall out of favor, be known to not treat people right and it could steamroll to where they can't get talent.

That's probably true, but in this company's case, it was because they had a hiring freeze for most of that three years, and a "la la la la I can't hear you" policy to middle management that begged to let them hire more people after that.

Or the few times they did allow it, about 2x more people left than they approved to be hired during that time period so the employee count still went down.

Neigh-all human employees are profoundly irrational about changes in their pay. If I'm raising their pay, any justification from "busy season" to "in-demand skills" to "inflation" to "chocolate ice cream melts in the sun" is 100% reasonable and acceptable. Vs. if I'm lowering their pay, it doesn't much matter whether sales are soft, their skills have gone out of demand, the local cost of living went down, or what - they get pissed off, and argue over every penny.

Do not expect any experienced boss to be rational on a topic, when you neigh-certainly are not.

"Neigh?" As in the sound horses make? Or did you mean "nay?"

I suspect `nigh` (as in nearly or almost). https://www.dictionary.com/browse/nigh

Nigh on impossible is a stock phrase meaning "virtually impossible".

s/Neigh/nigh/g

You think it’s irrational for employees to object to a reduction in pay? That seems rational to me

I know of several companies that do COLA, but they tie it to minimum wage. That isn't a joke about minimum wage jobs either, I know several people who work for 30-40 an hour who get a COLA bump when the minimum wage gets a bump. I rather think the minimum wage should be inflation adjusted, just like social security.

Yeah, the company I work for has a COLA, and when inflation was 3% we got 3%, for a few years. Now that inflation is higher, they just suspended the COLA - we don't even get the 3%.

Soooooo, here I am on Hacker News posting during work hours!

My company is a financial one and even they struggled to meet everyone's expectations. It's not COLA, but the "merit" adjustment tends to be close in the past.

People getting a good rating got 5-8%. So even good people are getting close to a 1% cut.

I got a further development needed rating. My raise was 1.5%. So about a 4.5% pay cut. Under the company policies, it will likely take me 3+ years to get back to making the save level of value. They say they want to retain me. Stupidity. I'm looking for other jobs but will likely be stuck here.

Okay, I don't want to give you a pep talk or pretend that I know you. But we're at the point where I recognise your username as "the-negative-person-who-doesn't-like-their-job-and-doesn't-make-that-much". I actually knew the pay-cut story in your comment before I read it because you've shared it before. So either I need to spend less time on HN or you need to ligten up a bit and shake things up career-wise.

Maybe the former. It’s not always easy for someone to shake things up career wise, and they said they’re already trying.

Yep, my job has turned me into that negative person.

I’ve been there pal. My biggest hope for you is that you can get out. I’ll be thinking about you and wishing you the best.

Tactically speaking, when I was there, my negativity came across in my resume. So I was really stuck. I’m lucky enough to be friends with a pretty good editor and she really helped me.

If you’d like a fresh set of eyes on your resume, you can email me. My address is in my profile.

Just a warning, I likely won’t reply until late tomorrow or early Friday. I have an adventure planned with my five year old. :)

I'm sorry you're in that situation. It may be more possible to get out of it than you think. I felt I was stuck in my previous job (which I stayed at for over six years) and dragged my feet to go job searching because I expected I'd struggle to get through technical interviews, and also was worried my skills had atrophied a lot since I was learning a lot of tech for something not high in demand (telecom-based).

But when I got serious on the job search, finally, I got about 10x more recruiter interest than any previous job search in my life, and the technical interviews I mostly did well on (a few places I didn't). And landed a job that uses very modern technologies and a 60% salary increase.

Maybe it could be the same for you as well. Companies are much more hungry for employees right now than they were two years ago.

Is it fair to say CPI at 6% for 2021 means that not getting a nominal raise in 2022 implies a 6% paycut in real wage?

I suspect most folks on this forum are quite asset-heavy compared to the CPI basket of goods and are experiencing that 6% inflation on some fraction of their spending. A lot of money earned goes into investments well outpacing 6%, existing mortgages aren't increasing in monthly payments but the house is increasing in value, etc. The math varies tremendously across individuals, but I wouldn't be surprised if a 2% bump more than covers inflation as actually experienced by the average US software engineer.

It depends on your goals and expectations. If the things you want to purchase are being bid on by others gaining 30% per year of purchasing power, then if you are not, you have lost purchasing power relative to them.

I like to use VOO as my measure of inflation, but that is only because of the things I am interested in purchasing, specifically the land I want, but also construction costs/tuition/vacations and family events/healthcare/legal services/political donations.

I'm not a developer.

In UK house price inflation is about 12-15%. If you're saving for spending on housing then that's your benchmark for investments to beat. Reportedly, RPI [Retail Price Index] is ~4-5% IIRC. Government controlled pay was frozen for everyone except MPs, AFAICT. UK gov managed to hit the poorest with a NI increase too, but at least they reduced tax on champagne (yes, really).

Some companies are doing this but it varies by industry. I have family on the comp boards of a few publicly traded companies and they are doing across the board raises of 5-9%.

My current company is not and so I have been interviewing.

> you guarantee employee turnover

Why? is your theory - are companies adding COLA to new offers and no COLA to existing employees?

Pay bands and offers have been about the same from the numbers i've seen in the past year or so. If a tech company is paying double your salary they also did before inflation rose. And you could have jumped ship back then as well. And they probably also are not doing any COLA adjustments once you join

COLA only makes sense for minimum wage, if you're making more than minimum you're just constantly trying to maximize your worth in the open market. That has nothing to do with COLA

> Why? is your theory - are companies adding COLA to new offers and no COLA to existing employees?

Yes. Internal raises are commonly 2% - 4%, but you can get 20%+ consistently by jumping ship every other year, and that was before inflation went to the moon.

Google just increased executive pay massively, while telling employees inflation was transitory and not to expect a cola. Also, they say they don't pay based on cost of living, but rather "the top of the market". They get this number by sharing salary info from many companies and bidding just slightly higher than the rest.

It's a pretty blatant attempt to collude with other companies to keep wages down, and keep exec pay high. This, folks, is why we need a union.

Cola's have never been for companies. It's a specific mechanism of government redistribution programs. Companies use their own internal metrics to determine when and how to adjust salaries.

I don't think I really had to tell you that though.

Companies don't do this because they can get away with it.

Unions are usually the most effective countermeasure to these kind of things.

Here in Finland the tech-sector union just agreed to a 2% salary increase (inflation is at 2.5% this year [1]) after having threatened strikes if the conditions of the agreement were not good enough [2]

[1]: https://yle.fi/news/3-12143521 [2]: https://yle.fi/news/3-12262577

> Why aren't companies doing this?

I don't know why the company you work for doesn't do it. In the place where I live (Europe), it is fairly common for medium and large companies - my salary is updated every year to reflect inflation. This is independent from pay rises and is happening automatically to all employees. The places where it usually doesn't happen is the smallest companies like startups and mom-and-pops where every penny counts.

How large are the adjustments? Do they keep up with inflation?

My data point for 1 big company - 0% in 2020 (excused with the pandemic) and 3% in 2021.

In my experience they are slightly lower than inflation but high enough to make people more or less happy. In any case, the expectations this year are extreme, so it will be interesting to see how they handle it this time (usually the adjustments are in March and we receive the compensation for January and February, too). It's not written in my contract but is a part of company policy as a means to minimize turnover.

Most employers determine pay based on market analysis. Generally, the employer will pay a consulting firm for a job market analysis that shows pay rates by job function and geo. The employer then performs it's own internal assessment using this data to develop an approach for talent acquisition (base pay, bonus, options, location, market competitiveness, etc).

Cost of living adjustments typically isn't a consideration.

As engineers we believe that employee turnover is a bad thing but companies have a targeted attrition rate that they will withstand. Other than getting rid of employees that already want to leave it saves them money in the long run. So pay increases / COLA etc are just pushing you to the door.

Whether the great resignation is making that number increase above that who knows?

One of the reasons high inflation is bad is that wages always lag the inflation.

They can't really help but do otherwise. Companies certainly aren't going to be able to proactively raise salaries based on future inflation expectations, and precisely matching inflation isn't an option when salaries are generally adjusted once a year. So lag it is.

Plus, with non-trivial inflation, things get complicated. Dollars cease to be fungible, and you have to consider how close to the "inflation sources" your company is. It is difficult to pay you an inflated salary if they still haven't gotten inflated prices for their own sales yet because they're "downstream" of the inflation. Or if they have to pay you with money from six months ago while you want a salary in current inflated dollars. Non-trivial inflation breaks a lot of casual expectations you may have about money under normal circumstances.

Companies are certainly able to proactively raise salaries based on future inflation expectations, and many do that for CEO salary packages. They just don't do it for workers.

People generally have this expectation that companies are just made out of money and greedily keeping it all for "themselves", whoever "themselves" may be, but in the real world, a company that makes a 5% profit margin is doing pretty well and a 10% profit margin is amazing. Being in the tech industry can really skew your perception of profit margins because we are in one of the handful of odd industries where that would be mediocre.

Having to proactively raise salaries 10% across the board can easily be the difference between profit and loss for a year. Raising a salary for one person is easy. Raising it across thousands and thousands is not.

It is very difficult for a company to look ahead and say "Hey, maybe inflation is going to be 10% this year so we should raise salaries by a huge amount", especially when all the official numbers are themselves much smaller than that. It was literally only three months ago the Fed was promising up and down that inflation was only going to be transitory. I didn't believe them for a second, but I'm observably faaaar more cynical about governments telling the truth than the average businessperson, and for that matter, the average HN denizen. (At the time, the modal HN position at least by comment posts was indeed that the Fed was correct and anyone who questioned otherwise was wrong at best and possibly a conspiracy theorist.) Do you seriously expect companies to be second-guessing every official news source about inflation?

Instead of doing 10% raises across the board, companies should do raises bottom up and use dollar amounts instead of percentages. 10% of 50k is way less than 10% of 400k, it's not a "fair" raise.

"Raising a salary for one person is easy"

Not raising a salary for one person is even easier.

I'm referring to this ancient concept of solidarity. If your workers are struggling, you don't reward yourself. You struggle with them. In fact, as CEO you should take a pay CUT, because you're the one that can afford it.

It's pathetic how we normalized executives robbing companies, we truly are morally bankrupt and even defend the behavior.

Calling it "easy" is not "defending" it.

You can't think clearly about situations if you're just firing emotions off at trigger words.

I can think perfectly clearly about executives rewarding themselves in dire times. Both rationally and emotionally.

My point, if you considered it angry, wasn't directed at your personally.

They aren't talking about lag. They are saying at year end, the inflation went up 6.2% (for me) over the past 12 months. I should get a 6.2% raise so that I make the same value next year that I did at the start of the current year. So yes, the adjustment took place after the fact.

What we are discussing here is when the raise amount is (significantly) less than the 6.2%.

It will take a while for companies to "realize" the inflation. They have all sorts of reasons not to, including the obvious selfish one, but also including a lot of business reasons.

Like what?

People forget that wages are inflation.

It's convenient to compress a billion price changes down to a single number, but ultimately the single number is a representation, and the price changes are driven by real market phenomena. Money printing on its own does not cause inflation, there has to be a "transmission mechanism" to get it into the market. After decades of policy to prevent wage inflation, especially at the low end, it's finally escaped.

Here in Finland they are part of collective agreements between employer and employee organizations, typically generally binding even for non-union/employer organization members. I assume it’s similar in most places in Europe.

Retention budget is a tiny tiny fraction of overall payroll. They would rather you up and leave after 1 year to 18 months. I wonder what will we do when it stops being a job seekers market though.

I haven't gotten a raise since COVID started. They canceled our raises as soon as they sent us to remote work and we have seen one since. We're supposdly getting a 3% raise this year.

I mean, capital has the edge over labor in everything we do in this country. Labor even votes against its own financial self-interests. It’s who we are.

There are also companies holding off even the paltry ~3% raise if you're at the top of your pay band. Adjusting pay bands for inflation is important as well.

I've seen activity on this topic recently on HN so I would imagine this will be a thing on job postings in the near future as went "unlimited PTO".

Jack Dorsey tweeted that hyperinflation is real, so all Block (nee Square) employees are having their compensation 10x to deal with it. True story!

I need someone smarter than me to explain me what happens if all wages are always compensated for inflation. Would that mean no inflation?

No, there could still be inflation or deflation. Those terms refer to price levels denominated in a currency. If wages increase, then the "buying power" of the wages might not change, but the nature of savings and credit can be dramatically affected.

Thanks

If companies start all giving wage increases due to inflation you realize that causes more inflation right?

It only creates inflation when people spend the money (a lot of the money will be saved), and the money that is spent is put into the same loop; it's not good for workers that won't have pay raised (e. g. workers at the minimum wage in the US, where it isn't adjusted for inflation), but that ought to be fixed, and the money buys things for people, which economists hold to be an objective good ,as it implies people are getting what they want.

> what am I missing?

Capitalism.

See the other post today on Google hiring anti-union consultants.

The company I work for does it. It's nice.

Rapacious boomers punishing the underclass. Quite simple really.

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