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Comment by skrebbel | Hacker News Reader

I never understood the idea that salaries should be expected to always be corrected for inflation, and that not doing so is somehow secretly a "salary cut". Salaries are driven by supply and demand, and individual companies (maybe not Microsoft though) can generally only afford to raise them by a given amount. If that amount is less than inflation then that's that, right? Most companies (again, maybe not Microsoft though) can't just conjure up more money out of thin air, that's not how businesses work.

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It's not secretly a salary cut, it's an explicit salary cut relative to the cost of living and everything else. After all, your money is worth less now than it was a year ago if there's no cost of living increase? I'm sure the initial circumstances of salary negotiations for a position took into account current economic factors. I'm much less likely to want to stick around at a company that cannot compete with living expenses with a general 2% increase YoY. That screams stiff/cheap or that the company is on the cusp of folding.

But the company itself faces all those challenges too. Customers are cutting back because inflation is forcing them to reallocate their own spending. Supplies cost more. Raising prices isn't always possible in the face of competition, at least not enough to offset inflation.

Inflation is basically a correction for a previous period where money was too cheap. It hurts everyone (at least everyone who didn't prepare for it).

The company can dry its tears with the several billion in profit they make.

There's no non-greed-related reason they can't share that profit with their employees, rather than stiffing them just when they need help.

Because it is a cut. Your spending power is less. It's a real terms cut. There's a good chance they've increased their product prices by inflation as well.

I mean they don't have to raise salaries, but if someone is offering me a higher rate I'm going to go.

You have no responsibility to your company.

Now if the entire market is telling me to take a cut, either it's collusion or software developers are simply worth less now.

Everyone is worth less when the pandemic and war disrupted so many things.

Some are worth more, some are worth less.

Relative worth is constantly changing.

There are professions that are paid more than ever

If the business can't afford to raise salaries to match the prices of goods, then that is a pay cut in terms of the goods I can afford. It doesn't matter why.

If I earned $5/hour last year and a gallon of milk was $5, then milk going to $6 means that my milk/hour rate has gone down unless I now earn $6/hour. That is a pay cut.

It is a salary cut because the dollar is worth less every year. It's already lost well over 99% of it's value in the last 200 years (a time when the average house cost 800$). So, if inflation goes up by 10%, your salary is being cut by almost 10%.

Presumably the business is not just leaving the prices they charge for their good/services static and saying "welp, a dollar is worth less now than it was, I guess we'll target less revenue!"

Cost-of-living salary adjustments should reasonably be expected in the same way a company is reasonably expected to adjust pricing according to economic conditions.

Company executives all understand that not adjusting for inflation is a salary cut though. When they make this move that's what they're trying to do.

I think this is a general issue.

An inflation measure is defined by a particular basket of goods, and sometimes their prices move for good reasons. We shouldn’t expect it to always cancel out in such a way that our salaries end up with exactly the same buying power for those particular goods.

But my cost of living is factored into whether or not I’m making enough money to, uh, live. My code output is not very good while I am dead.

Companies "conjure up money out of thin air" by increasing prices and passing the cost on to consumers.

Weird that the supply has an opinion, right?

This may help explain: https://en.wikipedia.org/wiki/Real_wages

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