Ask HN: Where Is the COLA?
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?
127 comments
[ 4.1 ms ] story [ 202 ms ] threadPeople 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.
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.
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.
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.
Yet, somehow, the new job is almost always (much) better paid. Strange, isn't it?
Any chance it has something to do with mandatory vaccination?
You know what else was free? Bullets in communist Russia and gas in Hitler's Germany. Price is not the only thing that matters.
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.
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.
How does one get that brainwashed?
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.
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.
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.
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.
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. :)
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.
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”.
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.
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)
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.
Sure we are, and that's why I'm jumping ship
Remember, never be loyal to your company because a company CANNOT be loyal to you. (You can be loyal to a good boss though.)
> 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 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'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.
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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.
When workers don't have democratic organizations of their own, their interests fall by the wayside.
https://twitter.com/webuildnpr https://twitter.com/CODE_CWA
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).
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.
My current company is not and so I have been interviewing.
It's not a perfect system, but it works reasonably well, even if it does somewhat disadvantage people with lower wages.
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/
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.
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?
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.
You can't think clearly about situations if you're just firing emotions off at trigger words.
My point, if you considered it angry, wasn't directed at your personally.
What we are discussing here is when the raise amount is (significantly) less than the 6.2%.
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.
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
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.
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!
My own tactic is to move jobs often, but also take on multiple remote roles at the same time.
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.
My data point for 1 big company - 0% in 2020 (excused with the pandemic) and 3% in 2021.
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.
Soooooo, here I am on Hacker News posting during work hours!
Capitalism.
See the other post today on Google hiring anti-union consultants.
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.
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.
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).
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.
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.
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.
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.
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
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.
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.
Whether the great resignation is making that number increase above that who knows?