Ask HN: How to ask employer to match inflation rate, independent of pay rise
Let's say I am earning $100,000 and inflation for the year is 5%; sure I am still earning $100,000 but the actual value of that money is worth 5% less. If this isn't adjusted I have effectively taken a pay cut of 5%.
Independent of raises based on things like role changes or good performance how can I stress that I really dislike the idea of not having my salary keep up with inflation, and then how can I best go about ensuring that my employer keeps the salary up to date with inflation?
103 comments
[ 4.2 ms ] story [ 171 ms ] threadChances are your salary and potential raise was budgeted long before the inflation hit, so a non-merit raise of 5% is not in this year's budget. Unless you have a particularly benevolent organization with funds enough to raise salaries 5% across-the-board it is unlikely that you'll get it. Or, they'll give people cost of living increases, that will pull funds out of the merit raise pool, so no merit raises will be offered, or will be considerably less. They may justify it by saying that inflation hit them too, and everything the company needs to buy to operate got similarly more expensive, so there is no extra money to splash for 5% cost of living increases across the board, and that "we all need to take the hit in the best interest of the company."
And, more cynically, they're getting you 5% cheaper now, so there is not a ton of incentive for them to pay you more, since you'll probably stay, or are easy enough to replace at the same or lower salary.
It is amazing how money is so tight for raises, while seeming flush with cash while hiring.
In the short term, there may be other factors you can use to offset that. Informal time off, working conditions, work-paid travel to conferences, etc. They don't increase your salary (which means they're not taxable!), but they can increase your quality of life. Managers often have more ability to affect these things, or get budget to implement them, than they have in raising salaries. In my company, vacation and sick pay are ordained across the board. Even the C level is limited to (admittedly generous) standard levels. That's offset by giving managers broad discretion to grant informal time away - if the work is getting done, take a Friday.
PS - We're being shafted harder than most people know. The Consumer Price Index, the official measure of inflation, was selected to downplay the actual rate of inflation. The official CPI inflation rate is 8% at the moment. If CPI were calculated the same was as in 1980, it would be 15% (http://www.shadowstats.com/alternate_data/inflation-charts). "Additionally, over the past 30 years, the government has changed the way it calculates inflation more than 20 times. These ‘methodological improvements’ to the CPI are said to give a more accurate measure of consumer prices. However, these changes could also be a convenient way to include or exclude certain products that give favorably low results, but there’s no way to know, given the lack of transparency." (https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo...).
Your personal inflation is probably not 15% if you're not buying the exact same bundle of goods you purchased last year. Higher, yes, but if you substitute away or choose other options you're probably not expending exactly 15% more than last year.
The one difference this year was we were also given official talking points on how to gently say "no" to anyone who brought up inflation when they rightfully complained.
You don't say what industry you're working on but I think it's a fair assumption you're probably an IT of some sort. If so the job market is wide open right now, and it's pretty wide open for any industry. Go find another job that will have the increase that you want.
Not all employers behave this way but it does take a while to find a good one. My employer adjusted salaries late last year outside of merit increases and I received a 6% bump and pay for among other things inflation and just the general pay scale adjustment because the industry has started to pay more due to things like inflation.
It's not that employees tend to be lazy. There are real costs to switching jobs. Depending on the industry, you may have to devote many hours studying for the interview and spend time interviewing. Switching jobs is also risky because you may not like the job as much and you'll have to rebuild all the good will.
> If companies realize that people will leave when they don't make sure salary automatically keeps pace with industry standards and inflation they will adjust their pay practices.
You're assuming inflation means wage inflation. Just because goods went up 7% doesn't mean salaries necessarily went up by that amount. An employer prices to the market for talent, not to how much people need to maintain purchasing parity relative to last year.
Because that 7% means your employer is also selling their product at an average of 7% higher because they're consumables are an average of 7% more. Of which one of the consumables that a company purchases is employees.
When you talk about the risk of changing jobs if you're working for a company that does not automatically adjust your wage for inflation then I submit your working at a job that you should not like.
The only real exception to this is the case of hyperinflation where your economy is going into a death spiral. And that's a very real thing that happens in some countries but it doesn't appear to be what's happening now at least in the United States. When your economy suffers hyperinflation you have much bigger problems because you're getting ready for a complete economic collapse.
Wages aren’t based on cost directly, but supply and demand. So it’s possible that inflation is up 10% because food, rent, etc but there’s still tons of people willing to do a job so wages did not match inflation.
So it’s important to look at how wages are doing rather than just straight lining from inflation.
I think based on the current economy and super low unemployment that wages have increased as well. Perhaps more than inflation.
I got a effective pay cut of 4.5% last year.
Having salaries automatically track inflation can actually lead to more inflation. When Australia had double digits inflation in the 1970's, one of the first things done to fix the problem was making sure salaries stop tracking inflation.
Can you blame them for thinking the workers would be desperate to come back for wages that were already too low to cover exploding housing and healthcare costs?
And don't you dare tell me the businesses are the ones raising the prices, they are not. The prices that other businesses publish are what causes prices to go up and business owners are powerless.
Governments stopping to print or lend money they don't have.
The monetary fiat model is broken. Inflation is basically a tax the government can levy and increase as they wish, without democratic due process.
Worse part of it? The poorer you are, the more heavily taxed you get through inflation.
Non-working poor like pensioners do often get hit hard by inflation.
I swear the things you read about macroeconomics is all just contradicting each other.
The p/e ratio is a measure of earnings per dollar of capital. If you invert it to the e/p ratio you can directly compare to interest rates. So a 5% interest rate is comparable to a p/e ratio of 20. So when the interest rates goes up, the "natural" p/e ratio for stocks goes down, thus deflating the stock market.
I think the OP was talking about real assets like houses, land, cars, etc. Those don't go down in value
most ppl in usa have their net worth tied to homes which have outpaced inflation.
Working poor will never ever be able to afford these again dooming them to permanent poverty for generations. So yea they are aren't really benefiting from inflation even if their salaries kept pace with inflation( which hasn't been the case).
Salaries take months, if not a full year to follow inflation. A salary is always behind the curve and devalued.
Besides, employees frequently fail to secure inflation adjustment to their salaries, especially in blue collar trades, where an individual worker is easier to replace.
Even when salaries are adjusted, it follows an average rate determined (more appropriate to say manipulated) by the same government which created the inflation.
Most likely the rate of inflation for your family's consumption basket is significantly higher than this "official" index.
If salaries tracked inflation in an environment without money printing, I'd expect you wouldn't observe an increase in inflation.
Only if you're one of the "good poors" that does smart things like living within your means and not taking on debt.
You mean governments stop printing and borrowing money indiscriminately does not stop inflation?
> Supply shocks also create inflation
I did not say indiscriminate money printing by governments is the only source of inflation.
Most money is created by private banks, and velosity of money affect inflation more than money supply does
How much more would you get paid by another employer? How much more would your current employer have to pay to backfill your role?
If you want to signal loyalty, phrase it as "I really like what I'm doing here but it's distracting to know that I may be giving up a XX%-YY% pay difference"
If your employer can actually fill your position without paying 20+% more or losing several months of ramp up, maybe you are being paid well regardless of the year over year CPI.
Every year you stay, expect your compensation to drop further below the wider market. Then when you move it gets reset to some point vaguely correlated with the market.
It's also way easier to move than to fill out a "promotion packet" or whatever corporate nonsense is in the way of internal ladder climbing.
This obviously sucks. Management know it, engineering knows it. Maybe it'll stop being the case at some point.
Why hasn't the human civilization found a model that counters inflation altogether? Is it because we can't plan for the demand new adult consumers bring? The birth rate? We keep printing money? Someone somewhere (probably in commodities/real estate) will ALWAYS affect greed and see how far they profit at the expense of others?
Like, who keeps pushing the rising prices? Can't we just say "stop doing that", make it illegal, and just print more money when a new person enters the world?
I have some suspicion that all of this wealth transfer to the elite doesn't help jack since they just let it sit in their accounts, earn dividends, and not really circulate inside the economy.
And you can ban people from raising prices. It's called price controls, and it creates awful shortages.
There seem to be numerous economic theories and inflation plays a different role in most of them, that I can tell, both good and bad.
I have some suspicion you don't understand how "the elite" end up getting (and staying) wealthy
They rarely have much in the way of liquidity - almost all of their wealth is on paper in the form of investments in opportunities (stocks, bonds, businesses, real estate, etc)
By investing in those things, they encourage/enable others to do things that bring them wealth, and bring the investors added wealth, too
Gone are the days wher you stay for 10+ years...Its move every 2-3 yers for career progression and salary increase. Of course if you're happy where you are then fine.
I got a raise at the end of last year, as I do ever year. When they told me what the raise was I immediately responded by saying "That's less than the rate of inflation, this is essentially a pay cut."
And when there was an opportunity to ask questions of the executives I asked "My raise, and I assume the raises of many of my co-workers, were less than the rate of inflation this year. Will you consider cost of living adjustments to our compensation?" The answer was usual business speak about paying competitive market-rate salaries and whatnot.
Rinse. Repeat. It's a never ending loop of wage inflation
The only way inflation stops, or even deflation starts, is if someone "gives up" on inflation adjustments
Higher YoY inflation announced -> Companies raise prices on everything -> employees demand an inflation raise -> Higher YoY inflation announced -> ...
Yes. This is exactly the cycle that approaches a limit (all else being equal). Inflation-adjusting wages doesn't make inflation keep going up indefinitely.
The underlying causes of inflation are the monetary levers that the government controls. These are money printing and taxes.
If you want to work with your current employer then you could simply ask your manager whether they've heard anything about adjusting salaries for inflation. You can keep it informal and light, but their response will tell you everything you need to know about whether they're planning on adjusting salaries.
It's no different than a business telling a customer "listen, you're gonna have to pay more because I have other more valuable work I could be doing". The customer can pay more or they can go elsewhere.
It's not "hard feelings", it's "Chris is more likely to leave than Pat."
It absolutely means you're leaving
If they match today, you've already telegraphed to them that you're not happy, and will leave as soon as you can
You're going to be first on the chopping block for layoffs, last in line for promotional consideration, etc
You're basically telling your employer "pay me more even though I'm not doing anything else for you"
If your boss is a competent business person, you would be insane not to ask for counter offer. This way I got a 50% bump last year. No hard feelings, and nothing has changed.
I received an offer, and my employer has beat it. If they only matched I would probably still leave.
Your suggestion is a weird behavior. Just be direct. We are in tech and don't need to beat around the bush. I can quit my job tomorrow and start a new job next week.
It's exactly as true that if you ask and they reject, then THEY are a marked man. You are on the lookout and will probably leave as soon as it's convenient. If they don't care about that then all the more reason to move on.
Managers and companies gain more with honey than salt. We need more goodwill, we are not just cogs.
I do understand financials here enough. When 4 out of 12 have left our team in the last few months, they did so after counter offers came up still 10s of thousands short. Replacing them will be next to impossible.
If you're making more than minimum wage, then the only thing setting your compensation is the job market. Not inflation, not how much a house costs in your city, and not the fact you just had 3 kids in 3 years
If you can find a job that will pay you much more, you probably already could have when inflation was 0%. So again, this has nothing to do with inflation. Are you looking to maximize your income? Interview interview interview, if you get better offers, bring them back to your company or just leave. If you don't get better offers, why would your company adjust your income by 5%? A 5% pay cut is great news for them and for you, if thats what the job market is saying is your fair pay
It affects everyone the same, just the absolute impact is greater the less you earn. (And nothing special about minimum wage in that, why does 50p an hour over it suddenly save you?)
> If you're making more than minimum wage, then the only thing setting your compensation is the job market. Not inflation
I see what you're saying, but market compensation is a function of (among other things) inflation.
It's much more efficient for employers to give inflation-linked raises (resp. paycuts in deflation!) than it is for employees to constantly job hop, or to take a buffer of real-terms paycuts and hop every x years (or after every $x or x% cut).
If you're in a minimum wage job, then your employer (successfully?) believes there is basically an endless stream of people who can replace you at no higher cost than what the government deems the absolute minimum
Once you're in a job higher than that, the only function is what other people with your skills agree to get paid. If OP is making top of the market, their employer has absolutely no reason to give them even a $1 raise. If top of the market compensation went down, then it would make sense for anyone making top of the market to get their salary cut
But, at the same time you have to do what's best for you and your family. Easiest thing is just to have a straight up conversation with your manager and see if you can get a timeline for a response and specific actions that will be taken in pursuit of this. Be prepared for "no", and be prepared to have to find a new job. In the vast majority of conversations I have with people on this topic, they have to find a new job to get a higher salary, unfortunately.
Also I agree about "find a new job to get a higher salary" thing. Then I witnessed the company struggling to find a good replacement etc. Are these people really dumb, or is it something else going on that I can't see.
I'd say it's less "dumb" and more that the incentives are aligned in such a way that they just won't do it. But we know that it works well. Netflix I think is/was known for finding out new market rates and just giving everyone a raise to reflect that rate so they don't leave. Also I think people in positions where they're making the call on rates don't have data or other information to really assess what we see as so obvious, which is that losing an engineer over a 5% pay increase during a period of inflation is far more costly than just giving them the pay increase. But I see this kind of thing all the time. There are a lot of what I call "boomerang companies" especially Fortune 500 where if you want a meaningful raise at the company you have to leave and then get hired back. Problem is many leave and don't come back, so the company churns talented people and keeps all the people who can't get higher rates on the market. It's really silly.
You job-hop after 1.5-3y and end up getting a nice 15% or higher boost to your salary.
As a converse, when they replace you, they'll have to pay higher market rates. Thats because businesses do the same to employees as customers: the longer you stay the more they'll charge you (or the less they'll pay you). They do that because you're "captive". They count on you on being 'sticky' and not have the wherewithall to actually change.
Equity is nice when things are on the up, but things like Netflix's recent problems will never happen to straight cash.
It is certainly a balance.
It’s also quite interesting that they totally lost touch with the user base.
Progressive liberal American values are very strange even for liberal people in many places where I go (outside US). It will be interesting to see if Reid can adapt, but I think he’s smart enough to change direction.
I would challenge you to prove this statement with data. The S&P got crushed in both the 40s and the 70s. I mean setting the bar at returning better than -4% is absurdly low and major spans in both of those periods would have failed.
Especially when you weigh the opportunity cost of other better inflation hedge trades you could make if you were compensated in cash, I don't think this is particularly wise advice.
Especially in a recession that probably comes with a growth to value rotation, tech stocks are about the last place you want to be. (not counting FAANGetc here)
https://www.macrotrends.net/2324/sp-500-historical-chart-dat...
Hi, [their name].
I love working for [company name], and I'm excited about the future of our team. As you know, we're a small group of passionate people who take pride in our work, and I'm grateful to be part of this family.
As you also know, inflation rates are rising, and it's becoming more difficult for me to keep up with my basic needs. I've been here for three years now, and I believe that my skills have grown considerably since joining the company. With this in mind, I'd like to ask that you consider matching the inflation rate moving forward, starting from next year.
I'm aware that you already gave us a raise this year. However, as you mentioned at the time, that raise was based on performance reviews and not pre-emptive of future rates. I understand that it's difficult for companies to predict economic trends—but as a small business, I think we can both agree that flexibility is one of our greatest strengths! Don't hesitate to let me know if there's anything else I can help with in terms of making the case for an increase.
If you are earning a wage well above median I'd be careful with this, if someone I am working with would imply the have a difficulty meeting their basics needs on a very good wage I'd likely be thinking less of them.
Inflation directly affects what you spend money on. You can choose to spend on other things that don’t suffer as much from inflation, but that may not be easy. On the other hand, how much you save from your income and where you put that is a lot more (relatively speaking) in your control.
Employers will match salaries based on supply, demand and other factors affecting the business. Inflation could affect the supply and demand equation, but is not a direct factor for them to consider. Companies exist to maximize profits. That also means paying the minimum possible to a person and extracting the maximum value from that person. Changes will happen when this equation is under threat.
So will you rather 2% raise and earn 5% on your savings or get 5% raise and earn 0% on your savings?
If they give you 3% or something, say "so I'm getting a 2% pay cut" and tell your boss every couple days you're not happy with taking a pay cut. They'll figure it out
On the other hand if the raise you are asking for is above current market rate (which could easily trail behind inflation), you don't really have much options.
Organize a union in your workplace and prepare to take escalating collective actions to protect your standard of living and working conditions.
https://www.code-cwa.org/
My coworkers and I have done it and would be happy to advise anyone in a similar position.
Second, it's bad to tie your raise to inflation because inflation is very real but very distributed. Here's the CPI for the USA: https://www.bls.gov/cpi/ Note that the change in March was far larger in energy than in food. Are you going to try to map your usage of goods to determine your personal rate of inflation and ask for that size of raise? I hope that sounds silly to you; it sure does to me.
If you want to ask for a raise, point to your productivity and dedication to the company, as well as what competitive comp looks like. Surveys are great for that.
Most employers want to be at market rate or above for employees they want to keep. Bringing in inflation just confuses the issue and makes it look like you want something for nothing.