5 ms·

> Not to be dismissive, but why would a company specifically care about some arbitrary number called "inflation" vs overall pressure from the labor market, whic

> Not to be dismissive, but why would a company specifically care about some arbitrary number called "inflation" vs overall pressure from the labor market, which presumably must have some encoding of that, considering they seem to clearly paying a person enough not to justify leaving? You hit the nail on the head. Everything related to compensation becomes much less confusing once you accept that hiring is a market. Like any market, supply and demand drives the prices. Nothing else matters much. Big companies have entire teams dedicated to compensation which are separate from HR and hiring managers. They carefully track these details and will fine tune their rates up and down depending on how often their offers are accepted or rejected. If every candidate is accepting the offers, they're probably too high and can be adjusted downward. If the company can't close any good candidates because they're going to other companies, it's time to raise the rates. Of course, not every company plays this game correctly or intelligently. If the OP's company has guessed wrong and gave too low of a raise, they risk losing too many people. On the other hand, if most of the employees shrug it off then maybe they made the right call for the business.

BLKNSLVR 5y ago
Do markets and inflation not go hand-in-hand, although sometimes slightly out of step, like I thought they did?
- garettmd 5y ago
  There's also the fact that the "inflation rate" is a pretty imprecise number. There's no real inflation rate, it's more of an average of the price increases of various sectors of the economy. But even drilling down into the sectors you have to account for things like geography. So the inflation rate is useful as a gauge for where the economy at the macro level is heading, but for making individual salary decisions at a single company it's not very helpful.
- jshen 5y ago
  Depends on the demand for your skills, not generic inflation.
- jnwatson 5y ago
  Your compensation isn't driven by the things it can buy. It is driven by the balance of supply and demand in the labor pool, which is mostly insensitive to inflation in the short term. In the long term, sometimes inflation is caused by employers being able to charge more for their products. If they can raise prices faster than their costs, then they'll be able to afford more folks to work, increasing demand in the labor pool, hence increasing labor prices (i.e. compensation). Still, it can take several quarters for information about pricing to flow through the supply chain and impact wages.
  - rdtwo 5y ago
    In the short term companies make incredible profits. Compensation is down but most price contracts are adjusted up for inflation. Most b2b contracts have an annual inflation clause for example
- kooshball 5y ago
  it's really not. in fact there are specific terms to differentiate them cost of living is your total live cost including inflation. cost of labor is cost to hire replacement in the overall labor market. most companies pay in each market based on cost of labor
totetsu 5y ago
So we should all be constantly interviewing and rejecting offers to drive up the price?
- chii 5y ago
  It's not the rejections, but the lack of hiring. If you artificially pump up the number of fake interviews, but the company is still receiving the same number of accepts from their offers, they will have no need to raise their salary offer.
  - selcuka 5y ago
    > It's not the rejections, but the lack of hiring. True, but note that there is a cost for interviewing as well. Ad absurdum, if you interview 100 candidates and get rejected by the first 99, your hiring cost could be much higher than simply offering x% more to the first candidate.
sifar 5y ago
>> Everything related to compensation becomes much less confusing once you accept that hiring is a market. Like any market, supply and demand drives the prices. Nothing else matters much. This is not about new hires but existing employees. There is not market or rather a less flexible one. People are reluctant to leave for a number of reasons. >> On the other hand, if most of the employees shrug it off then maybe they made the right call for the business. But not because of market reasons.

BLKNSLVR 5y ago

Do markets and inflation not go hand-in-hand, although sometimes slightly out of step, like I thought they did?

garettmd 5y ago
There's also the fact that the "inflation rate" is a pretty imprecise number. There's no real inflation rate, it's more of an average of the price increases of various sectors of the economy. But even drilling down into the sectors you have to account for things like geography. So the inflation rate is useful as a gauge for where the economy at the macro level is heading, but for making individual salary decisions at a single company it's not very helpful.
jshen 5y ago
Depends on the demand for your skills, not generic inflation.
jnwatson 5y ago
Your compensation isn't driven by the things it can buy. It is driven by the balance of supply and demand in the labor pool, which is mostly insensitive to inflation in the short term. In the long term, sometimes inflation is caused by employers being able to charge more for their products. If they can raise prices faster than their costs, then they'll be able to afford more folks to work, increasing demand in the labor pool, hence increasing labor prices (i.e. compensation). Still, it can take several quarters for information about pricing to flow through the supply chain and impact wages.
- rdtwo 5y ago
  In the short term companies make incredible profits. Compensation is down but most price contracts are adjusted up for inflation. Most b2b contracts have an annual inflation clause for example
kooshball 5y ago
it's really not. in fact there are specific terms to differentiate them cost of living is your total live cost including inflation. cost of labor is cost to hire replacement in the overall labor market. most companies pay in each market based on cost of labor

totetsu 5y ago

So we should all be constantly interviewing and rejecting offers to drive up the price?

chii 5y ago
It's not the rejections, but the lack of hiring. If you artificially pump up the number of fake interviews, but the company is still receiving the same number of accepts from their offers, they will have no need to raise their salary offer.
- selcuka 5y ago
  > It's not the rejections, but the lack of hiring. True, but note that there is a cost for interviewing as well. Ad absurdum, if you interview 100 candidates and get rejected by the first 99, your hiring cost could be much higher than simply offering x% more to the first candidate.

sifar 5y ago

>> Everything related to compensation becomes much less confusing once you accept that hiring is a market. Like any market, supply and demand drives the prices. Nothing else matters much. This is not about new hires but existing employees. There is not market or rather a less flexible one. People are reluctant to leave for a number of reasons. >> On the other hand, if most of the employees shrug it off then maybe they made the right call for the business. But not because of market reasons.