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I work for a small-mid sized German software engineering company (~200 employees). Last year the company raised all wages by 7,500.- EUR (additionally to the us

I work for a small-mid sized German software engineering company (~200 employees). Last year the company raised all wages by 7,500.- EUR (additionally to the usual raises). This was not a one-time payment, but a permanent increase in pay and it was the same absolute amount for all employees (including office management and other non-engineering departments). The reasoning behind this decision was that the inflation was hitting employees with lower income harder than employees with higher income positions. Whenever I'm seeing posts like this, I wonder if "up to x Euros" isn't the other way around and smaller incomes are on the lower end of the bonus range. Link (content written by our PR department, in German): https://www.presseportal.de/pm/164280/5271230 https://www.presseportal.de/pm/164280/5271230

judge2020 4y ago
> The reasoning behind this decision was that the inflation was hitting employees with lower income harder than employees with higher income positions. Isn't part of inflation that this doesn't work at scale? As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? Or do wages become a rounding error when you add in stuff like real-estate and loans?
- vlowrian 4y ago
  Sure. But this is more of an argument against raising all wages relative to inflation. Inflation (at least in Germany) raised mostly prices for everyday goods - like food, fuel and rent. Raising the wages by an absolute amount meant helping those whose expenses are mostly basic goods, not trying to match inflation with pay raise.
- Closi 4y ago
  > Isn't part of inflation that this doesn't work at scale? As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? Or do wages become a rounding error when you add in stuff like real-estate and loans? Kind of, but wages are only part of the cost of goods. Assuming wages represent 30% of the cost of goods (i.e. 30% labour, 20% property/fixed costs, 50% materials) and wages go up 10%, then they only impact the cost of goods by 3% (thus 3% inflation might be expected at a simplistic macro level). Then there is a sort of loop where the 3% inflation could encourage another 3% wage inflation, but that only affects the cost of goods by 0.9% and so on. When you follow this theory, that 10% wage inflation only turns into an additional c4.5% increase in inflation (or 15% if you include the initial 10%). This is overly simplistic and there are other levers at play, which is why lots of economics calculations often have continous simulations which can show the impact of these feedback loops (Inflation causes wage increases causes inflation causes wage increases).
- donkeyd 4y ago
  > As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? This is the thinking companies would like you to have. Meanwhile, profits have been massive for many companies in spite of inflation. The in site of part is somewhat sarcastic, because a lot of it is driven purely by corporate greed next to macro economic factors. Companies that move part of their profits into wages don't have to increase prices if... They accept a decrease in profits. To me, this seems like one of the only ways to avert a real crisis right now. We're moving money toward the rich at a crazy rate, causing regular people to be able to afford less and less. Rich people tent to not spend their money in the real world. A rich person doesn't buy 10 iPhones or 10 F150s, they buy one yacht. The middle class is who cause economic growth and stripping them from purchasing power will slow everything down. In the end, the rich will also feel this, when their assets implode. But they'll only feel it in the value of these assets. They won't feel it in their daily lives. Only the normals actually feel pain from all this.
  - astrange 4y ago
    > Meanwhile, profits have been massive for many companies in spite of inflation. The in site of part is somewhat sarcastic, because a lot of it is driven purely by corporate greed next to macro economic factors. This is not a good explanation because you have to explain why it went up at time X rather than earlier, and of course why it goes down sometimes. Do they just stop being greedy? And it's empirically not true: https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-to-recent-inflation/ https://www.kansascityfed.org/research/economic-review/how-m... > We're moving money toward the rich at a crazy rate, causing regular people to be able to afford less and less. Also not true, wealth inequality has been flat in the US since 2013 and has declined since 2020. People just love saying negative stuff!
- onlyrealcuzzo 4y ago
  > Or do wages become a rounding error when you add in stuff like real-estate and loans? In the US - debt is >30% of the economy (government deficit, new corporate debt, new mortgages, and personal auto & student loans). But non-debt still makes up the majority - so I don't think everything becomes a rounding error compared to debt. The interest rate has to be the single most important variable - but wages aren't a rounding error.
devnullbrain 4y ago
Reminds me of when ARM cut salaries by a flat amount during the attempted NVIDIA acquisition.

judge2020 4y ago

> The reasoning behind this decision was that the inflation was hitting employees with lower income harder than employees with higher income positions. Isn't part of inflation that this doesn't work at scale? As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? Or do wages become a rounding error when you add in stuff like real-estate and loans?

vlowrian 4y ago
Sure. But this is more of an argument against raising all wages relative to inflation. Inflation (at least in Germany) raised mostly prices for everyday goods - like food, fuel and rent. Raising the wages by an absolute amount meant helping those whose expenses are mostly basic goods, not trying to match inflation with pay raise.
Closi 4y ago
> Isn't part of inflation that this doesn't work at scale? As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? Or do wages become a rounding error when you add in stuff like real-estate and loans? Kind of, but wages are only part of the cost of goods. Assuming wages represent 30% of the cost of goods (i.e. 30% labour, 20% property/fixed costs, 50% materials) and wages go up 10%, then they only impact the cost of goods by 3% (thus 3% inflation might be expected at a simplistic macro level). Then there is a sort of loop where the 3% inflation could encourage another 3% wage inflation, but that only affects the cost of goods by 0.9% and so on. When you follow this theory, that 10% wage inflation only turns into an additional c4.5% increase in inflation (or 15% if you include the initial 10%). This is overly simplistic and there are other levers at play, which is why lots of economics calculations often have continous simulations which can show the impact of these feedback loops (Inflation causes wage increases causes inflation causes wage increases).
donkeyd 4y ago
> As in, if everyone gets higher wages, bigger bonuses, and more money is being poured into 401ks, inflation gets even worse? This is the thinking companies would like you to have. Meanwhile, profits have been massive for many companies in spite of inflation. The in site of part is somewhat sarcastic, because a lot of it is driven purely by corporate greed next to macro economic factors. Companies that move part of their profits into wages don't have to increase prices if... They accept a decrease in profits. To me, this seems like one of the only ways to avert a real crisis right now. We're moving money toward the rich at a crazy rate, causing regular people to be able to afford less and less. Rich people tent to not spend their money in the real world. A rich person doesn't buy 10 iPhones or 10 F150s, they buy one yacht. The middle class is who cause economic growth and stripping them from purchasing power will slow everything down. In the end, the rich will also feel this, when their assets implode. But they'll only feel it in the value of these assets. They won't feel it in their daily lives. Only the normals actually feel pain from all this.
- astrange 4y ago
  > Meanwhile, profits have been massive for many companies in spite of inflation. The in site of part is somewhat sarcastic, because a lot of it is driven purely by corporate greed next to macro economic factors. This is not a good explanation because you have to explain why it went up at time X rather than earlier, and of course why it goes down sometimes. Do they just stop being greedy? And it's empirically not true: https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-to-recent-inflation/ https://www.kansascityfed.org/research/economic-review/how-m... > We're moving money toward the rich at a crazy rate, causing regular people to be able to afford less and less. Also not true, wealth inequality has been flat in the US since 2013 and has declined since 2020. People just love saying negative stuff!
onlyrealcuzzo 4y ago
> Or do wages become a rounding error when you add in stuff like real-estate and loans? In the US - debt is >30% of the economy (government deficit, new corporate debt, new mortgages, and personal auto & student loans). But non-debt still makes up the majority - so I don't think everything becomes a rounding error compared to debt. The interest rate has to be the single most important variable - but wages aren't a rounding error.

devnullbrain 4y ago

Reminds me of when ARM cut salaries by a flat amount during the attempted NVIDIA acquisition.