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Wonder what the effect would be of forcing companies to equalize salaries if someone with the same title is hired at a higher rate? Ignoring location based pay

Wonder what the effect would be of forcing companies to equalize salaries if someone with the same title is hired at a higher rate? Ignoring location based pay, though that would be interesting. Could be pretty powerful for labor rights, "rising tide lifts all boats", "decentralized union effect", etc.

betaby 4y ago
It's the case since forever in many companies I though? As an example level E42 at $LOCAL_BANK has pay range 125-145k/year target bonus 12-15% which means variability is only (or whopping) 15% for the 'same' job title. I think very rigid predefined pay bands are very common for large companies, at least in Canada.
dopylitty 4y ago
Probably some effort by businesses to make everyone’s title include a random number followed by a government effort to force the use of some list of approved titles. The fundamental problem is that businesses are focused on profits rather than employee satisfaction or producing quality products. Unless that is changed any regulations nibbling around the edges will just end up in a cat and mouse game between then businesses and the government.
- candiddevmike 4y ago
  As an potential new hire, you would get to see that you're being hired for "Developer abci2hd" and know they are probably a shit company to work for. "Duck typing unions"
jandrewrogers 4y ago
Many companies traditionally have rigid pay bands, including many software companies. There are several problems you are overlooking. In job markets with highly volatile wages like software engineering, there is no practical way to budget for randomly giving most people large pay raises throughout the year. Many roles are necessarily budgeted multiple years out because of contracts. If you are a company that hires a lot of software engineers, salary is likely most of your cost basis for running the company. Your fixed costs have now become variable costs, which makes financing the business much more difficult. You are also imagining this as a ratchet where salaries can only go up but if salaries must track the market then they must track the market in both directions, which will make many employees unhappy. By adjusting salary to market conditions with each new hire, companies make the financial realities of rapidly adapting to changing market salaries more manageable. What many companies with rigid pay bands do to handle this in practice, and what would undermine what you are proposing, is to continuously invent new titles/bands if the salary requirements change too quickly. I've seen companies that had hundreds of different titles for tech peoples for exactly this reason, creating new ones if the market salary moved too quickly. It isn't just about how much people get paid. A policy of leveling up everyone automatically would massively increase the financial risk of the company, which has enormous downstream costs in terms of valuation, ability to borrow, etc.
- jt2190 4y ago
  Well explained! We see the same phenomenon in bank "savings" accounts, which only pay a meager interest rate, but protect the saver from essentially all the downside risk. (Contrast with, for example, investing directly in the stock market, etc.) Just for fun, I'm going to poke at this: > ... [T]here is no practical way to budget for randomly giving most people large pay raises throughout the year I think we can find examples of labor markets that do expose more "upside" to workers, and then see how the "downside" is handled in those instances. Contractors (1099 in the U.S.) comes immediately to mind... They typically make a lot higher rate (I'd guess around double although I often hear lower numbers, which I personally think is too low to make it a good deal) but must pay their full income tax (instead of half), their full health insurance, and are subject to be the first to be let go when the company needs to cut costs, i.e. higher risk of termination, so must be able to save for time between jobs. "Boom" economies can drive labor prices very high. I think we've been seeing this in temporary nursing lately, where the wages go very high, especially if you're willing to travel or locate in remote places. Of course, the "boom" doesn't last forever, and eventually wages will stabilize at a lower rate. Note again that these temporary positions. (So far it seems like the higher wages come with more "risk" put onto the laborer.) I'm sure there are some even better examples.
- ornornor 4y ago
  Why can’t companies pay fair wages and share part of the profits with employees? It’s very rare to see companies actually doing this. They usually don’t at all, and when they do it’s often so vague that the bonus is basically entirely at the superior’s discretion with no tangible basis. I think it’s fair that the people who risked the most to create the company get a significant chunk of the profit but why should employees be reduced to leftover crumbs in the best case and typically nothing at all beyond their poorly negotiated salaries that didn’t track inflation over the years? In a good year there is profit to spread around anyway, bad years there is nothing extra. I don’t know how that would work in our insane industry through where it’s a valid business model to hemorrhage money for years (decades even) without any real path to profitability. But I’m sure we can find a solution, as founders rarely live in poverty past a certain company size. And I’m not talking about the joke that equity is in most cases where it’s barely worth the paper it’s granted on.
doktorhladnjak 4y ago
You'd see a labor market that more closely resembles those of high income European countries. Lower wages with less variation. Employees rarely going above and beyond. Employees staying in positions longer. Overall, stability over hustle.
deterministic 4y ago
They will simply introduce many flavours of titles that pretty much mean the same thing. So that they can pay the 10% who does 50% of the work more than the rest.

betaby 4y ago

It's the case since forever in many companies I though? As an example level E42 at $LOCAL_BANK has pay range 125-145k/year target bonus 12-15% which means variability is only (or whopping) 15% for the 'same' job title. I think very rigid predefined pay bands are very common for large companies, at least in Canada.

dopylitty 4y ago

Probably some effort by businesses to make everyone’s title include a random number followed by a government effort to force the use of some list of approved titles. The fundamental problem is that businesses are focused on profits rather than employee satisfaction or producing quality products. Unless that is changed any regulations nibbling around the edges will just end up in a cat and mouse game between then businesses and the government.

candiddevmike 4y ago
As an potential new hire, you would get to see that you're being hired for "Developer abci2hd" and know they are probably a shit company to work for. "Duck typing unions"

jandrewrogers 4y ago

Many companies traditionally have rigid pay bands, including many software companies. There are several problems you are overlooking. In job markets with highly volatile wages like software engineering, there is no practical way to budget for randomly giving most people large pay raises throughout the year. Many roles are necessarily budgeted multiple years out because of contracts. If you are a company that hires a lot of software engineers, salary is likely most of your cost basis for running the company. Your fixed costs have now become variable costs, which makes financing the business much more difficult. You are also imagining this as a ratchet where salaries can only go up but if salaries must track the market then they must track the market in both directions, which will make many employees unhappy. By adjusting salary to market conditions with each new hire, companies make the financial realities of rapidly adapting to changing market salaries more manageable. What many companies with rigid pay bands do to handle this in practice, and what would undermine what you are proposing, is to continuously invent new titles/bands if the salary requirements change too quickly. I've seen companies that had hundreds of different titles for tech peoples for exactly this reason, creating new ones if the market salary moved too quickly. It isn't just about how much people get paid. A policy of leveling up everyone automatically would massively increase the financial risk of the company, which has enormous downstream costs in terms of valuation, ability to borrow, etc.

jt2190 4y ago
Well explained! We see the same phenomenon in bank "savings" accounts, which only pay a meager interest rate, but protect the saver from essentially all the downside risk. (Contrast with, for example, investing directly in the stock market, etc.) Just for fun, I'm going to poke at this: > ... [T]here is no practical way to budget for randomly giving most people large pay raises throughout the year I think we can find examples of labor markets that do expose more "upside" to workers, and then see how the "downside" is handled in those instances. Contractors (1099 in the U.S.) comes immediately to mind... They typically make a lot higher rate (I'd guess around double although I often hear lower numbers, which I personally think is too low to make it a good deal) but must pay their full income tax (instead of half), their full health insurance, and are subject to be the first to be let go when the company needs to cut costs, i.e. higher risk of termination, so must be able to save for time between jobs. "Boom" economies can drive labor prices very high. I think we've been seeing this in temporary nursing lately, where the wages go very high, especially if you're willing to travel or locate in remote places. Of course, the "boom" doesn't last forever, and eventually wages will stabilize at a lower rate. Note again that these temporary positions. (So far it seems like the higher wages come with more "risk" put onto the laborer.) I'm sure there are some even better examples.
ornornor 4y ago
Why can’t companies pay fair wages and share part of the profits with employees? It’s very rare to see companies actually doing this. They usually don’t at all, and when they do it’s often so vague that the bonus is basically entirely at the superior’s discretion with no tangible basis. I think it’s fair that the people who risked the most to create the company get a significant chunk of the profit but why should employees be reduced to leftover crumbs in the best case and typically nothing at all beyond their poorly negotiated salaries that didn’t track inflation over the years? In a good year there is profit to spread around anyway, bad years there is nothing extra. I don’t know how that would work in our insane industry through where it’s a valid business model to hemorrhage money for years (decades even) without any real path to profitability. But I’m sure we can find a solution, as founders rarely live in poverty past a certain company size. And I’m not talking about the joke that equity is in most cases where it’s barely worth the paper it’s granted on.

doktorhladnjak 4y ago

You'd see a labor market that more closely resembles those of high income European countries. Lower wages with less variation. Employees rarely going above and beyond. Employees staying in positions longer. Overall, stability over hustle.

deterministic 4y ago

They will simply introduce many flavours of titles that pretty much mean the same thing. So that they can pay the 10% who does 50% of the work more than the rest.