4 ms·

I always figured the explanation was much simpler than this. As a general thing, someone meeting expectations and performing their current role should expect a

by ozr 3y ago

I always figured the explanation was much simpler than this. As a general thing, someone meeting expectations and performing their current role should expect a nominal raise each year. Cost-of-living sort of thing. When you hire someone new from the market, you need to figure out the market price and pay that. There's no particular reason these two should be in lockstep besides, as the author mentions, a vague sense of inequity.

kamikaz1k 3y ago
It’s not a vague sense, and it does cause real painful attritions. I’ve seen it happen many times. I think the author is right in that HR doesn’t do a good job of quantifying the hit, and line level managers are not incentivized to burn their social capital on a flight risk just on principle.
- ozr 3y ago
  This is true. It's a result of poor management, as you said. Either a lack of incentives or a lack of skill. If someone leaving represents a substantial risk, then a) that role should be derisked, and b) that individual should be recognized via whatever process the company has (leveling, etc) to keep them on board.
happytoexplain 3y ago
Vague? It's pretty concrete. You may make a perfectly logical business-related argument as to why this compensation difference is acceptable, but why would that have any effect on the obvious, intuitive perception that it's unfair from the point of view of a rational human? Businesses do inequitable-by-definition things all the time. It's part of their DNA. They make measured trades, and often those trades involve mistreating humans, betting that the practical consequences of that will be worth whatever the upside of the trade is. That's why we have so many laws and organizations protecting people from businesses.
- ozr 3y ago
  Is it inequitable and mistreating an employee to pay them what we agreed to?
ta_1138 3y ago
The reason is pretty easy: You understand the value of your workers better than a random employer, because they work here. You know when someone is a bust, and when someone is a star player. If you don't give raises to your best people, they are the ones that quit first, and when people quit, they don't quit one at a time: If I get a major raise by changing youbs, you can bet all the coworkers that I respect will hear about it, and I'll want to take them with me. I suspect that losing a high percentage of your best employees all at once because you are paying them quite a bit less than what you'd pay a worse replacement is a bad thing you want to avoid.
- ozr 3y ago
  I agree. High performers should be recognized via whatever process the company has to do so. Leveling, at reviews, etc. The lack of doing that is just shitty management. It doesn't change the basic description of the market above.
caturopath 3y ago
That is not really an explanation. You are just stating how things are in a non-explanatory way. > should expect Should why, though? You didn't explain why they should have this expectation, rather than any other. > There's no particular reason these two should be in lockstep There is a pressure to keep these in lock-step: if you are paying lower than market rate, your employees have an incentive to go sell their labor elsewhere for more; if you are paying higher than market rate, you have an incentive to cut their pay (if you lose them over this, you can still replace them for less money). There are many reasons why such a basic price theory analysis is so incomplete as to give the wrong conclusion, but it's a real reason these things would be in lockstep that requires explanation why as to how it is inapplicable or incomplete.
- ozr 3y ago
  > Should why, though? You didn't explain why they should have this expectation, rather than any other. Because if we agree that I pay you $X/yr, that's just a placeholder for a certain amount of value per year. As inflation rises, the nominal salary I pay has to increase to maintain that value. A CoL raise handles that. > There is a pressure to keep these in lock-step: if you are paying ... This is all theoretically true, but just not how it works in practice. See: this post and all the comments lamenting it.
  - caturopath 3y ago
    Right. So, an explanation would describe why it works the way it does in practice. Lots of people have tried in this comment section and article to provide such explanations. I don't think what you're doing provides a "why", really -- a good explanation is hard to vary and still explain things and can explain more than just the phenomenon in question. If the situation were different, if salaries tended to follow a market index or the size of the working population or whatever, I could provide a statement of the same form as yours instead. > placeholder for a certain amount of value per year. As inflation rises, the nominal salary I pay has to increase to maintain that value I'm not sure I quite understand what you mean by value here, exactly. Value to the employer? That doesn't track the CPI. I think you must mean value to the employee, which is what I think is not explained by your explanation, as price isn't derived from value to the producer that way. Think about it in the market for apples rather than the market for labor, for example. Obviously it does work different in the labor market, but you have to say what the relevant differences between the market for apples and for labor are to explain things.
dboreham 3y ago
There's a whole field called Compensation Analysis devoted to doing the opposite of what you said. Well, truth be told it's mainly devoted to controlling risk for the employer, but as a prerequisite for that goal there are Compensation Analysists in the HR dept of every medium/large company in the US with a big spreadsheet, row for each employee and a row for each "job", and a mapping from one to the other. This spreadsheet highlights when the two are not in lockstep and all things being equal they will bring them back into step. Modulo some edge cases where individual employees are just paid above market "because" (e.g. they have some special knowledge that would be very expensive to recreate but otherwise don't merit a high paying job code).

by ozr 3y ago

kamikaz1k 3y ago

It’s not a vague sense, and it does cause real painful attritions. I’ve seen it happen many times. I think the author is right in that HR doesn’t do a good job of quantifying the hit, and line level managers are not incentivized to burn their social capital on a flight risk just on principle.

ozr 3y ago
This is true. It's a result of poor management, as you said. Either a lack of incentives or a lack of skill. If someone leaving represents a substantial risk, then a) that role should be derisked, and b) that individual should be recognized via whatever process the company has (leveling, etc) to keep them on board.

happytoexplain 3y ago

Vague? It's pretty concrete. You may make a perfectly logical business-related argument as to why this compensation difference is acceptable, but why would that have any effect on the obvious, intuitive perception that it's unfair from the point of view of a rational human? Businesses do inequitable-by-definition things all the time. It's part of their DNA. They make measured trades, and often those trades involve mistreating humans, betting that the practical consequences of that will be worth whatever the upside of the trade is. That's why we have so many laws and organizations protecting people from businesses.

ozr 3y ago
Is it inequitable and mistreating an employee to pay them what we agreed to?

ta_1138 3y ago

The reason is pretty easy: You understand the value of your workers better than a random employer, because they work here. You know when someone is a bust, and when someone is a star player. If you don't give raises to your best people, they are the ones that quit first, and when people quit, they don't quit one at a time: If I get a major raise by changing youbs, you can bet all the coworkers that I respect will hear about it, and I'll want to take them with me. I suspect that losing a high percentage of your best employees all at once because you are paying them quite a bit less than what you'd pay a worse replacement is a bad thing you want to avoid.

ozr 3y ago
I agree. High performers should be recognized via whatever process the company has to do so. Leveling, at reviews, etc. The lack of doing that is just shitty management. It doesn't change the basic description of the market above.

caturopath 3y ago

That is not really an explanation. You are just stating how things are in a non-explanatory way. > should expect Should why, though? You didn't explain why they should have this expectation, rather than any other. > There's no particular reason these two should be in lockstep There is a pressure to keep these in lock-step: if you are paying lower than market rate, your employees have an incentive to go sell their labor elsewhere for more; if you are paying higher than market rate, you have an incentive to cut their pay (if you lose them over this, you can still replace them for less money). There are many reasons why such a basic price theory analysis is so incomplete as to give the wrong conclusion, but it's a real reason these things would be in lockstep that requires explanation why as to how it is inapplicable or incomplete.

ozr 3y ago
> Should why, though? You didn't explain why they should have this expectation, rather than any other. Because if we agree that I pay you $X/yr, that's just a placeholder for a certain amount of value per year. As inflation rises, the nominal salary I pay has to increase to maintain that value. A CoL raise handles that. > There is a pressure to keep these in lock-step: if you are paying ... This is all theoretically true, but just not how it works in practice. See: this post and all the comments lamenting it.
- caturopath 3y ago
  Right. So, an explanation would describe why it works the way it does in practice. Lots of people have tried in this comment section and article to provide such explanations. I don't think what you're doing provides a "why", really -- a good explanation is hard to vary and still explain things and can explain more than just the phenomenon in question. If the situation were different, if salaries tended to follow a market index or the size of the working population or whatever, I could provide a statement of the same form as yours instead. > placeholder for a certain amount of value per year. As inflation rises, the nominal salary I pay has to increase to maintain that value I'm not sure I quite understand what you mean by value here, exactly. Value to the employer? That doesn't track the CPI. I think you must mean value to the employee, which is what I think is not explained by your explanation, as price isn't derived from value to the producer that way. Think about it in the market for apples rather than the market for labor, for example. Obviously it does work different in the labor market, but you have to say what the relevant differences between the market for apples and for labor are to explain things.

dboreham 3y ago

There's a whole field called Compensation Analysis devoted to doing the opposite of what you said. Well, truth be told it's mainly devoted to controlling risk for the employer, but as a prerequisite for that goal there are Compensation Analysists in the HR dept of every medium/large company in the US with a big spreadsheet, row for each employee and a row for each "job", and a mapping from one to the other. This spreadsheet highlights when the two are not in lockstep and all things being equal they will bring them back into step. Modulo some edge cases where individual employees are just paid above market "because" (e.g. they have some special knowledge that would be very expensive to recreate but otherwise don't merit a high paying job code).