Where Is the COLA?

does everyone really think theyre saving on payroll short- and long- term by not doing COLA?

People accept an annual pay cut. They have for decades. Employees don't leave, and whether they're happy or not generally doesn't matter so long as the work gets done. Have a look at a graph of the net worth of wealthy people over the past 40 years and then ask yourself if it works long-term because it obviously does.

Why aren't companies doing it? Because they don't have to.

When inflation was 3% a few years ago and I was given budget/guidance for raises in my group, I pointed out to the CEO that the 2% they wanted to give one person was effectively a pay cut. The answer? "Well, you can give him an extra 0.5% if you think it's warranted."

Employees don't push for it so businesses don't do it. It's that simple.

My current employer is all too quick to say how well the company is doing, I bought up COLA with a director and was told 'we were all the in the same boat'

Sure we are, and that's why I'm jumping ship

Companies in the private sector pay you based on the market for your skills, not cost-of-living.

They may move in tandem, but they are not in lock. If there is a shortage of talent even without inflation, your market rate will rise. Likewise if cost of living increases, but there is a surplus of talent—your compensation can still fall.

Almost anyone browsing this board makes far more than the cost it takes to “live”.

I am a unionized software engineer and we will be bargaining for COLA to address the issues you highlight.

When workers don't have democratic organizations of their own, their interests fall by the wayside.

There isn't a law requiring companies to give COLA raises so most companies won't. The reason they don't need to? You're not accounting for COLA yourself, so why should a company?

Do COLA adjustments in your own job/career. That's why so many people are moving jobs in this market. That's why so many high paying engineers move jobs every couple of years. COLA baby!

I tend to move jobs every 2-3 years and receive a 25-50% raise each time. COLA baby!

What are you missing? I don't know. I'm assuming this is a US thing? Because we've had this in Belgium for at least as long as I've been alive. My pay automatically went up by ~3.5% this month. It's required by law (mostly, it's complicated). The actual percentage depends on a number of factors, as does the frequency, but for people in tech it tends to be an an annual affair.

It's not a perfect system, but it works reasonably well, even if it does somewhat disadvantage people with lower wages.

At initial glance I also think it would be much cheaper to give out adjustments like this than have like 10% of your staff leave. Some napkin math indicates otherwise: if you have a staff of 10 that each make 100k on average, a 5% COLA costs you $50k vs. 1 person leaving (10%) and costing you maybe $25k in recruitment. That $50k is year over year too, not just a one-time deal, your avg salary is now $105k.

So in this fictional, theoretical employer scenario it would take 3 people leaving (30%) in order for it to have been less costly to just have given out 5% to everyone.

Even with my napkin math I still think its better to take care of your people reasonably vs. use a spreadsheet to drive decisions and hope people don't leave.

Neigh-all human employees are profoundly irrational about changes in their pay. If I'm raising their pay, any justification from "busy season" to "in-demand skills" to "inflation" to "chocolate ice cream melts in the sun" is 100% reasonable and acceptable. Vs. if I'm lowering their pay, it doesn't much matter whether sales are soft, their skills have gone out of demand, the local cost of living went down, or what - they get pissed off, and argue over every penny.

Do not expect any experienced boss to be rational on a topic, when you neigh-certainly are not.

I know of several companies that do COLA, but they tie it to minimum wage. That isn't a joke about minimum wage jobs either, I know several people who work for 30-40 an hour who get a COLA bump when the minimum wage gets a bump. I rather think the minimum wage should be inflation adjusted, just like social security.

Yeah, the company I work for has a COLA, and when inflation was 3% we got 3%, for a few years. Now that inflation is higher, they just suspended the COLA - we don't even get the 3%.

Soooooo, here I am on Hacker News posting during work hours!

My company is a financial one and even they struggled to meet everyone's expectations. It's not COLA, but the "merit" adjustment tends to be close in the past.

People getting a good rating got 5-8%. So even good people are getting close to a 1% cut.

I got a further development needed rating. My raise was 1.5%. So about a 4.5% pay cut. Under the company policies, it will likely take me 3+ years to get back to making the save level of value. They say they want to retain me. Stupidity. I'm looking for other jobs but will likely be stuck here.

Is it fair to say CPI at 6% for 2021 means that not getting a nominal raise in 2022 implies a 6% paycut in real wage?

I suspect most folks on this forum are quite asset-heavy compared to the CPI basket of goods and are experiencing that 6% inflation on some fraction of their spending. A lot of money earned goes into investments well outpacing 6%, existing mortgages aren't increasing in monthly payments but the house is increasing in value, etc. The math varies tremendously across individuals, but I wouldn't be surprised if a 2% bump more than covers inflation as actually experienced by the average US software engineer.

Some companies are doing this but it varies by industry. I have family on the comp boards of a few publicly traded companies and they are doing across the board raises of 5-9%.

My current company is not and so I have been interviewing.

> you guarantee employee turnover

Why? is your theory - are companies adding COLA to new offers and no COLA to existing employees?

Pay bands and offers have been about the same from the numbers i've seen in the past year or so. If a tech company is paying double your salary they also did before inflation rose. And you could have jumped ship back then as well. And they probably also are not doing any COLA adjustments once you join

COLA only makes sense for minimum wage, if you're making more than minimum you're just constantly trying to maximize your worth in the open market. That has nothing to do with COLA

Google just increased executive pay massively, while telling employees inflation was transitory and not to expect a cola. Also, they say they don't pay based on cost of living, but rather "the top of the market". They get this number by sharing salary info from many companies and bidding just slightly higher than the rest.

It's a pretty blatant attempt to collude with other companies to keep wages down, and keep exec pay high. This, folks, is why we need a union.

Cola's have never been for companies. It's a specific mechanism of government redistribution programs. Companies use their own internal metrics to determine when and how to adjust salaries.

I don't think I really had to tell you that though.

Companies don't do this because they can get away with it.

Unions are usually the most effective countermeasure to these kind of things.

Here in Finland the tech-sector union just agreed to a 2% salary increase (inflation is at 2.5% this year [1]) after having threatened strikes if the conditions of the agreement were not good enough [2]

[1]: https://yle.fi/news/3-12143521 [2]: https://yle.fi/news/3-12262577

> Why aren't companies doing this?

I don't know why the company you work for doesn't do it. In the place where I live (Europe), it is fairly common for medium and large companies - my salary is updated every year to reflect inflation. This is independent from pay rises and is happening automatically to all employees. The places where it usually doesn't happen is the smallest companies like startups and mom-and-pops where every penny counts.

Most employers determine pay based on market analysis. Generally, the employer will pay a consulting firm for a job market analysis that shows pay rates by job function and geo. The employer then performs it's own internal assessment using this data to develop an approach for talent acquisition (base pay, bonus, options, location, market competitiveness, etc).

Cost of living adjustments typically isn't a consideration.

As engineers we believe that employee turnover is a bad thing but companies have a targeted attrition rate that they will withstand. Other than getting rid of employees that already want to leave it saves them money in the long run. So pay increases / COLA etc are just pushing you to the door.

Whether the great resignation is making that number increase above that who knows?

One of the reasons high inflation is bad is that wages always lag the inflation.

They can't really help but do otherwise. Companies certainly aren't going to be able to proactively raise salaries based on future inflation expectations, and precisely matching inflation isn't an option when salaries are generally adjusted once a year. So lag it is.

Plus, with non-trivial inflation, things get complicated. Dollars cease to be fungible, and you have to consider how close to the "inflation sources" your company is. It is difficult to pay you an inflated salary if they still haven't gotten inflated prices for their own sales yet because they're "downstream" of the inflation. Or if they have to pay you with money from six months ago while you want a salary in current inflated dollars. Non-trivial inflation breaks a lot of casual expectations you may have about money under normal circumstances.

Here in Finland they are part of collective agreements between employer and employee organizations, typically generally binding even for non-union/employer organization members. I assume it’s similar in most places in Europe.

Retention budget is a tiny tiny fraction of overall payroll. They would rather you up and leave after 1 year to 18 months. I wonder what will we do when it stops being a job seekers market though.

I haven't gotten a raise since COVID started. They canceled our raises as soon as they sent us to remote work and we have seen one since. We're supposdly getting a 3% raise this year.

I mean, capital has the edge over labor in everything we do in this country. Labor even votes against its own financial self-interests. It’s who we are.

There are also companies holding off even the paltry ~3% raise if you're at the top of your pay band. Adjusting pay bands for inflation is important as well.

I've seen activity on this topic recently on HN so I would imagine this will be a thing on job postings in the near future as went "unlimited PTO".

Jack Dorsey tweeted that hyperinflation is real, so all Block (nee Square) employees are having their compensation 10x to deal with it. True story!

I need someone smarter than me to explain me what happens if all wages are always compensated for inflation. Would that mean no inflation?

If companies start all giving wage increases due to inflation you realize that causes more inflation right?

> what am I missing?

Capitalism.

See the other post today on Google hiring anti-union consultants.

The company I work for does it. It's nice.

Rapacious boomers punishing the underclass. Quite simple really.