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Comment by jerf | Hacker News Reader

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.

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Companies are certainly able to proactively raise salaries based on future inflation expectations, and many do that for CEO salary packages. They just don't do it for workers.

People generally have this expectation that companies are just made out of money and greedily keeping it all for "themselves", whoever "themselves" may be, but in the real world, a company that makes a 5% profit margin is doing pretty well and a 10% profit margin is amazing. Being in the tech industry can really skew your perception of profit margins because we are in one of the handful of odd industries where that would be mediocre.

Having to proactively raise salaries 10% across the board can easily be the difference between profit and loss for a year. Raising a salary for one person is easy. Raising it across thousands and thousands is not.

It is very difficult for a company to look ahead and say "Hey, maybe inflation is going to be 10% this year so we should raise salaries by a huge amount", especially when all the official numbers are themselves much smaller than that. It was literally only three months ago the Fed was promising up and down that inflation was only going to be transitory. I didn't believe them for a second, but I'm observably faaaar more cynical about governments telling the truth than the average businessperson, and for that matter, the average HN denizen. (At the time, the modal HN position at least by comment posts was indeed that the Fed was correct and anyone who questioned otherwise was wrong at best and possibly a conspiracy theorist.) Do you seriously expect companies to be second-guessing every official news source about inflation?

Instead of doing 10% raises across the board, companies should do raises bottom up and use dollar amounts instead of percentages. 10% of 50k is way less than 10% of 400k, it's not a "fair" raise.

"Raising a salary for one person is easy"

Not raising a salary for one person is even easier.

I'm referring to this ancient concept of solidarity. If your workers are struggling, you don't reward yourself. You struggle with them. In fact, as CEO you should take a pay CUT, because you're the one that can afford it.

It's pathetic how we normalized executives robbing companies, we truly are morally bankrupt and even defend the behavior.

Calling it "easy" is not "defending" it.

You can't think clearly about situations if you're just firing emotions off at trigger words.

I can think perfectly clearly about executives rewarding themselves in dire times. Both rationally and emotionally.

My point, if you considered it angry, wasn't directed at your personally.

People forget that wages are inflation.

It's convenient to compress a billion price changes down to a single number, but ultimately the single number is a representation, and the price changes are driven by real market phenomena. Money printing on its own does not cause inflation, there has to be a "transmission mechanism" to get it into the market. After decades of policy to prevent wage inflation, especially at the low end, it's finally escaped.

They aren't talking about lag. They are saying at year end, the inflation went up 6.2% (for me) over the past 12 months. I should get a 6.2% raise so that I make the same value next year that I did at the start of the current year. So yes, the adjustment took place after the fact.

What we are discussing here is when the raise amount is (significantly) less than the 6.2%.

It will take a while for companies to "realize" the inflation. They have all sorts of reasons not to, including the obvious selfish one, but also including a lot of business reasons.

Like what?

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