Raises should be on top of inflation, not part of it
Posted by xiangkunwan@reddit | CrazyIdeas | View on Reddit | 60 comments
Hear me out: what if raises were always calculated after adjusting for inflation, not bundled into it?
Right now, a “3% raise” in a year with 3% inflation isn’t really a raise; it just keeps you at the same purchasing power. You’re not moving forward, you’re just treading water.
Crazy idea:
- First, salaries automatically adjust monthly to match CPI inflation (so everyone maintains real income).
- Then, any additional raise is an actual increase in buying power, based on performance, experience, or company success.
That way:
- “Raises” actually mean improvement, not survival.
- Companies can’t quietly frame cost-of-living adjustments as a sign of generosity.
- Employees can clearly see real progress in their compensation.
Essentially, it's about not falling behind while also getting ahead.
Would this make compensation more transparent, or would companies just find a new way to blur the lines?
BarNo3385@reddit
This is called the wage <> price spiral.
Workers demand higher wages, in turn firms put prices up because their costs have gone up.
In response workers demand higher wages, in turn firms put prices up because their costs have gone up..
If it embeds properly its extremely bad news for the economy and results in runway inflation until the economy has a major crash and the link gets broken because unemployment is soaring.
Hawk13424@reddit
Raises should always be only the amount of inflation. Promotions should be in addition.
If you are doing the same job, your work has no additional value and inflation is the only reason it would increase.
wildmaiden@reddit
Uless you spend 100% of your salary on consumer goods, you don't need your salary to increase along with inflation to keep your same purchasing power. For example your income taxes don't go up with inflation, neither does your mortgage or other debt payments, or your 401k contributions etc. Those costs stay the same no matter what inflation does.
robotdancer@reddit
Not necessarily true. Mortgage can go up quite a bit with property insurance costs, and property tax also increases.
USLEO@reddit
A bit pedantic, but insurance and property tax are not part of your mortgage payment. Most people just pay them in escrow along with their mortgage payment.
robotdancer@reddit
True, but what most people call their mortgage payments is that lump payment of all three.
USLEO@reddit
Sure, people may mistakenly lump them together, but the person you replied to is correct that your loan payment does not increase on a fixed-rate mortgage.
Worldly_Owl953@reddit
Mortgage increase if interest increase when you renew your mortgage after your mortgage term ends
cubonelvl69@reddit
In the US almost everyone gets fixed rate mortgages
gc3@reddit
This is very true, but taxes do go up with inflation as you climb brackets
NoDig3444@reddit
Tax brackets are adjusted for inflation. If you keep the same salary, your tax bill goes down every year.
yetanotherredditter@reddit
Not in the UK. Tax bands have been/ will be frozen for most of a decade.
Confident-Syrup-7543@reddit
Actually of your wages go up with inflation then your taxes generally go up slightly faster than inflation as you move into different tax brackets.
not_so_wierd@reddit
Biggest problem is probably how to fairly calculate that inflation. What if groceries go up 15% but rents goes up 6%, and gas 20%? Depending on where and how you live that will affect you differently.
actuarial_cat@reddit
Well, it is call a promotion. Why would you get paid more for doing the same job
species5618w@reddit
Sure, enjoy -5% raises.😂
Fuzzy974@reddit
Yeah I said that to my boss. Also told them I was not OK with them not giving a raise to people who didn't perform above expectation cause that means a lost of salary due to Inflation.
toofshucker@reddit
Can I let you in on a dirty little secret?
Sometimes subpar employees don’t get raises because you hope by not giving them a raise they will quit.
And if they don’t quit, not giving them a raise means you get a raise for dealing with them every day…
Morifen1@reddit
In almost every case even that subpar employee is generating more for the company than they are paid. The dirty secret is most wage earners get paid far less than they are worth.
ChristianKl@reddit
Making a lot of things automatically adjust monthly to CPI inflation is how you get runaway inflation and hyperinflation. Constant renegotiation of prices is what keeps inflation healthy.
CrazyJoe29@reddit
1-3% is a-cost-of-living increase.
It roughly matches how the cost of living increases year on year.
You can call it whatever you like. It’s true, getting a cost-of-living increase isn’t as good as getting an additional 5% bump on top of whatever is supposed to match inflation.
It’s also true, that getting a cost of living increase is better than not getting one. Not giving a cost of living increase is also an option for your employer.
partdopy1@reddit
OP thinks COLA adjustments are raises.
Insert Ron Burgundy We are laughing gif
Valuable employees get raises. Normies get COLA
wizzard419@reddit
Indeed they should as it basically can be a pay cut if they don't track. I guess the only question is what happens when a company is not successful or simply doesn't want to pay raises and the job market is tough? They could theoretically r/monkeyspaw this bitch and give zero raises.
Level3pipe@reddit
I fully agree. But this will never happen the way we are thinking it will. To combat this yourself and ensure you keep getting extra money you need to invest.
wizzard419@reddit
So a few comments on that...
The first is that I always say "Investing is not a guarantee of a positive ROI", there are some on here who have 1920's thinking of it being impossible to lose money and that those who do are simply stupid.
The other is that much of this nation lives paycheck to paycheck, at the end of the month there isn't much, if any, money to invest. It really isn't even a new phenomena, inflation has been outpacing wages for decades.
Level3pipe@reddit
Yea I'm not discounting that investing is a privilege when you have excess money. Im just saying that's the only viable way to ensure growth as an employee without relying on an employer.
In terms of "is it guaranteed ROI", It isn't. But literally nothing is. Your employer doesn't have to keep employing you, your business may fail, your house might devalue, nothing is guaranteed.
TangerineTasty9787@reddit
I mean, you don't have to get a raise at all. It's not really tied to inflation, but the company policy and profits. So...this doesn't really make sense.
Maybe for a govt job or something?
GroundbreakingRun186@reddit
That would just increase inflation more. Companies don’t always raise prices with a perfect correlation to CPI. But if their wages cost is tied to CPI each month, then they’d very easily be able to justify increasing prices for every month, therefore increasing inflation.
kiwipixi42@reddit
Wait, you get raises that actually keep up with inflation???
Status-Cricket6376@reddit
That's what we have in Belgium. Every year your salary is automatically adjusted based on inflation from last year.
Downside is that companies tend to give less salary increases when you outperform because the available budget for salary increases is eaten up mostly by everyone in the company.
la_tajada@reddit
I think cost of living or inflation raises are a lazy way of doing it. What everyone should do (and won't because it's hard) is a yearly market analysis and pay people what they are actually worth in the marketplace (plus multipliers for performance and seniority).
Dave_A480@reddit
Why should you get a raise (other than inflation) for doing the exact same thing you did last year?
The whole point of raises is to compensate for inflation.
If you want to beat inflation you need to do a more valuable job.
xiangkunwan@reddit (OP)
to incentivize higher quality work and actually help customers instead of just doing the bare minimum and hoping nobody notices
Dave_A480@reddit
Nope.
Again, the work is worth what the work is worth.
It doesn't become worth more just because the person currently doing it has been doing it X amount of time.
They're leaving in a few years anyways - at least if they have any ambition, they'll job hop... And if not, then you have the perfect person for that job.....
WastedNinja24@reddit
No. The result of the work is worth whatever it’s worth, which tends to increase with inflation.
Wages, ideally, are tied to productivity.
As you gain experience and become more competent, your productivity increases. As you become proficient in handling a wider variety of out-of-norm cases (ask for less help), the “cost” of your productivity decreases.
In combination, over time (to a point of finishing returns, of course), your value to the company increases, even if you’re doing the same job.
Sjoerd85@reddit
Because you gain more experience each year, and therefore become more efficient. That's value for the company too.
wildmaiden@reddit
That's literally what OP said...
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USLEO@reddit
Start a company and do it.
jathww@reddit
Reddit, in a nutshell
dallassoxfan@reddit
Best answer
68024@reddit
Raises? Who gets those these days
StrongGarage850@reddit
So that means during a recession wages would go down?
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CEOofracismandgov2@reddit
What? Read the comment
wildmaiden@reddit
Only if there was deflation during the recession which isn't typically the case.
But if wages were forced up during a recession there would surely be an increase in unemployment.
ConsequenceTop9877@reddit
Welcome to real life robot!
ar355169@reddit
It would make pay more transparent in theory, but in practice companies would likely adjust base salaries, bonuses, or hiring offers to offset it—so the clarity improves, but the game doesn’t disappear.
Leverpostei414@reddit
Real wages increase over time in most countries. So this would just be about how it is communicated. I prefer the raise to be communicated as the actual percentage
GurProfessional9534@reddit
This already happens. It’s just when you get a raise above inflation.
Biuku@reddit
100%.
No which HR team would ever do that?
Xylus1985@reddit
Collective bargaining. Unions are known to push for this kind of standard increase
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Questo417@reddit
If we wanted the economy to do that, the federal reserve would just target 0% inflation.
Sorry-Climate-7982@reddit
That used to be common for some companies. Each year you'd get an automatic salary increase based off the amount of inflation and the number of flying pigs. Raises were merit raises. You got promoted, you consistently did something outstanding and are expected to continue, or you brown nosed successfully.
Typically for something outstanding you'd get a one time bonus, where mine were always grossed up.
phaqueNaiyem@reddit
AI slop
Quitcha_Bitchin@reddit
If wages were tied to GDP every year would be an adjustment. If it actually kept up it would be enough as long as you budgeted correctly you could be comfortable. If you wanted more you would have to work more or learn a better paying skill.