The 2022-23 Economic Crisis Megathread

[crazy canuck]

Your company paying its employees a wage which does not decrease their real wages is a no brainer.  The issue is whether your company has the ability/will to do it.  That is a more complex question but not the one you asked.

[Tamas]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

[The Minsky Moment]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

Not something you want to see in an inflation thread.

[Berkut]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

That won't be a problem. He has made it clear he doesn't want to discuss anything, so I simply won't respond anymore.

I am interested in other peoples views though. This is an actual, real problem for me. It is not theoretical.

We have to figure this out over the next several months, and I don't know the answer. I've never worked as a director in an economic environment with significant inflationary pressure. We've already raised our rates a lot for our customers in order to keep up with advancing salary expectations of our rather highly compensated, highly talented, and highly desired development staff, and that was *before* this inflationary spike.

It is trite to say "Raise their salaries, and pass the cost on to your customers". That might work in some industries, but not in all. In many cases, there isn't even a customer to raise rates on - we are doing product development, and we have a limited budget to support our development staff. We could reduce headcount in order to pay the remaining more, or we can try to find outside investment. Neither of those seem to be so obviously the right choice, either for the company, or for the employees, or for society in general.

[Sheilbh]

In the US where there's a really tight labour market I don't really see how you can avoid raising wages by a decent amount - in or around inflation. Because otherwise they'll just move on. It is - currently - similar in the UK. There are more vacancies being reported than people looking for work.

I'd make a priority of making sure the lowest paid who are most exposed to prices rising and likely have least cushion are most protected though - it's the junior staff on relatively low wages who'll feel this more and I think that probably needs communicating to them but also to more senior staff who may be comfortable taking a little less if there's reason behind it. That's what happened at my company at least (although we're heavily unionised and the pay deal was negoatiated at the start of the year before current inflation rates).

[crazy canuck]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

Oh for fuck sakes, Berkut asked whether it would be counter to good public policy for his company to pay wages that are greater that the rate of inflation. Is that answer not obvious to everyone here?

[Berkut]

Yes, it is totally obvious to everyone. So no need for you to state the obvious, and we can go one with our discussion and you can be right.

[Jacob]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

Not something you want to see in an inflation thread.

This calls for deflationary measures. The question is whether this falls under the US Fed or the Canadian Central Bank when it comes to jurisdicktion.

[Gups]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

That won't be a problem. He has made it clear he doesn't want to discuss anything, so I simply won't respond anymore.

I am interested in other peoples views though. This is an actual, real problem for me. It is not theoretical.

We have to figure this out over the next several months, and I don't know the answer. I've never worked as a director in an economic environment with significant inflationary pressure. We've already raised our rates a lot for our customers in order to keep up with advancing salary expectations of our rather highly compensated, highly talented, and highly desired development staff, and that was *before* this inflationary spike.

It is trite to say "Raise their salaries, and pass the cost on to your customers". That might work in some industries, but not in all. In many cases, there isn't even a customer to raise rates on - we are doing product development, and we have a limited budget to support our development staff. We could reduce headcount in order to pay the remaining more, or we can try to find outside investment. Neither of those seem to be so obviously the right choice, either for the company, or for the employees, or for society in general.

We work in completely different industries but if it's of any interest, here's what my firm does on salareis.

I should say that I'm a partner in a small, specialist planning law firm. We are ten partners (all equity) with about 30 employees of which 20 are lawyers. Equity partners do not get a salary, just a share of the profits. We're  guite a new firm, founded about 5 years ago (with 6 partners and just 5 employees) but are generally regarded as best in our (small) field.

Salaries for junior lawyers have exploded in the last couple of years, mainly due to US law firms. The top US firms are paying £160K to newly qualifieds solicitors (who are generally in the mid-20s). The top UK firms are paying between £110K to £125K. We benchmark our salaries against the tier below that which is in the range of £65K to £100K but at the lower end of the scale. We also provide a decent profit share pool for both lawyers and non-lawyers. We've made a big effort to professionalise our benefit system and training programmes and develop meaning CSR and pro bono programmes involving juniors. This is actually really important for rentention, perhaps more so than pay. We've given one-off cost of living payments to anyone earning less than £40K. Most importantly we do our best to make people feel like they are part of the business - involved in decision-making, business development and other programmes.

So far only one solicitor has left since we started (and not for money reasons). We are going to have to see how the era of high inflation plays out though I suspect that the boom in junior salaries has topped out for now. We have been able to afford increases by being fairly relentless in terms of rates, debt collection and write offs. Our rent is static and expenses are under control because so many more meetings can be held online. Hybrid working has helped with productivity too.

[Jacob]

Upwards pressure has been pretty relentless in the video game industry as well. It may abate a bit with the recent signals from the tech industry giants about hiring freezes/ layoffs, but I guess we'll see.

[Zanza]

In the Eurozone at least a lot of inflation is from external shocks, mainly the war and related sanctions, also supply chain to China.

Especially on energy, inflation should not just be compensated, as the higher price serves as a means to achieve the policy goal of reducing fossil fuel consumption. 

[Sheilbh]

I'm not sure I can think of a better way of undermining energy transition than making the politics of it that it'll make you poorer. Especially if there's no measures taken to make it seem fair so the hit isn't distributed unfairly.

I think that approach ends up making the gilets jaunes look like the Rotary Club.

[Jacob]

In the Eurozone at least a lot of inflation is from external shocks, mainly the war and related sanctions, also supply chain to China.

Especially on energy, inflation should not just be compensated, as the higher price serves as a means to achieve the policy goal of reducing fossil fuel consumption.

Yeah, I'm no economist but I think the inflation is being driven primarily by worldwide events impacting production and the supply chain -  war, sanctions, China covid zero policies, energy price increases.

Personally - though it's inconvenient for me as a hiring manager - I think it is very reasonable for working people to push for increased salaries.

Also, I think that given the demographics of the West - more workers retiring compared to new folks entering the workforce - we are entering (already in) an era where talent acquisition is going to remain an issue and workers have negotiation power. "Don't ask for wage increases because of inflation, be a team player for the sake of the economy" is just not going to cut it as an argument IMO.

[crazy canuck]

Advance warning: in this thread, it is verboten to have another Berkut-CC 5 pages long dick-measuring contest.

That won't be a problem. He has made it clear he doesn't want to discuss anything, so I simply won't respond anymore.

I am interested in other peoples views though. This is an actual, real problem for me. It is not theoretical.

We have to figure this out over the next several months, and I don't know the answer. I've never worked as a director in an economic environment with significant inflationary pressure. We've already raised our rates a lot for our customers in order to keep up with advancing salary expectations of our rather highly compensated, highly talented, and highly desired development staff, and that was *before* this inflationary spike.

It is trite to say "Raise their salaries, and pass the cost on to your customers". That might work in some industries, but not in all. In many cases, there isn't even a customer to raise rates on - we are doing product development, and we have a limited budget to support our development staff. We could reduce headcount in order to pay the remaining more, or we can try to find outside investment. Neither of those seem to be so obviously the right choice, either for the company, or for the employees, or for society in general.

We work in completely different industries but if it's of any interest, here's what my firm does on salareis.

I should say that I'm a partner in a small, specialist planning law firm. We are ten partners (all equity) with about 30 employees of which 20 are lawyers. Equity partners do not get a salary, just a share of the profits. We're  guite a new firm, founded about 5 years ago (with 6 partners and just 5 employees) but are generally regarded as best in our (small) field.

Salaries for junior lawyers have exploded in the last couple of years, mainly due to US law firms. The top US firms are paying £160K to newly qualifieds solicitors (who are generally in the mid-20s). The top UK firms are paying between £110K to £125K. We benchmark our salaries against the tier below that which is in the range of £65K to £100K but at the lower end of the scale. We also provide a decent profit share pool for both lawyers and non-lawyers. We've made a big effort to professionalise our benefit system and training programmes and develop meaning CSR and pro bono programmes involving juniors. This is actually really important for rentention, perhaps more so than pay. We've given one-off cost of living payments to anyone earning less than £40K. Most importantly we do our best to make people feel like they are part of the business - involved in decision-making, business development and other programmes.

So far only one solicitor has left since we started (and not for money reasons). We are going to have to see how the era of high inflation plays out though I suspect that the boom in junior salaries has topped out for now. We have been able to afford increases by being fairly relentless in terms of rates, debt collection and write offs. Our rent is static and expenses are under control because so many more meetings can be held online. Hybrid working has helped with productivity too.

We have gone away from annual wage increases to bi-annual increases.  We are also considering implementing retention bonuses and moving away completely from signing bonuses.

We are beginning to find that retention and competition for non lawyer staff is becoming more fierce then that for junior lawyers. 

We don't have a formal profit sharing, but we have a very robust bonusing program based on a number of factors that are unrelated to just profit.  We have also put a lot of effort into including all staff and employee lawyers in decision making, firm management, etc.

The recent spike in inflation is not really going to effect us too much since we were already giving large raises.

Regarding the spike in juniors caused by the US firms going crazy, I saw that also happening in the 90s.  But the difference then is everyone was in more of a lock step model.  Now pay is much more variable within years of call depending on ability/area of practice. 

[Iormlund]

In the US where there's a really tight labour market I don't really see how you can avoid raising wages by a decent amount - in or around inflation. Because otherwise they'll just move on. It is - currently - similar in the UK. There are more vacancies being reported than people looking for work.

I'd make a priority of making sure the lowest paid who are most exposed to prices rising and likely have least cushion are most protected though - it's the junior staff on relatively low wages who'll feel this more and I think that probably needs communicating to them but also to more senior staff who may be comfortable taking a little less if there's reason behind it. That's what happened at my company at least (although we're heavily unionised and the pay deal was negoatiated at the start of the year before current inflation rates).

My group is explicitly exempt of the collective agreement clause that indexed raises to CPI (along with management). 

The unions also push for headcount reduction in salaried positions during layoffs(which is often when we are busiest since it takes 2-3 years of engineering work to launch a new product line).

And they wonder why I won't vote for or strike with them.