Real terms “Pay Cuts” have been successfully rebranded “Nominal Increases”

Unfortunately, Vince Cable is correct, this is a poorer country than it used to be, and I am probably going to have to lump this. Even if it is bad for my health.

Pay is in part determined by power, and I have very little power to get more money out of my employers given my bargaining position.

Also, my manager has argued a 2.2% nominal increase (1.8% real cut) represents an efficiency wage rate, to keep morale and performance up. Ho ho ho.


2 thoughts on “Real terms “Pay Cuts” have been successfully rebranded “Nominal Increases”

  1. I am sure all of these things are true and, for your sake, I wish that you were getting the large pay rise you undoubtedly deserve.

    However. Just as your cost of living has risen, your employer’s cost of employing you has risen. Your employer’s costs generally are subject to the same inflation as your costs of living—all of his/her non-payroll overheads will have increased in line with inflation. And if you take into account the rise in employers’ NI, the likely drop in incomings, and the 3% of salary statutory pension contribution s/he will have to contribute for you next year, it is not entirely unreasonable to speculate that the rise in the cost of employing you is more than the 2.2% of your salary you are being offered as a pay rise.

    In a situation where your employer’s profits are rising and you are contributing substantially to this fact, things might be different—and maybe this is in fact the case, which would be useful of you to elaborate upon. Perhaps profits are increasing by more than the rate of inflation, in which case a pay rise is in order. On the other hand, perhaps revenues are dropping at greater than the rate of inflation.

    It might also be helpful to know why you feel your bargaining position—your power—is inferior. Are you a key employee? Would your employer’s business suffer measurably if you were to leave? Are you a critical employee but for some reason unable to leave? If job mobility is difficult for you, you could certainly find yourself in a disadvantageous position. On the other hand, perhaps you are not a key employee in terms of generating revenue or in terms of unique skill sets, and your employer feels s/he could replace you with someone equally local who doesn’t command your salary premium due to education level or employment background.

    I guess what I’m saying is, these considerations could all be the case, and it’d be cool to know a bit more just from the economics side of things, but at the moment it doesn’t seem to me like your employer is being totally unreasonable.

    On a slightly related note, I would add that everyone at the company where I work is woefully underpaid when you consider the market rate, and many of us have not had a pay rise since before the recession began, but we continue to work there. There are other types of compensation than money, and I would be interested to know whether you feel you derive these from your current job.

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