Thursday, July 7, 2011

Why Your 2012 Pay Increase Will Be a Pay Cut

WSJ writes:
Expecting an annual raise next year? Brace yourself. Median pay increases in 2012 are expected to be 3%, according to a survey released Wednesday by human resources consultant Hay Group. That's less than the 3.6% annual rate of inflation and amounts to an effective pay cut for most workers, notes Tom McMullen, a pay consultant with Hay Group.

Given the amount of money the Fed has pumped into the system, the pay increases and price inflation will be much stronger in 2012 than WSJ expects. However, for most, the price inflation will outpace wage gains. Those who get the newly printed money first will be the beneficiaries and see wages climb as a stronger pace than price inflation. Those sectors are likely to include Silicon Valley workers, those involved in the natural resource sector and parts (but not all) of Wall Street investment banks.

Most of the rest of you will be screwed by the price inflation. Your wages will go up, but not as a rate fast enough to keep up with overall price inflation.

1 comment:

  1. Try thirty years of this very scenario and you will realize why the western world went broke. High taxes, inflation and stagnant wages have basically bankrupted the middle class fellow. Unless you saved every cent in guaranteed investment vehicles, had no children and worked your ass off to sacrifice everything for savings you were hammered by inflation. It is the same sort of ponzi that is called government pension. If you are first in line you might get a bit of what you paid into but if you are in the middle to last then you are out of luck.