Should tech managers setting compensation fear wage inflation?

Written by Technically Media CEO Chris Wink, Technical.ly’s new Culture Builder newsletter features tips on growing powerful teams and dynamic workplaces. Below is the latest edition we published. Sign up here to get the next one this Friday.

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Wage inflation across the United States hasn’t been a concern for at least a generation.

During the crushing inflation of the late 1970s, increasing salaries by 10 to 20% year over year would only keep flat an employee’s purchasing power. Today, pay bumps like that are the stuff of a big promotion. That’s because year-over-year price inflation in this country hasn’t crossed even 3% since before The Great Recession.

After the distortions of the last year, including fiscal stimulus and pent-up pandemic demand, economists are debating inflation risks again. Demand is expected to surge this summer, so early consumer product prices are trending upward.

For those setting comp, the natural question: Will we see wage inflation, too?

To benchmark my own organizational budget the last 10 years, I would dutifully watch for the federal government’s projection for cost of living adjustments. For years that has meant very little; even raising salaries just 1 to 2% would be a genuine increase. From there, it’s been very stable to reward performance, experience growth and added responsibility.

What happens next is very much an open debate among economists. The U.S. Social Security Administration pegged its 2021 cost of living adjustment to 1.3%, though advocates have called to double that increase in the face of so much economic disruption.

This all will sound very foreign to anyone hiring software developers, where salaries have continued to grow through each of the last three major recessions. In 2019, 1.5 million people were employed as software developers in the United States at a median salary of $110,140, according to the U.S. Bureau of Labor Statistics and the growth in demand is expected to continue at a blistering path.

As any hiring manager who is building a custom software team will tell you, many are paying double that — and still Technical.ly is reporting on expectations of high rates of post-pandemic turnover. The point, then, is that competitive hiring for in-demand roles have already outpaced core inflation.

The funny thing about inflation, though, is that it doesn’t exist until enough people think that it does exist. Widespread wage inflation like we saw in 1970 does not appear imminent. Still, don’t be surprised to field questions about the topic. That would be something new for most of us.

And now the links:

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