Why You Won't Be Getting A Pay Raise Anytime Soon

As I noted in an earlier (June 19) post, quoting managing director of Aspen Advisors, Andrew Gadomski (from a WSJ piece), when companies lament they can't find workers to fill key openings, that is code for: "I can find talent, I just don't want to pay them as much as they cost."

Now from a Denver Post Business column  (Jan. 7 p. 3K, 'Don't Get Your Hopes Up For A Raise') we learn the raise situation is even more dire. We learn, first and foremost, companies would much rather give one off "bonuses" and leave out any permanent pay raises.  As the piece noted:

"Those one time bumps, whatever really precipitated them, don't mean higher wages are around the corner. ...And for now employers are in no hurry to raise them."

Why?  According to Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insists it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". Say equal to a half year's wage increase of 3 percent. (If you are a super star performer you have the optimal chance of getting a permanent good raise.)

But for the rest it's 'catch as catch can'.  In other words, permanent salary bumps are just too expensive and if "times get tough, the needed pay cuts hurt morale and productivity".

But why, if the labor market is so tight (such low unemployment), do wages remain stagnant?  You can blame a "combination of factors including the globalization of the work force, job automation and the decline of unions."

In the case of the first, jobs can be dispatched to anywhere in the world . In effect, factory workers in Pennsylvania compete for jobs not only with each other but also in China and Mexico where wages are lower..  And tech workers, say in Silicon Valley, also compete with tech workers in India. So do tech customer service reps - say working for Comcast or Xfinity.

Automation speaks for itself, and is now taking over most repetitive jobs.In fact, it will merely be a matter of time before 'higher level" work is also taken over by AI-robots using quantum computing technology.   And as colummist Jim Hightower points out, already the jobs of "accountants, bank loan officers, and insurance claims adjustors are "falling to the bots"

Why? Because they can calculate more rapidly and more accurately than humans. What about "journalism"? Well, the associated press already uses an AI program to "write thousands of financial articles and sports reports".  Meanwhile, FORBES uses an AI system called  'Quill" to pen its articles.

The same applies to the realm of manual labor, and Hightower cites the example of "SAM" a robotic bricklayer that "lays three times as many bricks in a day as a human can". Hence, it has the potential to displace three times the number of human workers.

Meanwhile, unions - which had fought ceaselessly for improved wages and working conditions - are slowly going the way of the Brontosaurus - this as more offshore workers and automation renders unions redundant.

All of this portends a much more difficult path to the middle class, or remaining there. Currently, according to the Pew Research Center, the minimum qualification to be considered middle class is to be independent of government support. That means an income which is "self-sufficient": no food stamps, no Medicaid, or other extraneous gov't inputs.  In Denver right now, an income of $47,000/yr. is generally regarded as meeting this standard. But barely 2 in 5 Denverites  meet it, mainly because they spend up to 50 percent of income on rent or mortgage.

And who benefits most from the GOP tax rewards? According to the same article:

"Dan Ryan who runs a Nashville -based executive search firm predicts the main winners will be the star performer - the same people companies are already plying with bigger raises and bonuses."

Looking for a pay raise this year? The optimal way to get it is to leave your existing job and find another paying more, according to Ryan and other experts. The problem? You are going to encounter stiff competition from others attempting the exact same strategy.