Money, money, money – why don’t we just pay people more?!
As an executive search consultant, I look at salaries in from many different angles. Especially lately with the ever-tightening candidate market and increasing difficulties filling positions, it seems to be fair game in the salary expectations. But there’s more to it – and there’s economic realities – something that concerns us all! Such as these:
Salaries are on the rise – and drop
A recent economic outlook by OECD showed how much real wages are declining in relation to inflation in the different OECD countries. Between the beginning of July and the end of September, the increase in nominal wages in Germany was far from sufficient to compensate for inflation, partly due to drastically increased energy and consumer prices. Real wages in the third quarter of 2022 were around 4.3 percent below the level of the same period last year. The Federal Statistical Office even assumes a price-adjusted drop in real wages of 5.7 percent with consumer price inflation of 8.4 percent. According to estimates by the OECD, the need for wage increases to compensate for inflation and maintain purchasing power is unlikely to decrease significantly in the coming years either. According to data from the Federal Statistical Office, the current drop in real wages in Germany is the longest-lasting and strongest since 2008. And that is although employers feel high pressure to pay much higher wages as it is.
That’s the interesting part about perspective here. There’s a lot of discussion around that employees` need to be paid more (which they absolutely do!) and their perspective in their unlimited choices on the job market but I also hear a lot of voices from the employers saying, yes but we need to be able to pay that. Money needs to come in accordingly and that also is tightly linked to production and energy prices as well as incidental wage costs.
Pay is a societal question
I think the question of salary is a societal issue. It has a big context, and a lot of discussions are falling short of the big picture. It’s not just the candidate who should earn this and that, there’s also the reality of budgets within companies (that may also be “just” salaries that need to rise accordingly) and there is a chain of realities in production that result in higher prices, higher productivity, higher pay, etc. That’s not to argument against better pay and appropriate wages but more to argument for seeing what all goes into this discussion. There not only the candidate`s perspective, there`s not only the employer`s perspective, there`s also budget structures, there`s wage cost regulations, there`s even hinders to employ foreigners, we so desperately need. The reason for the situation the OECD put into numbers (above), and we all deal with every day is complex.
Let’s take an example: You want to pay candidates what they want – good for you.
But what about the employees you already have? Do they all get a raise?
What about the budget structures on your client`s side that haven`t increased in 10 years? Where are you cutting that off for rising wages?
What`s at the end of the rising wages, more need for income/productivity/growth, burnt-out people, rising wages, more need… circle?
Is it fair to pay someone so much when the nurse / kindergarten teacher / caregiver earns so much less? What is the work worth really?
It feels like there`s a lot of questions to ask. Feel free to add in the comments!