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How inflation is impacting salary negotiations

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Fives, tens and twenty dollar bills.

Inflation can be an objective metric to use when asking for a raise. MarioGuti/Getty Images

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To put it extremely bluntly (and he would never say this out loud): Federal Reserve Chair Jay Powell probably doesn’t want you to get a raise right now.

That’s because of the potential for a wage-price spiral — prices go up, employees ask for higher wages to afford those higher prices, companies raise prices to afford those high wages and the cycle continues.

But inflation is coming up in salary negotiations in a variety of industries. A survey from the staffing firm Robert Half found that more than 60% of employees plan on asking for a raise this year, with the top reason being the rising cost of living.

If you haven’t had a raise since June of last year, you’re making about 9% less than you did then. That’s just inflation math. With the labor market still tight, why not storm into your boss’ office and demand to make at least as much as you did last year? 

“Inflation gives you a very solid metric,” said Mori Taheripour, who teaches negotiation at the University of Pennsylvania’s Wharton School. “This is not a subjective explanation. It’s purely objective, and it’s very rational.”

To be clear, she doesn’t advocate storming into anyone’s office, but she said smart executives know that rising living costs don’t just impact their employees’ pocketbooks, but also their productivity. 

“Laying your head down at night and not knowing whether you’re going to be able to afford your rent in a month, I think it actually affects your performance. You can’t help it.”

Of course, even the most enlightened boss may not have the budget for a major raise for all employees. Execs may be more willing to negotiate things aside from salary, according to Pepperdine University professor Bobbi Thomason.

“What they can offer is more vacation or more flexibility or some other sort of benefit,” she said. Like more remote work options or maybe a one-time retention bonus. 

While workers have almost unprecedented leverage right now, Hannah Riley Bowles at the Harvard Kennedy School said that it’s not clear how that will affect the gender pay gap. 

Since research suggests men are typically more likely to push for a raise, “if you have a moment in history where there’s likely to be a surge in requests for pay increases, we could come out of this pinch period with more men having negotiated raises than women,” Riley Bowles said, adding that she’s not sure how long this leverage will last with the economy slowing down. 

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