TIME TO ASK FOR A PAY RISE?
Mark Lister, 28 April 2022
Those ugly inflation figures told us all what we already knew, which was that the cost of living has been rising at the fastest pace since 1990.
An annual inflation rate of 6.9 per cent is a big problem for all of us. It puts significant pressure on household budgets, reduces our purchasing power and erodes the value of our savings.
If your income has increased by less than 6.9 per cent over the past 12 months, you’ve taken a pay cut in “real” terms.
There’s only so much belt-tightening we can do to soften the blow, especially when many of the cost increases are occurring in the necessities of life such as food, fuel and shelter.
Becoming more frugal about how we spend our money is one obvious solution, but maybe there’s also an opportunity to bring in some more of it in the first place.
It’s not just inflation that is breaking records. There’s another economic statistic running at the hottest level in decades, and it’s something many of us could use to our advantage.
The current unemployment rate is 3.2 per cent, which is the lowest we’ve seen since the early 1980s.
To put that in perspective, for workers under 60 years old (which is most of us) this is the strongest and most buoyant labour market of our working lives.
It’s the best opportunity in 40 years to try and squeeze a little more out of your employer, or if you can’t do that, to look around for a better deal.
You’ve got a much better shot at success than you probably realise.
Some fresh numbers on unemployment will be out next Wednesday. These will cover the first three months of 2022, and they’re expected to remain strong.
The Reserve Bank expects the unemployment rate to hold steady, while at least one of the local banks believes it could fall below three per cent.
Recruiting decent staff is a huge issue for employers right now. We’re seeing evidence of that in all the business surveys, and hearing it anecdotally across many different industries too.
Ask any business what its biggest challenges are at the moment, and I’ll bet finding and retaining good people is pretty close to the top of the list.
You might not realise it, but many of you have got your employer over a barrel.
I won’t be popular among my business-owning friends for giving this sort of advice. With employers facing cost pressures of their own, the last thing they’ll want to do is compound those problems by handing out pay rises.
Having said that, they’ll be equally reluctant to take their chances trying to replace you on the open market. They know full well how difficult that will be in the current environment, not to mention how much of an inconvenience it is.
The Reserve Bank isn’t too keen on everyone pushing for wage increases en masse either.
That would perpetuate a wage-price spiral, as the business community would respond by trying to pass the added costs on to consumers, causing the cycle to continue.
However, it’s tough out there and when inflation is almost seven per cent, it’s every man for himself.
For workers doing it tough amidst rising costs, this exceptionally strong labour market is the silver lining. It means you’re in much greater demand and that you wield far greater power than you might appreciate.