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Thanks for the blog on ECI, Jim.

I can see a company using the ECI as an escalator if there is a collective bargaining agreement; management wants a longer-than-normal contract duration (over 3 years); and an escalator is the price management has to pay to get the long term contract. Then the ECI may be the lesser of two evils compared with a CPI-based COLA.

But even with ECI, management needs to recognize what ECI is measuring - average salary increases versus structure adjustments. Management can pull down several years worth of WorldatWork annual salary budget surveys to demonstrate there is a difference between structure adjustments and total increases.

Considering the low percentage of unionized workers in the US workforce, most companies don't need to have escalator provisions in their pay policies. Nonetheless, the ECI might be a measure that management wants to look at as a reference point to compare the growth in their own salaries.

Finally, you made a good point about using the right ECI measure. If you use just salaries and wages the ECI growth may be different than the ECI with benefits. No need to remind compensation professionals of the continuing high costs of health benefits.

Good clarifications, Paul. Life would be easier with one simple metric to follow for pay changes, but then no one would need compensation experts.

No, I would not recommend adopting the procedure specified, and particularly using the ECI index.

And as a part of that federal bureacracy, I guess this places my comment clearly in the category of unnecessarily awkward.

No fear, Chris, because we are not adopting your procedures, anyway. The world is safe now.

One of the great ironies of the Feds passing the ECI escalator for government pay in 1989 is that it occurred just when the private sector was dumping their escalator clauses in their collective bargaining agreements. Businesses learned a painful lesson during the Carter era that with wages chasing prices and prices chasing wages, inflation was killing our economy. To eliminate those inflationary forces, companies and unions all over the country began eliminating COLA clauses in their labor contracts.but not the Feds. They embraced the ECI escalator.

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