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09/18/2015

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Interesting read. I tend to take issue with the assumption that COL is best determined by individual-centric compensation market surveys rather than a metric determined by a 3rd party(e.g. a government). After all, you gotta SELL these surveys and you cant have them reflect something universally unwanted by your clients. You allude to professionals organizing to obtain a COL, isn't this something unions have been successful in doing in the public sector? Have we seen an example lately? I think the tough part for many is that cost increases for the employer are used to justify wage stagnation for the employee. In an age of increasing info and transparency, I think more and more employees looking at 2% are now thinking, "why didn't they plan better, it's time to look elsewhere."

Hi Withdrawn,
It does not sound like you work in the Compensation field based on your question, do you mind sharing more information about your background? I don't think I have seen anyone post a comment under an alias on this forum before.

Are you suggesting that 3rd party survey vendors are manipulating data to SELL surveys? I'd image if they did they would be out of business quickly. The goal of any legitimate compensation professional is to provide an accurate reflection of the market. If the source data is manipulated to be lower companies using it would be limited in attracting the right talent.

Just to clarify are you using COL for Cost of Living or Cost of Labor? I have heard a couple of professionals explore looking at Cost of Living to set wages but the complications are overwhelming.

Aw, not everyone goes by their given name, Trev, says (EmmetJamesIII who goes by Jim).

To Withdrawn: Very few organizations outside of government agencies actually conduct surveys of living costs. All here know the three or four exceptions who only publish cost reports for relocating families. Private surveyors don't supply any handy single metric for sample market-basket cost changes like the CPIs. There are many different CPI measures and no two COL adjustment formulae typically found in purchasing contracts or collective bargaining agreements are precisely the same. Long story short, "COL" is shorthand for an excuse to ratchet up some charge via a mechanism created and maintained by an independent government body... all else is negotiated separately directly between the parties.

My article illustrates that wages are not determined by what people spend. The cost of labor is not the same as "the cost of living." The latter is either one of many variable statistical estimates based on sample family budgets or it is a measure of what YOUR family actually spends on YOUR unique lifestyle choices. What you and each other member of your family EARN as a wage or salary is determined by employers drawing on their knowledge of the local competitive labor market for discrete jobs. Neither national CPI relative changes to a hypothetical family budget nor your personal family expenses directly affect pay decisions in any ways not more accurately tracked by pay surveys.

Hope that clarifies it a bit. Sure! ;-)

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