Tags: inflation | pay raise | President Obama | quantitative easing | QE2

Inflation to Outpace Pay Raises in 2012

Friday, 08 Jul 2011 01:59 PM

First the good news: You're getting a raise! Now the bad news: Inflation is going to demolish it.

That's going to be the scenario for many in 2012, when inflation will outpace pay raises for many Americans, according to a study released by human resources consultant Hay Group.

Median pay raises for 2012 will come to 3 percent, less than the 3.6 percent inflation rate expected for next year, the Hay Group study shows, according to the Wall Street Journal.

"For conditions to get back to 4 percent increases, we need much healthier and consistent corporate performance and a more positive outlook on the economic environment," says Tom McMullen, a pay consultant with Hay Group.

Under President Barack Obama, fiscal and monetary stimulus measures have pumped tons of money into the economy with the aim of fueling growth and hiring.

Inflation is often found on the flip side of such policies.

Why not bump up pay raises a bit further? Many executives would like to, but political and economic uncertainties call for tighter purse strings, and 3 percent raises are all companies can afford.

Some say inflation rates will remain tame as the Federal Reserve wraps up loose monetary policies, including its recent round of quantitative easing, a $600 billion bond buyback designed to inject banks full of money in order to fuel more lending and stock-market gains.

"As that money stops growing, as the Fed’s balance sheet stabilizes as of tomorrow, I think that will take away some of the inflation pressures," says George Goncalves, head of interest-rate strategies at Nomura Holdings, according to Bloomberg.

 "We're not calling for double dip, we're not calling for real disinflation, but lower inflation, sure, and that’s a good thing."

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First the good news: You're getting a raise! Now the bad news: Inflation is going to demolish it.That's going to be the scenario for many in 2012, when inflation will outpace pay raises for many Americans, according to a study released by human resources consultant Hay...
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