A good salary adjustment method should allow for a smooth and continuous adjustment of salaries. Erratic changes of the salaries, with long periods of no-adjustments followed by sudden adjustments may have the tendency to introduce instability in the economy and may generate surges of inflation. Furthermore, after an extended period of no-adjustments the due adjustments become quite huge, and it could be difficult to have them accepted and voted by the governing bodies of the organisations. We had a similar issue at the European Patent Office at the end of last year. For short term financial reasons, some managements try to delay the adjustments of salaries and try to promote salary adjustment procedures that produce delaying effect. It is up to the Staff representation and to the unions to stress the importance of a continuous and smooth adjustment of the salaries in the interest of the employees and the organisation alike. In cases of high inflation as it was the case in 2022 an intermediate adjustment will allow a smoother adjustment process.
In search of stability
Financial stability and limitation of inflation are surely important, but social, labour and political stability in our democracies is even more important. In some circumstances, proper salary adjustment may contribute to enhance stability.
The main scopes of our financial institutions, particularly that of the European Central Bank, is to keep prices stable and limit inflation below a certain threshold. It seems, however, that the approach is sometimes too strict and mechanical, with too much attention being given to the compliance of fixed arbitrary thresholds (e.g., the ECB 2% inflation rate). These arbitrary thresholds should be interpreted as indicative aims, based on empirical experience, to keep inflation at a moderate level. More flexibility should be allowed according to circumstances, particularly in special cases like in the past three years (COVID, war in Ukraine). Again, a proper and detailed evaluation of the reasons of the inflation should be made before (and instead of) blindly applying the old and known easy recipes, in particular blocking wages or unduly delaying salary adjustments. Other mechanisms may be available and be more appropriate to restore stability. A salary adjustment well suited for the circumstances may help avoiding recession or deflation tendencies after an (high) inflationary period.
Finally, as unions, we should care about the stability from the employee’s viewpoint. Stability is important for the staff wellbeing, and this will also benefit the organisation on the long term. Proper salary adjustments in times of inflation will guarantee that staff may continue to live as planned and avoid unexpected and stressful financial situations.