How do companies get away with pay rises less than the rate of inflation?

Question

I understand that there are shareholders and costs increase, but surely the cost increases should be at the rate of inflation?

I know a load of companies increase by like 3.9% + Inflation every year – so why is it that when employees get pay rises they’ll always be less than the rate of inflation?

Doesn’t that just mean employees get poorer every time? Where does the extra 3.9% money actually go? Where does the difference between employees payrises and rate of inflation go?

Are all companies just screwing their employees or is there some other reason I’m not realizing?

In: Economics

Answer 1

Simply, it is because employees will take it. Unless they actually leave or negotiate an agreement, companies are going to pay as little as possible to retain employees. It can vary by company/industry. My company is obligated to raise pay by inflation +1.5% with additional raises determined individually.