A Dead-End Street?

Early in December, Roger Tomlin was called in for his annual salary review. Roger was a staff engineer for Zee Engineering Company, which he had been with for just over 10 years. In the past, Roger had usually received what he considered to be a fair pay raise. During this salary review his manager, Ben Jackson, informed Roger that he was recommending a 10 percent raise. Ben went on to extol the fine job Roger had done in the past year and to explain that Roger should be especially proud of the above-average pay raise he would be getting. Upon reflection, Roger was rather proud; in 10 years, he had been promoted twice and his annual salary had gone from $32,000 to $69,000.

Things were moving along just fine for Roger until he discovered a few weeks later that a new engineer right out of college had just been hired by Zee at a starting salary of $47,000. It really upset Roger to think that a new, unproven engineer would be starting at a salary that high. Roger's first move was to talk to several of his colleagues. Most were aware of the situation and didn't like it either. Lucy Johnson, who had been an engineer with Zee for over 12 years, asked Roger if he realized he was probably making less money, in actual dollars, than when he started at Zee. This really floored Roger. Roger realized inflation had eaten into everyone's paycheck, but he had never even considered the possibility that he had not kept up with inflation.

That evening, on the way home from work, Roger stopped by the local library and looked up the consumer price index (CPI) for the past 10 years. According to Roger's figures, if his pay had kept up exactly with inflation, he would be making $69,500! After a very restless night, the first thing Roger did upon arriving at work the next day was go straight to human resource manager Joe Dixon's office. After presenting his case about the new employee and about how inflation had eroded his pay, Roger sat back and waited for Joe's reply. Joe started out by explaining that he understood just how Roger felt.

At the same time, however, Roger had to consider the situation from the company's standpoint. The current supply and demand situation dictated that Zee had to pay $47,000 to get new engineers who were any good at all. Roger explained he could understand that, but he couldn't understand why the company couldn't pay him and other senior engineers more money. Joe again sympathized with Roger, but then went on to explain that it was a supply and demand situation. The fact was that senior engineers just didn't demand that much more pay than engineers just starting!

QUESTIONS
1. Do you think Roger is being fairly paid?
2. If you were Joe, how would you have responded to Roger?
3. Do you think a wage survey might help in this situation?
4. Should Joe establish pay grades for engineers?