The Impact of Inflation on the Determination of the Smallest Meaningful Pay Increase: a Cross-National Analysis (Canada, Argentina, Salary Administration, United States).

Abstract

A model of the determinants of the smallest meaningful pay increase (SMPI) was tested with a sample of 323 managerial, professional, and technical employees selected from companies in Canada, Argentina, and the United States. Significant zero-order correlations were found between the rate of inflation and personal pay history, average general pay increase given by company, and perceived inflationary trends, and between these variables, income, salary, personal job inputs, job and pay satisfaction, and the SMPI. A stepwise regression of Percent SMPI on the explanatory variables incorporated company general increase, salary, and pay satisfaction into an equation that accounted for 28 percent of the variance in the SMPI, while a regression performed on a reduced version of the model (replacing perceived inflationary trends, average company general increase, and last pay increase by the rate of inflation) incorporated the rate of inflation, salary, and pay satisfaction into an equation that accounted for 30 percent of the variance in the SMPI. No effect of orientation towards pay increases (whether individuals value pay increases as indications of organizational recognition or because of the additional money involved) on the determination of the SMPI was found, while orientation was found to be affected by the rate of inflation and organizational pay practices. Analysis of the attitudes of Argentine and North American respondents towards pay and pay increases suggests that differences could be explained in terms of the different economic environments, while factor analysis revealed substantial similarities in these attitudes. A high rate of inflation appears to result in expectations of higher real salary increases: Argentine respondents reported SMPIs, perceived reasonable promotional increases, and perceived adequate increases for changing employers, almost three times as large as did North Americans.