A recent edition of The Wall Street Journal had a great article called “More performance-based raises for companies” (new concept!). The article highlights how workers expected a 3.8% wage increase in 2007 and expect the same in 2008. Obviously, the first thing that struck me is that the implication of the title is that there are companies that do NOT base raises on the performance. Then I looked back at a couple of employers I’ve had and it was clear that performance didn’t drive rewards.

The article also focuses on the allocation of that 3.8% based on performance.

1. The highest-qualified employees will receive raises of 5.7% on average

2. Lowest rated employees will receive raises of 1.7% on average

So I asked myself, what does this mean in the real world? That is, what is the real increase? To find out, I went to the Money and Investing section to see the latest inflation figures. From 2006 to 2007, the June US Consumer Price Index increased 2.7% from June 2006. Basically, this means that the best employees can expect a “real” salary increase of about 3 .0% and the lowest performing employees will get a decrease in salary. of about 1.0%. How do you feel about that?

Most people don’t take inflation into account when calculating their raises. I used to think that more money on the check meant more money. I learned that my raises have to outpace inflation to be worth anything in the first place. Like superior performance, it wasn’t always a given because companies want to pay as little as possible to do the most work. As a high performance player, is 3.0% enough to keep us motivated? Is a pay cut fair?

In a career development context, seeking higher compensation may benefit top performers more than accepting a pay raise from their current employer. This is where having definitive career goals can help you decide if your compensation is fair or the grass is greener on the other side.