You'll Most Likely Be Making Less in 2008

It probably doesn't come as a great surprise that after inflation you'll be making less in 2009 then you did in 2007. Maybe that's why everyone has turned so glum.

The WSJ reports that the average employee will receive a 3.5% raise in 2009 and high performance employees may get 4%.  But with inflation running at 5% those gains will be wiped out by rising energy, food, and medical costs.  It's nice to know that we're all making progress.

This, of course, is different from the 1970s when high inflation led to high salaries.  To end that inflation cycle the Fed had to raise rates to 18% and choke the economy for a year.  This time, employers aren't increasing salaries so we'll just watch as the price of goods and services increase to the point where we can't afford them anymore.  Once that happens, a lack of demand will eventually cause a "correction" in prices.

Either way, look for your earned dollars to buy you less in the next year.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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