[hammock]

>Pay raises that rise faster than inflation are sustainable as long as revenue — or at least expectations of future revenue — are also rising at a similar rate.

You're assuming that revenue is decoupled from payroll costs.. in which case why should increased revenue lead to a pay raise?

In reality, an increase in revenue is supported by increased labor costs/manhours.

[nradov]

The whole point of start-up businesses is to make them scalable by finding ways to decouple revenue from labor costs. If you can't figure out a way to do that then you don't have a real start-up, you have some other kind of business and will have to apply other compensation approaches.

[hammock]

If that's the case, then why does a company like Google or Groupon go from 2 co-founders to 5,000+ developers once they get funding and start to scale?

And (to repeat myself), if revenue is uncorrelated to labor, then why should the labor get a proportional piece of it?

[nradov]

I think you're missing the point. As companies grow they tend to expand into other lines of business, which obviously requires additional resources. But if a software business is structured properly then revenue will trend upward at a rate which increasing diverges from labor costs. That's literally the whole point of automation. Draw a chart of revenue per employee for Google from when they were founded until now.

Labor isn't necessarily entitled to any particular share of revenue. Employees get whatever they can negotiate based on market rates at the time. And those rates are based far more on local area and industry demand than on the current revenue at any single company.

[lotsofpulp]

Labor doesn’t get a proportional piece of it, and nradov didn’t say it does. From my reading, nradov just said increases in pay above the norm are sustainable if revenue is also increasing at a rate above norm.