Hi there,
Q: Just read the Financial Times article that McKinsey, Bain and BCG all raised their salaries in the United States. Historically, did this also lead to salary adjustments in other countries?
I don’t have data on that, so I will just try to structure a logical answer (if someone has data I would be very interested as well).
Rationally, MBB will have an incentive to increase salary only if they risk losing talent or need to increase the talent acquisition above the current acquisition rate (eg due to above-average growth).
This could happen mainly if in the relevant geographic market (most likely nationally or anyway in Europe):
- An MBB competitor (another MBB, Tier 2, any company that could represent alternative in another sector) raises salaries and the others decide to follow. The first mover will probably do so to hire more employees compared to the past, while the others may follow to avoid to lose talent
- Current employees decide to stop to work in the corporate world at an above-average rate (eg to become self-employed) unless an increase in salary is offered
Theoretically, this could also happen if there was an “arbitrage” opportunity between US and Germany (meaning people could easily switch between countries). Given this is unlikely, this factor is probably not particularly relevant.
Overall, given even within Europe itself there has been historically a huge gap in salaries (eg between Italy and Germany), I would not expect an increase in US salaries to lead to one in Germany. As Pedro correctly noticed though, some factors that may have led to the increase in the US may appear in Germany as well.
Best,
Francesco