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When Charles Wilson, Chairman of General Motors, said that in 1955 in response to a US Senate inquiry, he meant that GM's monopolistic practices were beneficial to the American economy. Unfortunately the quote is true again but today it refers to something else: pay cuts.

Today GM announced that everyone at the company will get some type of pay reduction. The CEO's salary is being cut by 50% to $1.1 million. Other executives will get salary reductions ranging from 10% to 30%. No executives will receive cash bonuses or cash long-term incentive payouts for 2005. All employees will have their healthcare benefits reduced. Employees who are holders of GM stock will see another reduction as the dividend is cut in half, reducing the current yield from 8.6% to 4.3% - comparable to a risk-free 1-month Treasury bill. Even members of the Board of Directors will take a 50% cash compensation reduction to $100,000. Ouch.

Earlier this month it was reported that employee pay in the US was outpaced by inflation over the past year meaning that in real dollars, employees on average took a pay cut. This, on top of increases in health care costs and reductions in retirement contributions continues the erosion of pay levels in the US.

What's good for America, it seems, is indeed good for GM.

But wait - Wall Street is doling out a record $21.5 billion in bonuses to employees for 2005 while Google is offering some new hires record-setting pay packages of salary, hiring bonus, and stock units and pay for university presidents is hitting new heights.

We knew none of this information 3 months ago and it is not reflected in our salary surveys. What is going on?

The answer is simple: a dynamic global market for employees. How much someone was paid last week, last year, or five years ago, is becoming irrelevant. Push the reset button: the question is how much it is necessary - and affordable - to pay someone with the combination of education, skills, experience, and other qualifications to do that job today. If the employee's "ask" is higher than the market's "bid" then they may have no job and, if that continues long enough, their market value may be zero. (Well, they could probably get a minimum wage job at the local fast food joint.) But, if the employer's "bid" is based on poor information they may have turnover and difficulty hiring qualified employees.

GM has learned it has an unaffordable pay program. Some US workers are learning they have unaffordable pay expectations. Employers are trying to figure out how to have an affordable and competitive pay program in the dynamic global markets. If they had the answer yesterday it may have just changed today. It may change again tomorrow.

The market rate for talent is being set almost as efficiently as the global markets for stocks, bonds, and commodities with real-time 24-hour electronic trading. Many people make money by buying in one market in one time zone and selling a few hours later in an exchange in another time zone; that's called arbitrage, taking advantage of short-term efficiencies in the global market. To do that you need global real-time information. Employers are learning to "sell" (layoff) in one time zone and "buy" (hire) in another, which also requires global real-time information. Other markets remain more stable and see soaring pay levels due to talent shortages. Therein lies our challenge.