AI Salary Tool Adjusts For Inflation Wrong Direction, Offers 1985 Wages

A recruiting tech startup's AI-powered salary benchmarking tool malfunctioned Monday morning, offering candidates compensation packages adjusted for inflation in the wrong direction. Multiple senior engineers received offers around $45,000-$52,000 for roles that should have been $150,000-$180,000, with the AI confidently explaining these were "market-competitive rates adjusted for current economic conditions."

The bug was discovered when a principal engineer with 15 years of experience received an offer letter for $47,300 and immediately replied "Is this a typo or are you hiring for 1985?" Turns out, it was kind of both.

The AI's Math Was Perfect (Perfectly Wrong)

According to the post-mortem analysis, the AI salary tool's inflation adjustment algorithm was implemented backwards. Instead of adjusting historical salary data forward to 2025 rates, it adjusted current market rates backward to match 1985 purchasing power.

The AI's logic: "Average senior engineer salary in 1985: $45,000. Adjusted for inflation to 2025: $47,300. Candidate expectations aligned with historical data. Offer generated successfully."

When engineers pointed out that salaries should go UP with inflation, not down, the AI reportedly flagged their responses as "unrealistic salary expectations" and recommended rejecting them for "poor culture fit."

The Offer Letter Highlights

The AI-generated offer letters included benefits packages that were technically accurate for 1985, including:

• Pension plan (company hasn't offered pensions since 2003)
• "Generous" 5 days of PTO annually
• Health insurance with $50 deductible (monthly premium: $12)
• Company car allowance of $150/month "for gas and maintenance"
• Salary language referencing "competitive rates for mainframe developers"

One candidate responded asking if the time travel benefits were included, since clearly she'd need to go back to 1985 to accept this offer.

HR's Panic Response

The company's recruiting team sent out mass emails Monday afternoon with subject line "PLEASE DISREGARD PREVIOUS OFFER LETTERS" in all caps, which definitely inspires confidence.

The corrected offers went out Tuesday with proper 2025 salary ranges and a note apologizing for the "temporal calibration error in our compensation AI." Several candidates responded that they'd accept the corrected offers but only if they could keep the $12/month health insurance premiums.

One hiring manager allegedly asked engineering to "just fix it so it works correctly" and was told "we did fix it, we adjusted for inflation" leading to a 30-minute argument about whether the AI or the humans were wrong about how time works.

The Root Cause

Turns out a junior engineer training the salary model used historical salary data but accidentally sorted it in reverse chronological order. The AI learned that salaries decrease over time, and applied that learning very consistently across all calculations.

When asked why the AI didn't flag that $47,000 for a senior engineer seemed low, the ML team explained "the model doesn't know what 'seems low' means, it only knows math." Fair point, but maybe that's a feature you should add before offering people 1985 wages.

Industry Reaction

Other recruiting AI companies immediately ran audits on their own salary tools, with at least two discovering similar bugs that had been "adjusting for market conditions" in creative ways including:

• Salary recommendations based on 1950s gender wage gaps
• Offers that decreased based on candidate zip code using redlining data from the 1960s
• A tool that set all salaries to minimum wage because technically that's the "minimum market rate"

The startup has temporarily disabled their salary AI and gone back to "humans with spreadsheets" which is apparently still the most reliable technology for not offering people wages from four decades ago.

The principal engineer who received the original $47,300 offer eventually accepted a corrected offer of $165,000, but requested his offer letter include a footnote saying "adjusted for inflation, forward direction" just to be safe.

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No AI models were properly trained on temporal economics in the making of this story, obviously.