The New Normal
The drop in wages seems here to stay. Sudeep Reddy writes for the WSJ:
In California, former auto worker Maria Gregg was out of work five months last year before landing a new job--at a nearly 20% pay cut.In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour.
In Wisconsin, Dale Szabo, a former manufacturing manager with two master's degrees, has been searching years for a job comparable to the one he lost in 2003. He's now a school janitor.
They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months.
But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as "sticky." To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall.
The only other downturn since the Depression to see similarly large wage cuts was the 1981-82 recession. But the latest downturn is already eclipsing that one. Unemployment has stood above 9% for 20 straight months--longer than the early 1980s stretch--and is likely to remain above that level for most of 2011, putting downward pressure on wages.
Many laid-off workers who have found new jobs are taking pay cuts or settling for part-time work when they get new ones, sometimes taking jobs far below their skill levels.
Those are the lucky ones -- the rest are still out of work. But, yay! Our legislators passed that health care bill that nobody read until after they voted it in. Now, instead of dealing with the economy, they're working on whether it'll be repealed.
You know, it'd be much worse if they focused on working on the economy. The should focus on doing nothing. I've never seen an organization that was more motivated to make the rest of so miserable than the United States Federal Government.
swiftfoxmark2 at January 11, 2011 7:00 AM
It's in the nature of my work as a contractor to be "re-priced" every time I start a new assignment. Since I very much wanted to make a "career" out of contract work, I had already gotten myself debt-free. So the variation in what I earn doesn't affect me that much - I never earn less than I need to pay the bills, and when I make more, I save the money for time off.
What would make me nervous is to be like a couple of my friends, who have been in their jobs for a long time and are becoming fossilized in them. One in particular is what I would consider vastly overpaid. With lifestyles adapted to match, of course. When I listen to them talk about how the expensive vacations they have coming up, and how they plan to retire at the age of 55, I don't say a thing. I hope they are right - they are my friends and I hope they get what they want. I am just afraid they might be in for rude awakenings. At least they are married to men who make good money - I don't have that cushion, but am completely accustomed to doing without it.
Pirate Jo at January 11, 2011 7:20 AM
I'm cobbling together a Frankie Valli/4 Seasons tribute act as a backup to my hideous day job. If we do okay, it's "Bye Bye, Baby" and back to the life I loved for 22 years. Requests, anyone? :)
Graty Slapchop at January 11, 2011 12:54 PM
There's an aspect of this that isn't immediately obvious when you look at the raw numbers. As I've seen written recently, when wages deflate, they do not do so in the obvious fashion. Most employers aren't able to simply give their workers a 20% wage cut; their are union contracts, employment contracts, or simply the threat of mass defection. What happens instead is that jobs simply get cut. The people remaining are still making about what they were, but there are now people either making nothing or taking other jobs at far lower wages than what they were making. It may average out to a 20% cut, but that doesn't tell the whole story.
And: while all this is happening, food and energy prices are soaring. There are a lot of people alive today who weren't around in the '70s to experience Carter-era stagflation. It's going to be a rude awakening.
Cousin Dave at January 11, 2011 3:41 PM
What swiftfoxmark2 said. When the feds deal with the economy, that's when the balloon goes up.
Rex Little at January 11, 2011 4:49 PM
also i remember my stepmother saying when she worked for GM that the line workers were making something like $150-200k a year. for unskilled labor. plus benefits and lots of time off, some of them only worked 2-3 days a week for that money. of course they're not going to find jobs that pay like that again. and probably shouldn't.....
miki at January 12, 2011 2:56 AM
I was working at one company for about ten years in IT -- they canned me and outsourced my job. I have also been a volunteer on a tech website since about mid-2004.
My day job was sort of rote. Same Sh--, Different Day. But I made sure that I was the best at the SSDD. My work on the tech website puts my mind to work.
I was out of work for five weeks and part of my daily routine was a minimum of an hour doing a job search.
I still get a call at least once a month for my resume(s) hanging on the web. What I find hilarious is when three head hunters and an e-mail come in on the same day for the same job.
If you have skills -- you are valued and they seek you out.
What disgusts me is the 99 weekers. They should change the system that at 26 weeks, your unemployment drops to 90%. At 39 it drops to 80% or 75%. Then at a year it goes to 60% or 50%.
This says you need to get off your ass and actually being willing to compromise. I'm sorry -- the economy sucks -- but there are jobs out there.
Jim P. at January 12, 2011 9:04 PM
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