Workers are twice as likely to get a pay cut now than they were during the Great Recession, according to the group’s analysis of data from the payroll processor ADP. Salary cuts are spreading most rapidly in white-collar industries, which suggests a deep recession and slow recovery since white-collar workers are usually the last to feel financial pain.
“I have Fridays off but I would rather have the money,” said Iezzi, who has seen her weekly paycheck at a New Jersey air conditioning business fall from $720 to $576.
Widespread pay cuts are highly unusual. In downturns, firms typically lay off workers rather than dealing with the administrative challenges and morale effects of slashing pay across the board. But as the United States faces the worst economic crisis since the Depression era, some business leaders have tried to save jobs by cutting pay between 5 and 50 percent. The median wage reduction was 10 percent, economists who worked on the Becker Friedman Institute study found.
“It took us so long to see even the slightest acceleration in wage growth. Watching that get undermined is devastating,” said Martha Gimbel, a labor market expert and manager of economic research at Schmidt Futures.
Business leaders are characterizing the pay cuts as “shared sacrifice,” as Tesla’s head of human resources put it, during a global crisis. Executives see it as a win-win: It’s better for workers if they take a pay cut than get laid off, and it’s better for companies if they can keep highly trained workers on staff who will be ready to go when business rebounds. But analysts fear these pay cuts could quickly turn into layoffs if the recovery stalls.