2009 October 13 Tuesday
Wage Cuts Still Lowering Weekly Pay

We aren't worth as much as we used to be.

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau, “is that the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed.”

We were living beyond our collective means and still are even with pay cuts. The US Federal government is now spending far more than the nation can afford.

Colorado's minimum wage is going down slightly because it is indexed to inflation.

DENVER — When Coloradoans voted to tie the state’s minimum wage to inflation, they were trying to make sure low-wage workers did not fall too far behind the cost of living. But their vote has had an unintended consequence: Colorado plans to lower its minimum wage next year because of falling inflation rates, becoming the first state in the nation do so.

The state’s Department of Labor and Employment said Tuesday that it planned to lower the minimum wage to $7.24 from $7.28, after an August federal consumer price index report showed that the cost of living had fallen in the state.

It is easy to find news articles on pay cuts - especially by state and local governments. Salt Lake County in Utah is cutting wages 2.75%.

Working to save jobs in an economy that continues to create budget challenges, the Salt Lake County Council approved a proposal from Mayor Peter Corroon Tuesday to enact a 2.75 percent across-the-board wage cut next year.

Are we in a deflationary spiral?

Wages for the Colorado Symphony Orchestra will go down 12.5%. The Indianapolis Symphony is also cutting musician pay 12%.

Professors at University of Hawaii are trying to avoid a pay cut.

University of Hawaii professors have rejected a proposed five percent pay cut and will instead make their own proposal on how the university can save money.

These profs want to be insulated from the market forces that most of us face. I'd like to see tenured university faculty feel the same market forces the rest of us feel.

Share |      By Randall Parker at 2009 October 13 11:25 PM  Economics Labor


Comments
Lyle said at October 14, 2009 8:06 AM:

The Hawai'i situation is rather embarrassing. Their union negotiated a 5-year plan where they got the following raises: 1%, 2%, 2%, 7%, 11%.

I'm not anti-union generally, but that was short-sighted and stupid by the state and union negotiators 5 years ago - like taxes would suddenly go up in years 4 and 5 to afford salary increases like that.

The short of it is that the Hawai'i professors essentially saw no gain during the good times. No crying over spilt milk, but the issue the professors have with the new contract was that even if they accept it, there are no guarantees that there won't be additional furloughs further reducing their salary. Also, the "last and best" offer was also the first. Bullshit is spewing all around. They'll probably offer a similar plan that includes such guarantees.

Maybe the negotiators will be bright enough this time around to negotiate a plan that doesn't balloon at the end. Given the economic situation though, I doubt it. It's probably be another impossible -5%, 2%, 2%, 7%, 11% plan.

miles said at October 14, 2009 5:47 PM:

I think Colorado did a smart thing by indexing its minimum wage to the Consumer Price Index. Once a minimum wage is "set", if it follows the CPI either up or down, you know the purchasing power is the same and it takes the issue "off the table" for the left when they would demagogue it. I wish the Minimum Wage was set at about $7.35-an-hour and pegged to the CPI in most states. If a man is unemployed, he can work 50 or 55 hours at that wage and make enough to get by for a while as he searches for a better job. Its high enough to make working -worth- his time. $5.00-an-hour on the other hand is so little that much of the underclass would understandably just pass on it, and sit at home scheming for ways to get a governement check in the mail (disability, "crazy" checks, sue-someone, crime, pregnancies, whatever). We will always have to have some "menial" labor, so this issue will always be with us. Unlike a few other republicans, I dont hate the poor. I realize that some very decent people were born with lower IQ's and aren't as able as the rest of us. I still think that if they are willing to give a decent effort, they deserve a little dignity. In this case I think Colorado is doing a good thing. I know some uber-free-market-econ-servatives will disagree with me about that though.


I sure hope the economy picks up over the next year. I hate to see so many of our true fellow citizens be unemployed (PC-Roberts wrote that we have about 15 million unemployed Americans while there are 8 million illegals still employed here----which is horrible in my estimation).

not anon or anonymous said at October 14, 2009 10:29 PM:
We were living beyond our collective means and still are

Some of us are forced, upon penalty of imprisonment, to subsidize that behavior. Should I feel ashamed or simply betrayed?

averros said at October 16, 2009 10:12 PM:

There's is no such thing as "deflationary spiral". It's a fantasy concept from Keynesian pseudo-economics.

In the real world, lower prices stimulate consumption and capital good acquisition out of savings - and, also, forces producers to increase productivity (for example, by firing hordes of MBAs which seem to proliferate during times when the business is good - so these MBAs could start doing something actually useful to society, like flipping burgers).

Deflation, basically, is an increased scarcity of money. It increases worth of monetary savings and increases purchasing power of fixed wages - while reducing profits relative to interest payments of heavily indebted businesses. Which is, to say, poor businesses - which consume more real resources than producing them. Liquidation of these businesses releases the resources for use by more productive businesses.

The only way to have rapid deflation is to either drastically increase rate of savings (which is kind of impossible) or to destroy money. The panic in banking world, with its fractional-resevre banking practices, causing banks to sit on money rather than loan it out, effectively decreases money multiplier - decreasing quantity of money. This is what currently keeps inflation in check (the monetary base increased twice over the last 12 months!) This also can't last forever because big banks have to start lending at some point - or go belly up; they are too fat costs-wise to survive with low money multipliers.

Clarium said at October 17, 2009 10:51 AM:

"In the real world, lower prices stimulate consumption and capital good acquisition out of savings - and, also, forces producers to increase productivity (for example, by firing hordes of MBAs which seem to proliferate during times when the business is good - so these MBAs could start doing something actually useful to society, like flipping burgers)."

No... that is not such a good idea. There are only a finite number of burger flipping jobs, and the marginal utility (productivity) of burger flipping declines when there are more burger flippers.

Just pay them to do "labor market political activities" like the Swedes do. Thanks for showing me the article "The Sweden Myth" more than a year ago. It made me love Sweden even more.

MaryJ said at October 17, 2009 4:00 PM:

University of Hawaii professors have rejected a proposed five percent pay cut and will instead make their own proposal on how the university can save money.

They could start by getting rid of all the useless diversity coordinators, ethnic studies departments, and the like. That would save a huge pot of money I'm sure. How long before they start turning on their own, in order to save their cushy sinecures? English profs against "Queer Studies" charlatans, Math profs against "Raza Studies" academics. It'd be a beautiful sight! There are advantages to recession and bankruptcy after all.

averros said at October 18, 2009 4:36 PM:

"There are advantages to recession and bankruptcy after all."

It's not called "correction" for nothing:)


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