Dismal Salary Trends For 2011

January 13, 2011

unhappy business woman next to laptopFacing a struggling job market and a persistent recession, American workers can expect to see their wages drop within the next year, economists say.

According toTime Magazine, wages have been growing very slowly during the economic downturn, up only 1.5 percent, falling from 3.5 percent at the beginning of recession. After factoring in inflation, real wages, which is the measure of whether individuals can buy more or less goods with their paychecks, has basically remained the same.

That economists are forecasting a drop in wages is unusual because workers simply do not like to bring home smaller paychecks. Thus, for morale reasons, employers typically avoid lowering salaries; however, given the economic climate, analysts are predicting that is precisely what is going to happen. With an unemployment rate that has stubbornly hovered above 9 percent for 20 months, jobless Americans must make the tough choice of working for less pay. Especially for the 6.4 million unemployed Americans who have been out of work for more than 6 months, the prospect of working for less is better than not working at all, economists say.

A new report from the Bureau of Labor Statistics reveals that more than half of all workers who have been laid off during the recession from jobs that they held for more than three years took pay cuts when they landed a new job. Notably, nearly 40 percent of all workers who got new jobs reported receiving paychecks that were at least 20 percent lower than what they previously earned.

Kevin Cronan, who lost his job at a money-management company inBoston, MA, where he says he made nearly $150,000 a year, now works as a Starbucks barista,The Wall Street Journal reported. Cronan enrolled in adult-education courses and tried to wait out the recession as he saw friends and colleagues with MBAs take entry-level, $40,000-a-year jobs. After his 19-month severance period ended, Cronan decided he could not limit his job search to only his field so he took a job at the local Starbucks, where he earns $8.85 an hour. He says he plans to leave once he finds employment in his field.

"If I'm offered $75,000, that's a lot more than I'm making now," Cronan said. "It's a realistic approach. You can't live looking in the rearview mirror."

With workers willing to take jobs well below their skill and pay levels, the current downturn marks the first time when wages have actually fallen since the recession during the early 1980s,FOX Business reported.

Compiled by CityTownInfo.com Staff


"Downturn's Ugly Trademark: Steep, Lasting Drop in Wages," online.wsj.com, January 11, 2011, Sudeep Reddy

"The Truth Behind the Unemployment Rate," foxbusiness.com, January 11, 2011, Gerri Willis

"Will Paychecks Shrink in 2011," curiouscapitalist.blogs.time.com, January 13, 2011, Stephen Gandel

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