More Workers Face Pay Cuts, Not Furloughs
The furloughs that popped up during the recession are being replaced by a highly unusual tactic: actual cuts in pay.
James Rajotte for The New York Times
Lynn Fillinger at the Mott's plant in Williamson, N.Y. Workers went on strike on May 23 over demands to cut pay and benefits.
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Local and state governments, as well as some companies, are squeezing their employees to work the same amount for less money in cost-saving measures that are often described as a last-ditch effort to avoid layoffs.
A new report on Tuesday showed a slight dip in overall wages and salaries in June, caused partly by employees working fewer hours.
Though average hourly pay is still higher than when the recession began, the new wage rollbacks feed worries that the economy has weakened and could even be at risk of deflation. That is when the prices of goods and assets fall and people withhold spending as they wait for prices to drop further, a familiar idea to those following the recent housing market.
A period of such slack economic demand produced a lost decade in Japan, and while it is still seen as unlikely here, some policy-making officials at the Federal Reserve recently voiced concern about the possibility because the consequences could be so dire.
Pay cuts are appearing most frequently among state and local governments, which are under extraordinary budget pressures and have often already tried furloughs, i.e., docking pay in exchange for time off. Warning that they will have to lay off people otherwise, many governors and mayors are pressing public employee unions to accept a reduction in salary of a few percentage points, without getting days off in exchange.
As Finances Tighten, Furloughs Give Way to Pay Cuts - NYTimes.com
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