Friday, January 14, 2011

U.S. wage downturn worst since Great Depression

Making even a little bit of money is better than having no income at all. Nevertheless, the lucky ones who do find jobs after a period of extended joblessness are being slapped within the face with earnings losses that are great when compared with their pre-unemployment salary levels. Despite numerous years of experience, workers battling with the latest wage downturn may never get back to where they were. Such is the "new normal" within the U.S. labor market. Regardless how many payday loans many people take out they’ll never be able to live the lifestyle they had before the economic recession.

Might have been sticky wages although it isn't any longer

In U.S. history, the wage downturns are usually slow. This is true even when unemployment is very high. There is a term economist's use. "Sticky" wages are what these are called. The recession wages aren't sticky at all. Reports of educated, highly skilled workers who have been laid off, only to finally get a job that pays a fraction of what they made before – from several dollars less per hour down to something resembling minimum wage – are frighteningly common. The U.S. Department of Labor explains the numbers. About 36 percent of newly employed workers are making 20 percent or less than what they made before this job.

Only twice in U.S. history, during the great depression and during the 1981-82 recession, were there earning losses as great as this shown. The wage downturn the country faces now has already outpaced the latter period.

Unemployment and negative wage pressure

For over 20 months we have seen unemployment be over 9 percent. There is a ton of competition for new jobs which means that businesses, which will continue through 2011, will be able to hire new employees for less money. This negative wage pressure has forced workers to either settle for less and remain there or accept the low offer and return to college to renovate their skill sets.

Businesses helping the economy

According to Columbia University labor economist Till von Wachter, companies will become more competitive as they are able to hire more workers at lower wages even though the wage downturn is actually bad for individual workers. This allows a recovery for the economy. The U.S. may benefit from it.

Information from

Wall Street Journal

In some countries, this is what low wage protests look like

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