Pay Cuts Are The New Norm During The COVID-19 Recession
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The Washington Post Reports: Pay cuts are becoming a defining feature of the coronavirus recession
At least 4 million private-sector workers have had their pay slashed during the COVID-19 pandemic. Now, workers are twice as likely to get a pay cut than they were during the Great Recession. White collar industries are taking the biggest hit.
Companies have also trimmed employee hours, leaving many hourly wage workers with leaner paychecks as well. More than 6 million workers have been forced to work part time during the pandemic even though they want full-time work, Labor Department data show.
Widespread pay cuts isn't usually the norm because during economic times of downturn, firms lay off workers rather than bothering to reduce wages.
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.
The worries about potential layoffs or pay cuts has caused Americans to save their money rather than spend it. This has hurt the economy, as 70% of the US economy depends on consumer spending.
Both small and large companies have been cutting pay. In data shared with The Post, Gusto found almost a third of small businesses had cut some workers’ pay or hours by at least 10 percent in May. That includes 9.5 percent that reduced pay for at least one employee, and 22 percent that cut hours.
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