Wages for American workers have fallen dramatically since the financial crisis, in what will likely turn out to be the worst such plunge since the Great Depression, the Wall Street Journal reports.
When hard times hit, employers typically are reluctant to reduce wages. But this downturn has been different: More than half the workers who found new work by early 2010 after losing jobs between 2007 and 2009 said their pay had dropped, according to Labor Department data cited in the WSJ. A full 36 percent said the new job paid 20 percent less than their former one.
While headlines have focused on the national unemployment rate of 9.4 percent, the pain extends far beyond those 14.5 million who are deemed officially unemployed by government statistics. The only other instance of such severe wage reductions since the Depression was during the recession of the early 1980s, but the current slump is on track to be far worse, the WSJ notes.
Among people who are lucky enough to have work, living standards have been significantly downgraded. Almost a third of America's working families are now considered low-income, earning less than twice the official poverty threshold, according to a recent report. The recession reversed a period of improvement.
This trend spells a grim future for the American worker, and for the American economy.
"They're no longer working actively, with a chance to advance and gain more experience and skills," said Brandon Roberts, manager of the Working Poor Families Project and a co-author of the report on low-income working families. "They're just putting pieces together to stay afloat, to meet basic needs."
Michelle Feliz, a single mother of two, saw her salary drop to $37,000 from $42,000 as a layoff forced her to switch careers. She is in an especially cruel predicament: Her pay is low enough that she can't afford day care for her one-year-old son, or clothes for her teenage daughter, but it's just high enough that she also didn't qualify for food stamps.
The recession has been especially brutal to certain industries. As the real estate market crashed, jobs in construction and manufacturing disappeared, unlikely to return for years to come. Men, who dominate those jobs, have been especially hard-hit. Last month, the male unemployment rate was more than a full percentage point higher than the rate for women.
As companies struggle to increase their efficiency to cope with the hard times, that directly translates into worker layoffs. Benefiting from stimulative monetary policy, companies have been able to bolster profits with piles of borrowed cash, which they've been reluctant to spend on hiring. U.S. corporations increased their cash holdings 7.3 percent in the third quarter of 2010, bringing their ratio of cash to short-term liabilities to its highest level since 1956, recent Federal Reserve data show.
Even when workers are re-hired by the companies that laid them off, they're likely to face a wage cut, the WSJ notes. As wages grow at an excruciatingly slow rate, it will be years before many workers see their former pay restored.