A Bad Week for Workers

While the business pages are freaking out over the possibility that the subprime mortgage debacle will bring down the macro-economy, there have been three unfortunate developments on the wage front. These might not get the attention they deserve, so here's a brief tour through the recent rocky waters of the have nots.

First, there was a truly weird announcement Wednesday from the big electronics retailer, Circuit City. In a press release full of the usual claims about how big changes would position the firm to make "improved and sustainable returns in today's marketplace," they announced that they plan to layoff 3,400 sales associates. That part's not unusual; restructurings often involve layoffs. What's weird is they said they're going to hire a new sales force at lower wages.

Talk about in-your-face management. I can absolutely see the rationale for a firm whose stock is down by a third over the past year for making some big changes. But, unless they're truly overpaid, replacing a big chunk of your workforce with lower-paid workers is a recipe for lousier service, fewer sales, and lower profits. I could be wrong, but my bet is that after the initial bump, stock prices sink further. Scrimp on your sales staff--CC graciously says the laid off workers can themselves apply for their old jobs at reduced pay after ten weeks--and you're cutting off your nose to spite your face.

They say their staff is overpaid, but from my own poking around, they seem to make about the market average of around $11/hour. That's barely a living wage. Circuit City thinks they're being lean and mean, but I think they're just being mean.

Second, remember the Federal minimum wage increase to $7.25 by 2009 that majorities in both houses of Congress claim to support? A few weeks ago, it was the rage in Congress to say you're fed up with the facts that a) it's been ten years since the last increase and b) the buying power of the minimum is at a 50 year low. But still no increase.

Why not? Because they're wrangling over a wasteful package of tax cuts for businesses that the Senate (including Democrat Max Baucus) insist must accompany the wage bill. House Democrats want a clean bill, but Baucus et al won't budge. Worse, the tax cut addicts just added $4 billion more!

Meanwhile, a minimum wage worker earning $5.15 an hour is missing out on the first seventy-cent step in the increase. Workers in the affected range work around 30 hours per week, meaning a loss of about $21 per week or over a thousand bucks for a full-year worker. For folks with low-incomes, that's real money.

Finally, over in the labor market, faster price growth is nibbling away at real wage gains that were looking pretty good there for a New York minute. Real hourly wages have been flat over the past few months, and given the softening job market and the resulting decline in weekly hours, real weekly earnings are down a few bucks so far this year.

So if you're wondering why consumer confidence took a dive in March, you don't have to look much past the pocketbooks and wallets of many working Americans.

Hey, I hear Circuit City is hiring!

Jared Bernstein is a senior economist at the Economic Policy Institute and the author of "All Together Now: Common Sense for a Fair Economy."