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Archive for Sunday, January 10, 2010

For the unemployed, new job often means pay cut

January 10, 2010

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Jessica Moore, third from left, editor and publisher of Teen Voices Magazine, listens to peer leaders and teen editors, from left, Agostinha DePina, 17, Reynelle Dickson, 16, and Sally Nguyen, 18, Tuesday in Boston. Moore, 34, had been steadily employed since graduating from college more than 10 years ago. But last March, she found herself unemployed for the first time after her job was cut as Web site designer in New York.

Jessica Moore, third from left, editor and publisher of Teen Voices Magazine, listens to peer leaders and teen editors, from left, Agostinha DePina, 17, Reynelle Dickson, 16, and Sally Nguyen, 18, Tuesday in Boston. Moore, 34, had been steadily employed since graduating from college more than 10 years ago. But last March, she found herself unemployed for the first time after her job was cut as Web site designer in New York.

Unemployed for nearly a year, David Becker was relieved to land a new job in information technology last summer.

The offer carried a price, though: It was a lower-rung job than the one Becker had lost. He had to uproot his family from Wisconsin to Nevada. And, like many formerly jobless people who find work these days, Becker is now paid far less than before — $25,000 less.

It’s one of the bleak realities of the economic recovery: Even as more employers are starting to hire, the new jobs typically pay less than the ones that were lost.

In the government’s data, a job is a job. More jobs point to a growing economy. But to people who used to earn $60,000, a new $40,000 job means they’ll spend less — and contribute less to the recovery.

“In most cases, it means a subdued expansion, for sure,” said Marisa Di Natale, director at Moody’s Economy.com.

Worse for those affected, people hired at lower wages in a tight job market tend to lag behind their peers for years, sometimes decades. For example, workers laid off during the 1981-82 recession earned 20 percent less than people who remained in a job — even 20 years after they were rehired, a Columbia University study found. The study examined pay for white- and blue-collar workers, managers and hourly workers.

That means a few short months of unemployment could haunt workers such as 34-year-old Jessica Moore for years.

Moore had been employed since graduating from Penn State University more than 12 years ago. But in March, she was laid off from her job as managing editor for digital media at the nonprofit Sesame Workshop in New York, which produces “Sesame Street.”

In April, Moore got an interview for a job opening as editor and publisher of the nonprofit Teen Voices magazine in Boston. The job paid 25 percent less than her previous position. And the company was a fraction the size of Sesame Workshop.

Still, she leapt at the offer.

“I wanted the immediate security,” she said.

It’s not surprising that employers are stingy with pay these days. Their own businesses were squeezed by the recession. Most depend on consumer spending, which remains tepid.

A different life

The first jobs to emerge from a recession typically aren’t well-paying ones, says Till Marco von Wachter, a Columbia economics professor. Companies delay hiring for higher-paying jobs, in particular, until they’re confident the recovery will last, he says.

In addition, as the unemployed compete for the few job openings available, employers face no pressure to raise wages. More than six people are now vying, on average, for each job opening, according to Labor Department data — compared with just 1.7 workers per opening when the recession began in December 2007.

That’s why Becker considered himself lucky to get a job offer this summer as an information-technology manager after months of searching. That was even though he had to move his family from Milwaukee to Reno, Nev., and take less pay than he’d been used to.

“I think a very large number of people will never have the life they had at one time,” he said.

Though his current job is a step down, he wasn’t prepared to hold out for a better and higher-paying one. Too many other workers were lined up for each opening he sought.

John Irons, research and policy director for the Economic Policy Institute in Washington, says that as millions of unemployed workers accept lower pay for new jobs, their collective wage cuts will likely stifle income growth for years.

Inflation-adjusted hourly wages rose throughout most of 2008 but peaked at an average $8.65 in May for non-management hourly employees, as measured in 1982 dollars, according to Labor Department data. (Unadjusted for inflation, the average was $18.53.) Since then, inflation-adjusted wages have fallen 1.3 percent to an estimated $8.54.

The resulting wage depression is part of the economic “scarring” of the labor force, Irons said. For example, inflation-adjusted wages stagnated for four years after the downturn of 1991. And they remained mostly flat from 2002 to 2005, after the mild recession of 2001, according to Labor Department data.

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