Tuesday, August 18, 2009


As the global economy continues to contract there is much news about the growing ranks of the unemployed and the millions that have had to take jobs paying less than half of their previous incomes. We don’t hear much about those being asked to take smaller salary cuts and contribute more to their medical plans. Employers often promote these 5% to 10% pay cuts as something their employees and their families should easily be able to weather. For us it brings back memories of a time when we got a 2% raise while at the same time having to cover a greater percentage of our medical plan, which added up to a 7% pay cut. This seemingly "small" pay cut significantly changed the quality of our life.

Small changes, that seem like they shouldn’t be a big deal, can completely change what works . If the voltage in the electric grid was cut by 7%, most appliances would stop working. If you cut back on the gasoline in your car by adding 7% water, your car wouldn’t run.

Though a 7% pay cut seems small, particularly in comparison to those without jobs, our experience is that it lowers the quality of your life far more than 7%. The income we lost was money for our savings, cell phones, babysitters, movies, and dinners at good restaurants. When our income suddenly stopped paying for these things, our motivation to work hard dropped. Since the pay cut affected not just us but all the employees working for the largest employer in the region, it devastated the businesses that were no longer getting our income; many of them closed down. In the same way that appliances are designed to run on a certain amount of voltage , most of our lives are designed around getting a certain amount of income for the work that we do. If a person loses their job, it is expected that it will greatly change their life; they have time to make those changes. It is like a car with no gas, no one expects it to run. But those with "small cut backs" may also find, as we did, that much of what was working stops working. We had to completely redesign our lives while still working full time and deal with the fallout of the shrinking local economy.

We know from experience that the "lucky" people who keep their jobs with only a pay cut will get no sympathy and may even get contempt from family, friends and the community who cannot understand why such a small change in income could have such a large impact.


Keahi Pelayo said...

Sometimes we lose sight of how delicately balanced a system may be. Looks like we need the old free enterprise system to be healthy to pay for all of these other do-gooder schemes.

Anonymous said...

What is the alternative? Would you rather loose your job entirely, than make changes by cutting out luxuries?
You may find it hard to believe, but there are many families who do not eat out, travel, or hire baby sitters, because they have NEVER been able to afford it.
This sounds like someone saying-"You should feel sorry for me- parts for my Ferrari are so hard to get!"

Anonymous said...

I think the real point is that, to the person that is receiving the cut in pay, that it can be very hard. Since it's really all about what one is use to. One man's hardship could easily be another's luxury. All is relative from where you start out. The author is trying to point out that everyone has their own perception of hardship. This of course can always be compared to others that are in much worse shape than all of us who feel at least some sense of financial despair.

Anonymous said...

Thanks for your post; it's an interesting perspective. Rank and file take pay cuts and reduced benefits. "C" level management may take base pay cuts, too, but then make big bucks on their stock trades. It's infuriating to hear, "you're lucky you have a job".

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