Posted by: adrienehill | February 26, 2009

Wages Up Or Down?

Yesterday I posted a story from the New Yorker about rising wages during economic recessions–there have been a couple of really thoughtful comments I wanted to point out.

Are those of you with jobs making more or less than you were a year ago?

steve February 25, 2009 at 2:17 pm

One thing to point out is that while average wages may be increasing, that doesn’t necessarily mean that any one individual’s salary is going up. If a company cuts 1000 of its entry level workers, the average wage will probably go up, because it will be dominated more by the higher paid, more senior workers that are left.

When GM lays off all of it’s manufacturing workers, and only has the CEO and executives left, you can bet that GM’s average wage will be higher.

It’s certainly possible for layoffs to have the opposite effect as well: a company trying to cut costs by getting rid of highly paid, senior managers. I don’t know which one would be more common. All I’m saying is, if I hear that the average wage is going up right now, I’m still not going to conclude that anyone is getting a raise, at least based on what I’ve seen.

reidmccamish February 25, 2009 at 3:17 pm

I’m with Steve on this one, I think a lot of what we’re seeing is that the lower wage jobs are the ones being cut the most.

Even if high and low wage jobs were being cut proportionally (say, 10% of low wage jobs lost, and 10% of high wage jobs lost as a simple example), there are a lot more low wage jobs to begin with, thus average wage would go up in this scenario.

To really see what’s going on, you’d need year-to-year data for the surviving jobs, which would be harder to obtain. My intuition is that you’d see slower wage growth within surviving jobs during a recession, despite the average wage stats going up for the above reason.

Stephanie February 25, 2009 at 8:16 pm

My company recently laid off a number of people to contain costs, and at the same time cut the wages of the remaining employees by 2%.
If and when the time comes to hire people to replace those laid off, they will probably hire younger, cheaper laborers.

The New Yorker article talks about rising productivity. But productivity has been rising for decades, with no comparable rise in worker wages for the the same period of time. If the minimum wage over the past 30 years had kept up with company profits, GDP and the other economic measures, the minimum wage would be about $19/hour.


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