How low would you go?

February 16, 2009 at 2:00 am 2 comments

When I offered up my predictions for how 2009 would pan out, I said that employers could get nasty and force workers into accepting lower wages by exploiting collective fears of a Recession, Depression, unemployment, Deflation (take your pick). Unfortunately, seems this is happening.

General Motors is busy trimming employee salaries. Casual and part-time employees are getting screwed in Australia where the economic pinch is becoming more of a painful squeeze. Academics are taking a haircut on their salaries rather than face mandatory days off and some are being asked to accept a 12% cut in salary.  The Governator, Arnold Schwarzenegger, is forcing State workers to take two days off per month unpaid in order to save US$1.3 billion. The Governor of Ohio is following the Governator’s lead by seeking a 5% pay cut for State workers and a reduction of the working week hours (40 down to 35). Across Asia and the UK, pay cuts of between 10% and 25% are happening. Heck, even top celebrities in South Korea are getting their incomes slashed.

Now, if it’s a choice between no job because of the Global Financial Hissy Fit or a job with less pay – what would you choose? If you work for Jet Airways (India), you might give the finger to management who are suggesting a voluntary pay cut. Only 50% of Jet Airway’s staff agreed to a hair cut on their salary. A UK survey of 1000 employees revealed only 1 in 10 would take a pay cut although over a quarter would be prepared to have their hours and their pensions contributions axed. Disturbingly, 1 in 10 also said they would have no hesitation in stabbing another employee in the back if it meant keeping their job (there goes teamwork and collaboration!). But sometimes desperate times call for desperate measures. The embattled Irish economy has 66% of people surveyed saying they would willingly take a pay cut.

If you don’t fancy a pay chop, you can always relocate to more exotic places. IBM is apparently offering their laid-off workers a chance to relocate to developing countries like India, China and Brazil. Of course, this is very attractive to companies like IBM because you’d be paid in local currency according to in-country pay rates.

I think there’s clearly a mixture of companies taking advantage of employees contrasting with workers willingly taking a pay cut to save their job. I would have no issue with a pay decrease IF it was across the board, all employees, and starting with senior top dogs (who frankly could take a hair cut of 25% or more).

So I guess the question we are all going to increasingly face in 2009 is – how low would you go to keep your job? Competition for jobs will be fierce. I truly feel sorry for school leavers and fresh out of Uni graduates. So I am not entirely surprised to come across a new website where job seekers actually bid for LOW pay.  Recent College grads in Massachusetts have created jobaphiles, a job-auction website, and job seekers try for positions based on who will work for the lowest salary. The bids are based on how much a job seeker is willing to be paid and are accompanied by resumes and photos. Employers come onto the site and cherry pick from amongst the bids.

I’m not quite sure what to say about this. On the one hand, it’s a proactive business model that helps young grads get a job. On the other hand, employers are most likely going to select the bidder who will accept the lowest or low wages – and this maintains the downward pressure on salaries we are seeing and potential exploitation of workers.  I’ve always told you I’m no economist but with all the reading I’ve been doing, I’m sure I read that pay cuts are a sign of deflation (which is defined as a general drop in prices and is the opposite of inflation).

Have you taken a hair cut on your salary?  Would you do so to save your job?


Entry filed under: Economics. Tags: , , .

Love from tragedy China, wikis and blogging

2 Comments Add your own

  • 1. Paris  |  February 16, 2009 at 10:18 pm

    Pay cut? let’s talk about daily/hourly pay ONLY. I don’t agree to get a daily pay cut (my job is not measured by woking hours, but daily hours, french system for management jobs)
    If that could help reduce unemployment, I would agree to get one month off, or a few weeks, without pay, this year.

    Still it’s well known that people only feel as poor as they are less rich than neighbors, so instead I promote a tax rise on richer people (maybe the 30% biggest earners of the country) and let them pay double taxes this year to finance the social cost of the crisis.

    In addition, on pay cut, let’s face the truth, who will buy the stuff that company produces if people get less pay, AND while banks do not lend?????
    yep, almost no one, and that will only make the crisis worse, actually converting it into a Depresiion.

  • 2. thinkingshift  |  February 17, 2009 at 12:38 am

    and then of course there is the whole morale thing Paris. A person might agree to a pay cut, feel at least they have secured their job, but how long before resentment kicks in; or you feel that you shouldn’t work as hard because hey, you’re getting less pay? A person would end up feeling devalued and resentful.
    I personally would support a higher tax for the richer echelons of society. Somehow we have to end up with more balance – at the moment, it’s financial hissy fit coupled with a yawning gap between rich and poor.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

Search ThinkingShift

   Made in New Zealand
     Thinkingshift is?

Flickr Photos

This work is licensed under a Creative Commons Attribution 2.5 Australia License.

ThinkingShift Book Club

Kimmar - Find me on

%d bloggers like this: