U.S. wage downturn worst since Great Depression

When it comes to wages, something is superior to nothing. Yet those who are finding jobs after extended unemployment are discovering that earnings losses are typical. Despite numerous years of experience, workers suffering through the latest wage downturn may never get back to where they were. Such is the "new normal" within the U.S. labor market. No matter how numerous payday loans a lot of people take out they will never be able to live the way of life they had before the economic recession.

It isn't sticky situations

Historically, even during some of the highest times of unemployment in U.S. history, wage downturns have been slow. Economists call these "sticky" wages. Current recession wages are far from sticky, though. Many people are taking whatever jobs they can get which typically ends up paying close to minimum wage. They will be very educated and skilled workers that have gotten laid off just to need to pick up whatever job comes at them. About 36 percent of newly employed workers are getting paid 20 percent less than their previous jobs according to the U.S. Department of Labor.

Earnings losses on such a scale have only been seen twice in recent U.S. history: during the Great Depression and during the 1981-82 recession. The wage downturn the country faces now has already outpaced the latter period.

Unemployment causes pressure for negative wages

For over 20 months we have seen unemployment be over 9 percent. There is a ton of competition for new jobs which means that businesses, which will continue through 2011, will be able to hire new employees for less money. This negative wage pressure has forced workers to either settle for less and remain there or accept the low offer and return to college to renovate their skill sets.

The benefit businesses have

While individual workers do not benefit directly from the wage downturn, Columbia University labor economist Till von Wachter argues that in theory, being able to pay lower wages makes companies more competitive by allowing them to hire more workers. Long-term, that would aid the U.S. economic recovery.

Articles cited

Wall Street Journal

online.wsj.com/article/SB10001424052702304248704575574213897770830.html

In some countries, this is what low wage protests look like

youtube.com/watch?v=oKX7o5dXJEM