Speaker 1: It's Tuesday. Je I'm Oscar Emiras from the Daily Dive
Speaker 1: podcast in Los Angeles, and this is reopening America. When
Speaker 1: looking at the economic toll the pandemic has inflicted on
Speaker 1: the country, many people are focused on job losses and
Speaker 1: unemployment benefits, but another thing to look out for is
Speaker 1: wage cuts. Many Americans who kept their jobs have seen
Speaker 1: temporary hour and pay cuts that could become permanent or
Speaker 1: paved the way for more layoffs. Megan Casella, economics reporter
Speaker 1: at Politico, joins us for these widespread wage cuts. Thanks
Speaker 1: for joining us, Megan, thanks for having me. We continue
Speaker 1: to monitor the economy as we go through the coronavirus pandemic.
Speaker 1: One of the things that a lot of people are
Speaker 1: focused on is job losses and people getting unemployment benefits.
Speaker 1: But another thing we should be keeping an eye on
Speaker 1: also are wage cuts. A lot of people have taken
Speaker 1: cuts to their pay throughout this thing, thinking, you know,
Speaker 1: it might be a short term solution. But the pandemic
Speaker 1: continues on and on and on, and there's a worry
Speaker 1: that a lot of these pay cuts could be permanent.
Speaker 1: Megan tell us about this, please, This is a trend
Speaker 1: that we're starting to see, and there's your federal data
Speaker 1: on this. Really federal data actually shows that wages are rising,
Speaker 1: but that's only because low wage workers are just unfortunately
Speaker 1: losing their jobs. And so what we're starting to see
Speaker 1: now is economists putting out different studies and estimates, and
Speaker 1: likely at least four million, maybe up to seven million
Speaker 1: workers have taken cuts to their pay over the past
Speaker 1: several weeks a couple of months now, likely because their employer,
Speaker 1: you know, looked at their balance sheets and said, maybe,
Speaker 1: as a way to preserve jobs, we're just going to
Speaker 1: have everybody take a ten percent cut or twenty percent cut,
Speaker 1: whatever it might have been. The issue, though, is that
Speaker 1: now you know that trend is growing. For one, it
Speaker 1: tends to be a really rare move in the US
Speaker 1: because employers know that employees obviously hate wage cuts. It's
Speaker 1: bad for morale, it can be bad for productivity. But
Speaker 1: now that these shutdowns are really lasting longer than many
Speaker 1: of us anticipated in March and April, that they might
Speaker 1: either become permanent at least last for you know, another
Speaker 1: several months, perhaps through the end of the year, or
Speaker 1: that they might lead to layoffs because if if an
Speaker 1: employer in April said that I need to cut income,
Speaker 1: and now you know they're in really dire straits and
Speaker 1: need another move, another way to save money. The only
Speaker 1: step left really is to probably lay off some markers.
Speaker 1: And you look at it from the perspective of both sides.
Speaker 1: The employee their business tells them, hey, we need to
Speaker 1: cut your pay just to make it through. You say, okay,
Speaker 1: I have no other option. I probably am not going
Speaker 1: to be able to find another job that will pay
Speaker 1: me the same and this is going to be short terms,
Speaker 1: so you agree to it. And then as you mentioned
Speaker 1: just right now, for the employer, they're gonna go with
Speaker 1: this option, hopefully before they start firing people flowing laying
Speaker 1: people off. So they both kind of feel like they
Speaker 1: have no other option but to do this. And you
Speaker 1: look at what the effect is going to be, smaller paychecks,
Speaker 1: less spending, the recession that's going on would be extended.
Speaker 1: So this is a really bad final around because you know,
Speaker 1: for the reasons you just sent it, it shows that
Speaker 1: employees feel that they have no better option in as
Speaker 1: you said, and the New York Federal Reserve actually put
Speaker 1: out a survey this past week Americans now feel they
Speaker 1: have a less than fifty percent chance of being able
Speaker 1: to find a job within three months if they lost
Speaker 1: their job today, And that's a more than sixteen percentage
Speaker 1: point jobs to a year ago. So it really you know,
Speaker 1: these employees in many cases probably feel lucky that they
Speaker 1: have a job and they say, Okay, I'll take this
Speaker 1: pay cut because it means I can keep working and
Speaker 1: hopefully it's temporary. But we just don't know where things
Speaker 1: go from here, and it's a worrisome trent for sure.
Speaker 1: And these cuts generally hit more people in white collar industries.
Speaker 1: I know the job losses tend to be more low
Speaker 1: income workers, but these tend to be on the other
Speaker 1: side of things. One of those studies I mentioned was
Speaker 1: put up by some Federal Reserve economists and economists at
Speaker 1: the University of Chicago, and they found the three fourths
Speaker 1: of the cut in pay fell within the top of
Speaker 1: a wage earner. So on one hand, that's someone of
Speaker 1: a good thing, you could say. You could say these
Speaker 1: are workers who are more able to weather the cut
Speaker 1: to their income and might have more wealth to hear
Speaker 1: them through, or might not be as dependent on their
Speaker 1: full paychecks. But on the other hand, these workers are
Speaker 1: also the ones that tend to be more shielded from
Speaker 1: an economic recession. And so if these workers in the
Speaker 1: top four percent are already feeling something like a pay cut,
Speaker 1: but also really, you know, so something worrying about the
Speaker 1: depths of the recession and damage to the labor market
Speaker 1: as well. What are some of the companies that are
Speaker 1: going through this? I know my company i Heeart Media
Speaker 1: did something similar to this, A lot of people took
Speaker 1: cuts in you know quarter two and quarter three type
Speaker 1: of thing. Uh, what are some of the other companies
Speaker 1: that are doing this? So it tends to be pretty
Speaker 1: widespread and among smaller companies there's no way of totally
Speaker 1: judging it, but some really big companies have taken part
Speaker 1: as well. So I spoke with one economist, Julia Coronado,
Speaker 1: who tracked US based companies with market caps greater than
Speaker 1: one billion, so really, really, you know, major companies, and
Speaker 1: she found that of the ones that were providing details
Speaker 1: on earnings calls for two percent were announcing that they
Speaker 1: were reducing pay between April and July. So some of
Speaker 1: those on there are lift the rides sharing app announcing
Speaker 1: reductions for all salaried employees, and other companies were focusing
Speaker 1: their reductions just on their top executives or maybe their
Speaker 1: board best buying gaps both did that. So some major
Speaker 1: names we're doing this, but also you know, we do
Speaker 1: that just anecdotally. We know that sort of mom and
Speaker 1: pop shops and smaller companies and restaurants and things were
Speaker 1: doing this as well. And so now what's the outlook.
Speaker 1: We're seeing cases rise. This thing is not going to
Speaker 1: be over for some time still. I note in the
Speaker 1: article there was you know, a number of American households
Speaker 1: expecting to lose income over the next month. That's according
Speaker 1: to a a recent survey. That number is beginning to rise.
Speaker 1: So what can we be expecting soon likely expecting the
Speaker 1: trend to just increase. I know those University of Chicago economists,
Speaker 1: for example, are in the process of updating their paper.
Speaker 1: They're seeing some of those trends really continue and spread
Speaker 1: it the longer that this goes on. And we also
Speaker 1: know that even you know, regardless of what governments do
Speaker 1: and whether governors decided to actually impose regulations, we know
Speaker 1: that consumers change their spending habits just based on their
Speaker 1: own fear of the virus and so as cases rise,
Speaker 1: regardless of whether there's actual shutdown restrictions in place, we
Speaker 1: know that as long as the virus is raging the
Speaker 1: way that it is now, consumers are going to stay inside.
Speaker 1: They're going to be spending less money, which of course
Speaker 1: is good from a public health perspective that they're not
Speaker 1: going out as much, but bad from an economic perspective
Speaker 1: that a lot of these businesses and just can't get
Speaker 1: back on their feet. And you know, the worrying thing
Speaker 1: is just maybe companies were able to hang on for
Speaker 1: a few months, especially smaller businesses, but larger ones as well,
Speaker 1: And so the longer that this goes on, particularly with
Speaker 1: no end in sight, really it just becomes harder and
Speaker 1: harder to really lean on your savings or maybe you've
Speaker 1: got a loan from the government, but it was short term.
Speaker 1: It just becomes harder to really hang on without income
Speaker 1: coming in that you're really depending on. Megan Casella, economics
Speaker 1: reporter at Politico, Thank you very much for joining us.
Speaker 1: Thank you so much for having me. I'm Oscar Ramirez
Speaker 1: and this has been reopening America. Don't forget effort. Today's
Speaker 1: big news stories. You can check me out on the
Speaker 1: Daily Dive podcast every Monday through Friday. To follow us
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