WEBVTT - Pandemic Wage and Hour Cuts Could Become Permanent If Crisis Persists

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<v Speaker 1>It's Tuesday. Je I'm Oscar Emiras from the Daily Dive

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<v Speaker 1>podcast in Los Angeles, and this is reopening America. When

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<v Speaker 1>looking at the economic toll the pandemic has inflicted on

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<v Speaker 1>the country, many people are focused on job losses and

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<v Speaker 1>unemployment benefits, but another thing to look out for is

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<v Speaker 1>wage cuts. Many Americans who kept their jobs have seen

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<v Speaker 1>temporary hour and pay cuts that could become permanent or

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<v Speaker 1>paved the way for more layoffs. Megan Casella, economics reporter

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<v Speaker 1>at Politico, joins us for these widespread wage cuts. Thanks

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<v Speaker 1>for joining us, Megan, thanks for having me. We continue

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<v Speaker 1>to monitor the economy as we go through the coronavirus pandemic.

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<v Speaker 1>One of the things that a lot of people are

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<v Speaker 1>focused on is job losses and people getting unemployment benefits.

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<v Speaker 1>But another thing we should be keeping an eye on

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<v Speaker 1>also are wage cuts. A lot of people have taken

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<v Speaker 1>cuts to their pay throughout this thing, thinking, you know,

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<v Speaker 1>it might be a short term solution. But the pandemic

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<v Speaker 1>continues on and on and on, and there's a worry

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<v Speaker 1>that a lot of these pay cuts could be permanent.

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<v Speaker 1>Megan tell us about this, please, This is a trend

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<v Speaker 1>that we're starting to see, and there's your federal data

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<v Speaker 1>on this. Really federal data actually shows that wages are rising,

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<v Speaker 1>but that's only because low wage workers are just unfortunately

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<v Speaker 1>losing their jobs. And so what we're starting to see

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<v Speaker 1>now is economists putting out different studies and estimates, and

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<v Speaker 1>likely at least four million, maybe up to seven million

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<v Speaker 1>workers have taken cuts to their pay over the past

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<v Speaker 1>several weeks a couple of months now, likely because their employer,

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<v Speaker 1>you know, looked at their balance sheets and said, maybe,

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<v Speaker 1>as a way to preserve jobs, we're just going to

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<v Speaker 1>have everybody take a ten percent cut or twenty percent cut,

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<v Speaker 1>whatever it might have been. The issue, though, is that

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<v Speaker 1>now you know that trend is growing. For one, it

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<v Speaker 1>tends to be a really rare move in the US

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<v Speaker 1>because employers know that employees obviously hate wage cuts. It's

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<v Speaker 1>bad for morale, it can be bad for productivity. But

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<v Speaker 1>now that these shutdowns are really lasting longer than many

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<v Speaker 1>of us anticipated in March and April, that they might

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<v Speaker 1>either become permanent at least last for you know, another

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<v Speaker 1>several months, perhaps through the end of the year, or

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<v Speaker 1>that they might lead to layoffs because if if an

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<v Speaker 1>employer in April said that I need to cut income,

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<v Speaker 1>and now you know they're in really dire straits and

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<v Speaker 1>need another move, another way to save money. The only

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<v Speaker 1>step left really is to probably lay off some markers.

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<v Speaker 1>And you look at it from the perspective of both sides.

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<v Speaker 1>The employee their business tells them, hey, we need to

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<v Speaker 1>cut your pay just to make it through. You say, okay,

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<v Speaker 1>I have no other option. I probably am not going

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<v Speaker 1>to be able to find another job that will pay

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<v Speaker 1>me the same and this is going to be short terms,

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<v Speaker 1>so you agree to it. And then as you mentioned

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<v Speaker 1>just right now, for the employer, they're gonna go with

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<v Speaker 1>this option, hopefully before they start firing people flowing laying

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<v Speaker 1>people off. So they both kind of feel like they

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<v Speaker 1>have no other option but to do this. And you

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<v Speaker 1>look at what the effect is going to be, smaller paychecks,

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<v Speaker 1>less spending, the recession that's going on would be extended.

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<v Speaker 1>So this is a really bad final around because you know,

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<v Speaker 1>for the reasons you just sent it, it shows that

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<v Speaker 1>employees feel that they have no better option in as

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<v Speaker 1>you said, and the New York Federal Reserve actually put

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<v Speaker 1>out a survey this past week Americans now feel they

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<v Speaker 1>have a less than fifty percent chance of being able

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<v Speaker 1>to find a job within three months if they lost

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<v Speaker 1>their job today, And that's a more than sixteen percentage

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<v Speaker 1>point jobs to a year ago. So it really you know,

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<v Speaker 1>these employees in many cases probably feel lucky that they

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<v Speaker 1>have a job and they say, Okay, I'll take this

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<v Speaker 1>pay cut because it means I can keep working and

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<v Speaker 1>hopefully it's temporary. But we just don't know where things

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<v Speaker 1>go from here, and it's a worrisome trent for sure.

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<v Speaker 1>And these cuts generally hit more people in white collar industries.

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<v Speaker 1>I know the job losses tend to be more low

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<v Speaker 1>income workers, but these tend to be on the other

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<v Speaker 1>side of things. One of those studies I mentioned was

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<v Speaker 1>put up by some Federal Reserve economists and economists at

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<v Speaker 1>the University of Chicago, and they found the three fourths

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<v Speaker 1>of the cut in pay fell within the top of

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<v Speaker 1>a wage earner. So on one hand, that's someone of

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<v Speaker 1>a good thing, you could say. You could say these

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<v Speaker 1>are workers who are more able to weather the cut

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<v Speaker 1>to their income and might have more wealth to hear

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<v Speaker 1>them through, or might not be as dependent on their

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<v Speaker 1>full paychecks. But on the other hand, these workers are

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<v Speaker 1>also the ones that tend to be more shielded from

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<v Speaker 1>an economic recession. And so if these workers in the

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<v Speaker 1>top four percent are already feeling something like a pay cut,

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<v Speaker 1>but also really, you know, so something worrying about the

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<v Speaker 1>depths of the recession and damage to the labor market

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<v Speaker 1>as well. What are some of the companies that are

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<v Speaker 1>going through this? I know my company i Heeart Media

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<v Speaker 1>did something similar to this, A lot of people took

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<v Speaker 1>cuts in you know quarter two and quarter three type

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<v Speaker 1>of thing. Uh, what are some of the other companies

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<v Speaker 1>that are doing this? So it tends to be pretty

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<v Speaker 1>widespread and among smaller companies there's no way of totally

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<v Speaker 1>judging it, but some really big companies have taken part

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<v Speaker 1>as well. So I spoke with one economist, Julia Coronado,

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<v Speaker 1>who tracked US based companies with market caps greater than

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<v Speaker 1>one billion, so really, really, you know, major companies, and

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<v Speaker 1>she found that of the ones that were providing details

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<v Speaker 1>on earnings calls for two percent were announcing that they

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<v Speaker 1>were reducing pay between April and July. So some of

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<v Speaker 1>those on there are lift the rides sharing app announcing

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<v Speaker 1>reductions for all salaried employees, and other companies were focusing

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<v Speaker 1>their reductions just on their top executives or maybe their

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<v Speaker 1>board best buying gaps both did that. So some major

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<v Speaker 1>names we're doing this, but also you know, we do

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<v Speaker 1>that just anecdotally. We know that sort of mom and

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<v Speaker 1>pop shops and smaller companies and restaurants and things were

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<v Speaker 1>doing this as well. And so now what's the outlook.

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<v Speaker 1>We're seeing cases rise. This thing is not going to

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<v Speaker 1>be over for some time still. I note in the

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<v Speaker 1>article there was you know, a number of American households

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<v Speaker 1>expecting to lose income over the next month. That's according

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<v Speaker 1>to a a recent survey. That number is beginning to rise.

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<v Speaker 1>So what can we be expecting soon likely expecting the

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<v Speaker 1>trend to just increase. I know those University of Chicago economists,

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<v Speaker 1>for example, are in the process of updating their paper.

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<v Speaker 1>They're seeing some of those trends really continue and spread

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<v Speaker 1>it the longer that this goes on. And we also

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<v Speaker 1>know that even you know, regardless of what governments do

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<v Speaker 1>and whether governors decided to actually impose regulations, we know

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<v Speaker 1>that consumers change their spending habits just based on their

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<v Speaker 1>own fear of the virus and so as cases rise,

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<v Speaker 1>regardless of whether there's actual shutdown restrictions in place, we

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<v Speaker 1>know that as long as the virus is raging the

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<v Speaker 1>way that it is now, consumers are going to stay inside.

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<v Speaker 1>They're going to be spending less money, which of course

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<v Speaker 1>is good from a public health perspective that they're not

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<v Speaker 1>going out as much, but bad from an economic perspective

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<v Speaker 1>that a lot of these businesses and just can't get

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<v Speaker 1>back on their feet. And you know, the worrying thing

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<v Speaker 1>is just maybe companies were able to hang on for

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<v Speaker 1>a few months, especially smaller businesses, but larger ones as well,

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<v Speaker 1>And so the longer that this goes on, particularly with

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<v Speaker 1>no end in sight, really it just becomes harder and

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<v Speaker 1>harder to really lean on your savings or maybe you've

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<v Speaker 1>got a loan from the government, but it was short term.

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<v Speaker 1>It just becomes harder to really hang on without income

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<v Speaker 1>coming in that you're really depending on. Megan Casella, economics

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<v Speaker 1>reporter at Politico, Thank you very much for joining us.

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<v Speaker 1>Thank you so much for having me. I'm Oscar Ramirez

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<v Speaker 1>and this has been reopening America. Don't forget effort. Today's

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<v Speaker 1>big news stories. You can check me out on the

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<v Speaker 1>Daily Dive podcast every Monday through Friday. To follow us

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<v Speaker 1>in I Heart radio or wherever you get your podcasts,