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Pay cuts become permanent for many Americans during pandemic

Bloomberg September 25 | Updated on September 25, 2020 Published on September 25, 2020

Pay cuts were introduced to stave off layoffs and retain key employees

Pay cuts introduced by US employers in the early days of the coronavirus pandemic — meant to stave off layoffs and retain key employees — have proved less temporary than perhaps originally envisioned.

The majority of workers who took a reduction as the virus brought the economy to a halt are still earning less than they were prior to the outbreak, according to a Pew Research Center study released on Thursday, a sign of fragility in the labour market as the recovery slowly takes shape.

The extent of outright job losses brought on by efforts to contain the virus has been well-documented: Half of adults who say they lost a job due to the pandemic remain unemployed, according to the study, a finding consistent with government statistics showing the US has regained about half of the 22 million positions lost in the early spring.

Also read: Unemployment, media consumption trigger depression amidst Covid-19

But shifts in earnings and pay structure have been harder to track, with average hourly wage data skewed higher by the disappearance of low-paid service-industry jobs and with overall income figures inflated by expanded government benefits that gave Americans a temporary boost.

Nearly one-third of adults surveyed by researchers say either they or someone in their household had to reduce their hours or accept a pay cut because of the outbreak, with 21 per cent saying this happened to them personally. Among that sub-segment of adults, 60 per cent say they are currently earning less than before the outbreak, with 34 per cent making about the same amount of money and 6 per cent earning more than before the spread of the virus.

The nationally representative survey of 13,200 US adults was conducted from August 3 to August 16.

Racial divides

Separately, survey results highlight the racial divides in Americans’ economic wellbeing.

Some 44 per cent of Hispanic Americans say they or someone else in their household have taken a pay cut because of the virus. That compares with 29 per cent of White, 32 per cent of Black, and 41 per cent of Asian adults who say the same.

While about 40 per cent of Black and 43 per cent of Hispanic adults say they have used money from a savings or retirement account to pay their bills since the outbreak began, 29 per cent of White adults and 33 per cent of Asian adults say the same, the survey results showed.

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Published on September 25, 2020
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