The Great Recession: The Illusory Recovery

Laid-Off US Workers Are Taking Huge Pay Cuts At Their New Jobs

The U.S. economic recovery hasn't felt much like one even for people who managed to find new jobs after being laid off. Most of them have had to settle for less pay.

Business Insider,

26 August, 2012

Only 56 percent of Americans laid off from January 2009 through December 2011 had found jobs by the start of this year, the Labor Department said Friday. More than half of them took jobs with lower pay. One-third took pay cuts of 20 percent or more.

The figures would be even lower if people who could find only part-time jobs were included in the total.

The report provides an illustration of the job market's persistent weakness well after the Great Recession officially ended in June 2009. It also documents that while the economy has added nearly 3 million jobs since the recovery began, many pay less than those that were lost.

And it points to the challenge for President Barack Obama, who's seeking re-election with unemployment at 8.3 percent. No president since World War II has faced re-election with unemployment above 8 percent. It was 7.8 percent when Gerald Ford lost to Jimmy Carter in 1976.

Laid-off workers always have a harder time finding new jobs than do people who quit. But since the government began tracking such data in 1984, people who lost jobs in a recovery haven't had it as hard as they did in the one that began three years ago.

And the pay cuts in their new jobs usually aren't so deep.

For example, in 2003-2005, a period that included a slow recovery, nearly 70 percent of those who were laid off found jobs. More than half who found full-time work in that time did so at equal or higher pay.

The government compiles data on laid-off workers every two years. The report covers only people who had worked at least three years in the same job before being laid off. In doing so, it focuses on those who had stable careers before they lost work.

They are people like Andrew McMenemy, who used to make $80,000 a year as a computer systems administrator at a software firm. He was among the 80 percent of the firm laid off in March 2010.

Now, he makes $9.15 an hour, providing tech support for Apple. The job offers no benefits. He works from home in East Stroudsburg, Pa., where he lives with his father.

"I'm going to be 53; I have to live at home with my father," McMenemy said. "I made more when I worked in high school."

About 6.1 million people with at least three years on the job were laid off in the three years ending in 2011, the government's report said. That's down from 6.9 million in the previous report, which covered the 2007-2009 period. But it's still the second-highest total since 1984.

Though the proportion of laid-off workers finding jobs has improved since the 2007-2009 period, "by no means are they back to a normal level for a recovery," said Henry Farber, an economics professor at Princeton University.

Compared with most other recoveries, "this is really bad," said Dean Baker, an economist and co-director of the Center for Economic Policy Research, a liberal think tank.

Baker noted that only 15 percent of those laid off in 2009 through 2011 have found new jobs with equal or higher pay. That compares with 25 percent in the three years before the recession.

"You were much more likely to be re-employed in 2007 at the same or higher wage than now," he said.

An Associated Press analysis this month documented that by just about every measure, this economic recovery is the feeblest since the Great Depression. The weakness goes well beyond high unemployment. Economic growth has never been weaker in a postwar recovery. Consumer spending has never been so slack. And even for people who have jobs, paychecks have fallen behind inflation.

The Labor Department report Friday showed that men were more likely than women to regain jobs after a layoff. Male-dominated fields, such as manufacturing and mining, have experienced some of the strongest job gains. By contrast, hiring has been below average in some occupations with mostly female workers, such as office and administrative support.

That would come as no surprise to Kim Pinto, who lost her job in November 2009 as an executive assistant and office manager at a commercial interior design firm. Pinto, 50, who lives in Plymouth, Mass., was unemployed for nearly two years before landing a job as a sales person at a furniture store in July 2011.

Her new job pays roughly half the $52,000 she earned at her former job. The new one offers health insurance. But she can't afford the premium.

Pinto considered the sales job a "life raft" until she could find something better. She's still looking, and the competition is fierce. She applied for an administrative position at a local police station. There were 186 applicants, she was told.

"I've always worked a full-time job with benefits," Pinto said. "It's almost like that's a thing of the past. It really erodes your self-esteem."